It is not a ponzi. The 20% they were paying out should be considered a cost of user acquisition paid out by the team themselves. If paying incentives to attract users is a crime, we’d have to shutter most startups.
I’m not defending Terra, but we should be precise with our words lest we escape reality ourselves.
>Where was this coming from if not from new buyers?
Anchor generated revenue in 2 ways. The first is that it collects staking rewards for collateral that was deposited. The second is that it collected interest on the loans it lent to people. Some of what it was able to collect can be attributed to new buyers because an increase demand for UST increases the value of Luna. This combined with more gas fees means that bLuna holders will be paid out more. bLuna is one of the assets which can be used as collateral on Anchor. Even without new buyers there would still be profit that could be awarded to depositors.
Even if that part were a Ponzi, it wasn't related to the core problem with the stablecoin peg algorithm, which was what actually brought Terra down, and which could/would have been targeted regardless of this high yield staking program.
When the algorithm was coded, they didn't know those things. It could have worked equally well with minuscule volume. Supply and price could have multipled by a million with no new investment.
A Ponzi uses new investments to pay interest. If it doesn't get exponentially increasing revenue it collapses. Paying someone in more tokens or stock is different. If it collapses, it's for different reasons under different circumstances.
It's a lot easier to fabricate market cap than to fabricate cash.
They were paying existing holders a ridiculously high rate for staking. Where was this coming from if not from new buyers?