Editor's note: This story and its headline were updated after publication to reflect the fact that the Terra blockchain was restarted.
After Terra’s UST stablecoin lost its U.S. dollar peg earlier this week, the firm’s LUNA cryptocurrency went into free fall. And today, after shedding nearly 100% of its value over the past week, Terra validators announced that they would halt the blockchain.
Per a tweet from Terra’s official account, validators “decided to halt the Terra chain to prevent governance attacks following severe $LUNA inflation and a significantly reduced cost of attack.”
In other words, given how dramatically the price of the LUNA governance token has fallen, the blockchain network rapidly became much more susceptible to attackers.
In a subsequent quote-tweet, Terra wrote that it would be a temporary outage: “Validators are applying a patch to disable further delegations, and they will coordinate to restart the network in a few minutes.”
Terra developers announced roughly an hour and half later that the blockchain had resumed block production, albeit with staking on the network disabled. "Delegations are disabled now that the chain is live with the new code merge," they tweeted.
LUNA currently sits at a price of just over $0.01 per coin, per data from CoinMarketCap, a precipitous fall from a price point of over $81 just one week ago. That’s a 99.99% fall over the past week, although much of the decline has occurred over just the past three days.
Earlier today, Terraform Labs—the creators of LUNA and UST—unveiled a series of steps aimed at salvaging the Terra ecosystem following the collapse of both coins.
Terraform Labs said that it would burn (or effectively destroy) any remaining UST in the community pool, as well as burn any UST that is running on Ethereum, and stake $240 million worth of LUNA to avoid potential governance attacks. The move to halt the blockchain today is similarly designed to avoid such attacks.
Crypto industry observers and insiders offered widely negative takes on the announcement. Crypto twitter mainstay Cobie, who hosts the UpOnly podcast, called the move “a bit fucked” on Twitter.
“Their plan is to let hyperinflation of Luna dissolve the bad UST debt, but the chain security of Luna goes down as hyperinflation reduces its price,” Cobie continued. “So the chain is not even safe enough to continue their plan for recovery?”
Describing it in soccer terms, What Bitcoin Did podcast host Peter McCormack remarked, “It’s the 89th minute, they are losing 432-0 and have run off with the ball.”
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