Terraform Labs, the company behind the Terra USD (UST) and Terra (LUNA) cryptocurrencies, briefly halted the Terra blockchain for two hours on Thursday following the Terra ecosystem’s meltdown this week, which caused its stablecoin, UST, to crash, taking with it the rest of the cryptocurrency market.
The halt meant no new blocks were being generated on the blockchain network after its block height of 7603700, and holders couldn't move their Terra assets until the blockchain was unfrozen.
“Terra validators have decided to halt the Terra chain to prevent governance attacks following severe $LUNA inflation and a significantly reduced cost of attack,” the company tweeted.
The move comes after Terra’s not-so-stablecoin TerraUSD (UST) depegged from the $1 level it was supposed to stay at and plummeted over 99% earlier this week.
The company previously stated that delegations will be disabled once block production resumes, and the network should go live again once two-thirds of the voting power comes online.
Do Kwon, the founder behind both cryptocurrencies, unveiled a plan yesterday in hopes of fixing the situation. “Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before $UST can start to repeg,” Kwon wrote in a thread of tweets. “There is no way around it.”
Kwon planned on endorsing a Terra community proposal that would increase the amount of LUNA that could be minted by four times so that holders can “absorb the UST more quickly” or sell because only a certain amount of UST can be sold daily.
But by increasing the minting capacity, LUNA’s price would be susceptible to dropping even more; indeed, it's plummeted significantly since yesterday.
As it stands, about 352,345,072 votes (based on the number of LUNA tokens, not per user) have been cast in favor of the proposal and zero votes against it. The number of votes has increased 270% from 95,200,000 votes on Wednesday. It's unclear whether Kwon will continue to support the proposal after Terra halted the blockchain today.
“For the uninitiated, when a cryptocurrency collapses and becomes incredibly cheap and more is being minted, anyone can just scoop up majority control of the network,” Zack Guzmán, a former crypto reporter at Yahoo Finance, said in a tweet. “That would obviously not be good as a bad actor could do anything they want with it. Halting is a last option.”
In the past few days, LUNA has fallen over 99% to $0.01479, while UST fell 62.7% to $0.37 from its $1 peg, according to CoinMarketCap.