Validators for the Terra blockchain have decided to officially halt network activity on Thursday in a move designed to prevent governance attacks following the severe devaluation of the network’s LUNA token.
Terraform Labs' official Twitter handle confirmed that the blockchain network was halted at a block height of 7,603,700. The move follows a series of dramatic events that triggered an unprecedented decline in the price of LUNA and its associated TerraUSD (UST) stablecoin. The stablecoin, which was designed to maintain algorithmic parity with the United States dollar, lost its peg earlier this week before plunging below $0.30.
The Terra blockchain was officially halted at a block height of 7603700.https://t.co/squ5MZ5VDK— Terra (UST) Powered by LUNA (@terra_money) May 12, 2022
Terra validators have decided to halt the Terra chain to prevent governance attacks following severe $LUNA inflation and a significantly reduced cost of attack.
With LUNA’s price collapsing more than 99%, Terraform Labs is no longer confident that it can prevent governance attacks. In other words, the price decline “significantly reduced [the] cost of attack," the ecosystem operator tweeted Thursday.
However, the downtime in block production didn't last long, with Terra later announcing 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.
The patch release is out:https://t.co/BZ8t86cuwA— Terra (UST) Powered by LUNA (@terra_money) May 12, 2022
Delegations will be disabled once block production resumes.
The network should go live once 2/3 of the voting power comes online. An update will be provided accordingly. https://t.co/vffpjw7uom
As Cointelegraph reported, LUNA/USDT contracts were delisted on Binance on Thursday after the trading pair fell below 0.005 USDT. That followed a delisting of LUNA tokens by cryptocurrency exchange Huobi the previous day.
Earlier this week, Terraform Labs co-founder Do Kwon shared details about a recovery plan that would help save the UST peg from further devaluation. Terra's official Twitter handle further elaborated on those plans on Thursday by laying out a strategy to burn $1.4 billion UST and stake 240 million LUNA. However, the details of the rescue plan have failed to deter market sell pressure.
1/ The prevailing peg pressure on $UST from its current supply overhang is rendering severe dilution of $LUNA.— Terra (UST) Powered by LUNA (@terra_money) May 12, 2022
The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads.
Before the events of this week unfolded, Terra LUNA was a top 10 cryptocurrency project by market capitalization, and its UST asset was the third-largest stablecoin behind only Tether (USDT) and USD Coin (USDC).
The article was updated with information about Terra's patch update, which allows block production to resume.