How Terra obscured its break-up with Chai

While many people are still counting their losses after the Terra blockchain collapsed last week, one company appears to have escaped unscathed.

Chai Corporation, a Korea-based payments service company that was established by Terraform Labs co-founder Daniel Shin, touted its integration of crypto into a mainstream payment app.

Daniel Shin (left) and Do Kwon established Terraform Labs in 2018. Shin is also the founder and current CEO of Chai Corporation. / Photo credit: Terraform Labs

Chai used TerraKRW (or simply KRT), an algorithmic stablecoin that’s pegged to the won, South Korea’s official currency.

The algo coin was part of Chai’s back end, which the company claims helped lower transaction speeds and cut costs. KRT also lost its peg last week after an unusual US$285 million sell-off of UST kickstarted a cascading liquidation of assets on the Terra chain.

But on May 13, Chai posted a message in Korean on its homepage that it had disconnected its KRT service before the currency depegged. In fact, the partnership with Terra was terminated in 2020, Chai further revealed. It also emphasized that the two entities operate separately and that no services provided by Chai are linked to Terra.

The tie-up was severed even as the wider crypto scene was kept in the dark, if these articles mentioning Chai are any indication.

A screenshot of Chai’s message (in Korean only) that it had stopped using the KRT stablecoin. / Photo credit: Tech in Asia

It is unclear exactly how popular Chai’s crypto service was. KRT’s market value, which is an indication of utility on algorithmic staple coins, peaked on Dec. 1, 2020 at US$144.1 million. It had dropped to below US$30 million prior to last week’s crash.

In 2021, the Chai mobile app could be used to make payments with KRT. But by March 2022, the feature was discontinued due to low consumer demand, the company said. In August 2021, Chai typically had about 100,000 daily transactions and over 50,000 daily active users, but it did not break down how many of those transactions were made using crypto.

Big claims

In the message posted on its website, Chai said that it originally partnered with Terra in early 2019 “to study various models so that blockchain and digital assets can be applied in real life.”

That same year, Terraform Labs co-founder Do Kwon gave a talk and showed a slide mentioning that Chai was “powered by Terra.” He also explained how the blockchain integration benefits users and claimed that Chai’s daily active users had surpassed Litecoin’s.