The French company Just Mining suffered the costs of the collapse of the stablecoin terra usd (UST). His boss Owen Simonin returned to this event on BFM Business.
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Owen Simonin from JustMining on May 13, 2022 on BFM Business
The collapse of the stablecoin terra usd (UST) had consequences in the crypto ecosystem, including for companies whose customers were exposed to this stablecoin. The French company Just Mining in particular suffered costs as explained on BFM Crypto on its lending vertical, the company being notably exposed up to 30% to the luna blockchain to generate interest on the protocol, as part of its lending products.
In decentralized finance, there are liquidated pools that allow many stablecoins to be traded, including UST, DAI, etc. When there was the fall of the UST, their holders sold off so many of them that the liquidity pool was destabilized. This generated a higher than expected exposure to the UST, which rose from 30 to 40%.
On the set of BFM Bourse this afternoon, his boss Owen Simonin gave details of what happened. Just Mining has 65,000 clients, and 4,000 of them were positioned on this lending product.
“As soon as there was the first peg, on May 10, it reallocated part of the funds in decentralized finance, and it overexposed us, to more than 40%, even beyond 45% at one point. And instantly, we took the position of using part of the company’s equity to go back below 40% exposure and freeze it. When we saw that it continued to drop, we launched a exceptional contingency plan to contact customers to educate them on the situation and take emergency action,” said Owen Simonin.
Concretely, Just Mining injected the company’s own funds a second time to cover the lack of peg on this part of the contract, up to 1250 dollars per client, which covered 73% of all of its clients on this contract: about 3,000 clients out of the 4,000 were positioned and “there were only 27% of clients who had a risk related to the position we had on the lending product.”
As a reminder, the stablecoin terra usd (UST) is a algorithmic stablecoin, which maintains its parity with the dollar with an algorithm and a cryptocurrency. In terms of stablecoins, when the price of the underlying goes up or down, the value of the stablecoin must align with the latter. The promise is to permanently maintain the parity, for example 1 UST = 1 dollar. This peg to a currency is also called a “peg”. When there is a gap between the value of the underlying and that of the stablecoin, it is called a “de-peg” or “loss of parity”.
The latter also takes the opportunity to recall that this “is not a discretionary management product: we can diversify the funds for the client but we cannot make a decision on their behalf”. The company gave its clients the choice to stay or exit their position: 27% of subject clients exited in the very short term, the first exited at a loss of 17% and 8% for those who exited at the start. evening, others decided to go out the next day or to stay, says Owen Simonin.
Will Just Mining hold up? This scenario affects only one out of sixty services offered by the company. “Although we committed equity, we were not required to do so contractually, but it was part of our moral position. We want to be a partner of our customers,” explains his boss.
“We have committed a portion of the cash that does not call into question any product of the platform and even the execution and operation of the structure. Naturally, this is a cost for many.” Now, for the latter, it is time for “operationality, we have to take a step back and why not recreate a more solid product”, explains the latter who thinks that the vertiginous loss of value of the terra usd will have repercussions in decentralized finance.
Just Mining is not the only company concerned by this scenario, all those offering staking or lending of cryptocurrencies could also be called upon to communicate in the coming days.