It appears the drama surrounding Terra *LUNA) and the UST stablecoin is far from over. While the latter has yet to stabilize remotely, the Terra chain has been halted altogether. Although the process raises many awkward questions, there is a good reason for doing so.
Terra Chain Is Put On Hold
Following the recent price collapse and developments affecting the Terra ecosystem, it is almost surprising they did not make this decision sooner. While the team tries to stabilize $UST and keep $LUNA afloat, all actions seem to backfire sooner rather than later. UST is still fluctuating wildly and the value of $LUNA has dripped below $0.01 in recent hours. Quite the feat for a currency once valued at over $100.
Unfortunately, the team now decided it is best to halt all Terra blockchain transactions. The decision went into effect on block 7.603.700 and will remain suspended for a while. A chain restart is planned, although it will feature a temporary network “upgrade” to disable LUNA staking. The developers argue it has become too cheap to acquire many LUNA and take over the chain’s governance. Furthermore, staking delegation will be disabled for the foreseeable future.
While the above is a significant risk to decentralization, so is halting the chain. Most validators and the initial developers made the decision. There is no reason to put the network’s governance at risk, as enough things have gone haywire recently. However, preventing users from transacting will only spark more panic and achieve the opposite effect of stabilizing either LUNA or UST.
The Terra blockchain was officially halted at a block height of 7603700.https://t.co/squ5MZ5VDK
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 (UST) 🌍 Powered by LUNA 🌕 (@terra_money) May 12, 2022
Furthermore, the same team decided to issue a higher amount of LUNA to burn $UST tokens with the community’s approval. Additionally, other UST in the community pool would be burned, which makes sense. Unfortunately, the low LUNA price makes it too easy to mint more UST and ensure stability remains out of reach. Halting the network seems the only option, even if it is far from a popular option.
Decentralization At Its Finest?
The decision to halt the Terra blockchain has not been well-received. Many people see this as the opposite of decentralization, as a handful of players decided to switch things off for a while without involving the community. Then again, any network relying on validators to process transactions si inherently more centralized than decentralized. Sadly, many top-tier networks are relying on validators today, and they may all face similar issues in the future.
Unfortunately, there is no indication of the Terra chain restarting. There will be more communication on that front, but for now, there are more questions than answers. That is always unfortunate, and can create much unnecessary friction. It does not appear to affect the LUNA stored in wallets or exchanges, as there will not be a token swap [for now?].
However, users who have bonded LUNA and want to unbond it may face some timing issues. There will likely be some delays to the original schedule because the chain is halted temporarily. That is another can of worms waiting to be opened over the coming days.
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