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Terra validators restart network after second outage in 24 hours

ForkLog
Terra validators restart network after second outage in 24 hours

Against the backdrop of the collapse of the native token LUNA and the algorithmic stablecoin UST, Terra validators halted the network for the second time in a day. They attributed the move to the need to devise a ‘recovery plan’ for the network.

Update:

Terraform Labs announced that validators decided to resume the network’s operation. The network is up, but on-chain swaps are disabled, and IBC channels are closed. Users were invited to move wrapped assets such as bETH to native platforms.

On May 12, validators had already stopped the network to prevent governance attacks, which became possible due to the dramatic drop in LUNA’s price. They resumed work the same day, disabling the delegation function.

Terraform Labs did not disclose what measures the company intends to take to fix the situation. Previously presented initiatives did not save ecosystem assets from almost complete devaluation.

On May 10, UST lost parity with the US dollar — the stablecoin has yet to regain its peg. At the time of writing it was trading around $0.13, according to CoinGecko.

The LUNA cryptocurrency, used to issue UST, has fallen by nearly 100% over the past seven days. On May 6 the asset traded at over $80 — at present its price is $0.000059 (Binance).

LUNA/BUSD price chart on Binance. Data: TradingView.

One of the measures proposed by the developers involved expanding the base pool of LUNA and increasing the supply of the cryptocurrency. This was supposed to enable a faster withdrawal of the required amount of UST from circulation.

The activation of the proposal led to the circulating supply of LUNA exceeding 6.5 trillion coins. The UST supply is estimated at 11.3 billion, according to SmartStake.

Amid the decline in Terra’s native token price, crypto exchanges began winding down operations with the coin. On May 12 Binance delisted base-asset-denominated perpetual contracts for LUNA.

On May 13 the platform removed from the spot market almost all trading pairs with LUNA and UST, as well as the BUSD-denominated perpetual contracts for LUNA. The exchange allowed users to sell assets for BUSD.

Following the exchange’s decision, there was a large inflow of LUNA to Korean exchanges.

Huge volatility in LUNA led to price display problems on Chainlink’s decentralized oracle network, used by many DeFi projects.

The lending protocol Venus Protocol reported a loss of $13.5m. Chainlink oracle settings do not permit displaying LUNA price below $0.1 (the actual value at the time was around $0.01). Attackers exploited this — they deposited millions of tokens on the platform and used them as collateral.

The same exploit was also reported by Blizz Finance on the Avalanche blockchain. It is not known what damage was inflicted on the project.

As CoinDesk reported, Do Kwon was one of the anonymous co-founders of the collapsed algorithmic stablecoin Basis Cash.

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