No, it is not encoding.
It is a secret-sharing scheme, where the idea is to divide the secret into multiple parts, with each part revealing nothing about the secret on its own.
It was the same algorithm as Iron finance on Polygon the year before which imploded in the exact same way but on a more expedited timeframe because it didn't limit the apy at 20%.
The terra/luna collapse was simple to see coming as it happened exactly when the terra (stablecoin) market cap met the luna one.