A deep dive into stablecoins

The Terra Luna episode was sad. It led to massive wealth destruction, thus killing market confidence in a sector promising innovation at various levels. And ultimately, market participants agreed that the concept of algorithmic stablecoins was ponzinomics working at its best.

The community has generally agreed to play it safe with 1:1 collateralization with complete asset backing for stablecoins to function effectively. But what did go wrong in the ecosystem other than the obvious forced deleveraging?