Terra halted its blockchain on Thursday evening after validators decided to try and prevent governance attacks as the severe inflation of LUNA reduced the cost of attack for bad actors.
“The Terra blockchain was officially halted at a block height of 7603700,” TerraUSD said in a Twitter post.
“Validators are applying a patch to disable further delegations, and they will coordinate to restart the network in a few minutes,” said Terra’s official page.
In what is believed to be a coordinated attack on the Terra ecosystem, LUNA crashed to below half a cent on Thursday while UST went severely off its peg. Since holders of UST can redeem 1 UST for $1 worth of LUNA, arbitrageurs have been repeatedly buying $UST at a discount and minting LUNA before selling for the profit on the difference. In four days, LUNA’s supply went from 340,000,000 to over 42,000,000,000 at the time of writing.
No specific plan has been announced to rebuild the system, and it isn’t clear whether or not the Terra team wants to abandon either LUNA or UST.
On May 11, TerraLabs founder Do Kwon wrote in a thread,
“With the current on-chain spread, peg pressure, and UST burn rate, the supply overhang of UST (i.e., bad debt) should continue to decrease until parity is reached and spreads begin healing,” he said. “Naturally, this is at a high cost to UST and LUNA holders, but we will continue to explore various options to bring in more exogenous capital to the ecosystem & reduce supply overhang on UST.”
So far, the only official course of action has been to enact Terra community proposal 1164, which suggests increasing the basepool from 50M to 100M SDR, or in other words, raising the system’s minting capacity from $293 million to $1.2 billion.
Terra’s blockchain resumed on Thursday evening shortly after it was halted.
The Terra blockchain has resumed block production.— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) May 12, 2022
Delegations are disabled now that the chain is live with the new code merge.
Validators, please check the Discord announcements for the latest patch notes. https://t.co/CGQgfMDWQe