The $LUNA system was well-designed but had a major flaw that occurred by chance. The system aimed to make LUNA deflationary during bear markets by burning LUNA when more #UST was bought.
This could have limited LUNA's losses to around -20%, making it a safer investment compared to other altcoins dropping -95%. Terra's ecosystem, built with the Cosmos SDK, had high-quality, user-friendly applications unlike many new blockchains focused on AirDrops. However, Terra lacked an effective decoupling mechanism.
If UST fell by 20%, a decoupling break and an insurance fund could have maintained UST's peg, limiting losses to LUNA.
