The drama continued in the TerraUSD (UST) ecosystem this afternoon, when its operations were halted this morning to prevent governance attacks. “Terra validators have decided to halt the Terra chain to prevent governance attacks following severe Luna inflation and a significantly reduced cost of attack,” Terra’s official Twitter account tweeted. The blockchain began producing blocks a few minutes later and its block explorer showed that regular production of blocks was in progress. However, staking of Luna tokens was disabled after the restart until two-thirds of the blockchain’s validators – systems used to confirm transactions on its network – come online.
Why Did Terra’s Blockchain Halt?
Luna is a governance token on the Terra blockchain. It is also used to maintain Terra’s parity with the US dollar. It’s supply increases when Terra’s peg declines and decreases when it increases above the $1 figure. In the last four days, the markets have been flooded with new Luna tokens to help restore Terra’s unhinged peg, leading to an oversupply that has crashed Luna’s price. The token now trades for less than a dollar. Cheap prices make it easy for malicious actors to purchase the tokens, stake them on the network, and gain control of the blockchain.
A ceasing of operations on Terra’s blockchain meant that all transactions for TerraUSD (UST), Terra Luna and other cryptocurrencies operating on its blockchain stopped. This was bad news for investors in UST and Luna because demand for the currencies is mainly concentrated in Terra’s ecosystem.
Not that it made much of a difference to their prices, which continued to slide downwards in wake of a peg crisis that has engulfed their ecosystem. As of this writing, Luna was trading at $0.020, down 98.97% from its price 24 hours ago while UST was still off-kilter from its 1:1 peg with the US dollar and trading at $0.40 to the dollar.