The Generalist - Terra: The biggest TAM in crypto?

Hey everyone,

Welcome to the many new friends that joined us after the Tiger Global piece. I'm so glad to have you with us on this journey of learning.

Today's piece is several weeks in the making.

Starting in October, I began digging into Terra, a cryptocurrency project. For reasons that will quickly become evident, I think it's one of the most interesting players in the space, marrying vast potential with real-world consequences.

It is used by millions of people, and yet is still in its early stages. If Terra succeeds over the next decade, our financial system will look fundamentally different.

I can't wait to hear what you think.

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Actionable insights

If you only have a couple of minutes to spare, here’s what investors, operators, and founders can learn about Terra.

• Terra is using crypto to build practical products. Unlike some other projects, Terra is grounded in the real world. It is used by millions of people to pay for everyday items, without the need for those users to interact with the blockchain or realize they're interacting with crypto.
• Its TAM is enormous. Terra can be understood as a "Layer 1" protocol with a fleet of stablecoins. The latter are cryptocurrencies designed to maintain a fixed price. This combination gives Terra the potential to serve as foundational infrastructure and eat into the payments market. So far, it's made progress on both fronts.
• Skeptics point to the project's stablecoin as a critical risk. Terra's stablecoin "UST" is not collateralized. Instead, its value is maintained through algorithms. Some have argued that stablecoins of this kind are "built to fail."
• Others argue we're at an inflection point. A recent update to Terra's infrastructure lays the groundwork for an explosion of new projects. We could see a flurry of additions add functionality and attract more capital.

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"It's the biggest TAM in crypto."

Early in my research, I asked one expert what people most frequently miss when digging into Terra. What do they overlook?

This was his response.

This expert is not prone to exaggeration, and he is, as the designation suggests, extremely well-versed on the subject. At the time, I did not fully grasp his rationale for that position, but after hours of research, discussions with Terra's leadership, and conversations with many other crypto connoisseurs, I have come to.

Terra is building better money. Not only that, it is creating infrastructure for others to ceaselessly improve and remix it, giving it new abilities and uses. It is a blockchain and a bank and a payment processor, and a sort of technological nation-state. Terra's contributors are just as likely to compare it to Y Combinator as they are to Singapore.

And yet, while Terra has the potential to revolutionize the financial industry and mainstream crypto adoption, some believe it is destined to fail, architected for collapse.

In today's piece, we'll study Terra from different angles, touching on both its strengths and vulnerabilities. You'll hear about:

• Terra's origins. The founder of a mesh network startup and a successful e-commerce entrepreneur team-up.
• How it achieved wide adoption. Millions of South Korean consumers use Terra to buy products online or at their local stores. Many may not realize they're interacting with the blockchain.
• How Terra's UST stablecoin works. Can you create a stable currency that is backed by nothing? Terra believes so.
• Its growing ecosystem. An abundance of projects is being built on Terra, bringing new lending, trading, and social capabilities.
• The magic of Do Kwon. Founder Do Kwon has been compared to one of the greatest entrepreneurs of all time.
• The risk of collapse. "Algorithmic stablecoins" like Terra's have failed in the past. Could that happen here?
• A powerful community. Terra's "Lunatics" have played a pivotal role in the project's success.

By the end, you'll understand just why someone considers Terra to have the largest TAM in crypto. ​
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IN A MEME

For the pictorially inclined, here's the whole piece — all 12,000 words of it — in a single meme.

PUZZLER

All guesses welcome and clues given to anyone that would like one. Just respond to this email for a hint.

Harry W was The Generalist's Mary Poppins last week, showing an impressive mastery over an umbrella. He was followed by a merry band, including Evgeny S, Thomas K, Jordan R, Tomiwa, A, Tyler S, Kate T, Jim W, Robert M, Georgina F, Michele T, Gary J, Daniel H, Dan C, Neil H, Binoi C, George T, Eduardo R, Warren S, Matthew C, Andrew W, Rob B, Pad M, and Lorcan B.

All recognized the solution to our last puzzler:

The answer? As you might have gathered, the right response is "umbrella." Another clever solution is smoke. Neatly done to all that played.

Yesterday, I turned 32. It was lovely to spend it writing and thinking. Today, I think I'll relax a bit, and eat another slice of cake.

Until next time,

Mario

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*See important disclosures​