Terra validators decided to halt blockchain network after this week’s severe devaluation of the network’s LUNA token
On Thursday validators
for the Terra blockchain announced that they officially would halt the
blockchain activity. This step was designed to prevent governance attacks.
At 12:14 p.m. Eastern Standard (ET) there was a post from Terraform Labs' official Twitter account, which confirmed that the blockchain network was paused at a block height of 7,603,700. On Thursday the ecosystem operator tweeted that the price declined significantly reduced the cost of attack. The Terra team announced roughly one and a half hours later that block production had resumed, though staking is disabled on the network. While block production was down for a short period, Terra later announced that it would restart the network once validators applied a patch to disable further delegations. "The network should go live once 2/3 of the voting power comes online," they said. Terraform Labs is the creators of LUNA and UST.
Due to the dramatic decline in the price of the LUNA governance token, the blockchain network has become increasingly vulnerable to attacks. In a subsequent quote-tweet, Terra wrote that “Validators are applying a patch to disable further delegations, and they will coordinate to restart the network in a few minutes.” On the announcement Crypto industry observers and insiders offered widely negative takes.
As per TerraformLabs, it would burn any remaining UST in the community pool, also burn any UST that is running on Ethereum and stake $240 million worth of LUNA to avoid potential governance attacks. To avoid similar attacks the move to halt the blockchain today was designed.
Due to this halt, there was a series of dramatic events took place that led to unprecedented decline in the price of firm’s LUNA cryptocurrency and its associated TerraUSD (UST) stablecoin. After losing its peg with the U.S. dollar earlier this week, the stablecoin plunged below $0.30. Terraform Labs is no longer confident that it can prevent governance attacks after LUNA’s price collapses more than 99%.
Beginning of this week, Terraform Labs co-founder Do Kwon shared details about a recovery plan which will help to save the UST peg from further devaluation. Terra's official Twitter account further elaborated on the plans on Thursday, stating that Terra intends to burn $1.4 billion UST for 240 million LUNA stakes. However, the details of the rescue plan have failed to deter market sell pressure.
On Thursday LUNA/USDT contracts were delisted on Binance after the trading pair fell below 0.005 USDT. This lead cryptocurrency exchange Huobi to delist LUNA tokens the previous day. This week before of this event came out, Terra LUNA was a top 10 cryptocurrency project by market capitalization. Its UST asset was the third-largest stable coin behind only Tether (USDT) and USD Coin (USDC).
As per data from CoinMarketCap currently, the price of LUNA is more than $0.01 per coin which is a precipitous fall from a price of more than $81 last week.
CBW - External Analyst