Terra was paralyzed again and is considered to “erase the history” of the last days

Terra was paralyzed again and is considered to “erase the history” of the last days
Key facts:
  • They evaluate measures to reassemble the organizational and economic structure of Terra.

  • Yesterday, the network was paused to prevent a governance attack.

This Friday, May 13, at 2 AM (UTC time), the Terra network was paused for the second time in 24 hours. The objective of its developers with this measure is to restructure the network, and one of the possibilities is to return it to its “pre-attack” state, without the intervention of the Luna Foundation and with its stablecoin, terra USD (UST), with collateral to support it.

The detention of Terra in the block 7607789 he was informed by the official Twitter account of the network. This situation had been experienced a few hours earlier, when she was arrested for the first time, as Criptonews reported.

With yesterday’s shutdown of the network, the developers they introduced a patch that prevents new addresses that are not validators from being able to exercise their vote. This eliminates the option of delegating it to third parties as was done in the past. The move was intended to prevent governance attacks.

In addition, Terra’s account retweeted a message from William Chen, director of developer relations at the Luna Foundation. This developer explained in his post that the community is deciding what to do with Terra.

The possibilities on the table, according to Chen, they include restoring the network to its state prior to the “attack” that it would have suffered according to its developers. This is the main theory that the creators of the network use to justify the collapse that began last Monday, May 9.

Some of the options they are evaluating in Terra to reorganize the economy of the ecosystem. Source: Twitter @stablechen

On the other hand, other measures being evaluated also entail the elimination of the Luna Foundation (LFG), in charge of ensuring the operation of UST and terra (LUNA), the cryptocurrency that is burned for the issuance of the stablecoin. Regarding UST, precisely, there is a proposal by developer Do Kwon that suggests a total collateralization model for the stablecoin. This implies the existence of another underlying asset to support its issuance, and differs from the algorithmic method that it currently uses to maintain parity with the US dollar (or at least to try).

Finally, Chen said that “new mechanisms for LUNA will be discussed.” The developer closed his message by saying that they will have to “save the remaining value in the ecosystem and the community and rebuild in the right way.”

The bad news for Terra

While in the Terra community emergency and desperate decisions are made, the cryptocurrency ecosystem continues to react to the week of terror that they had their UST and LUNA cryptoassets and their decentralized finance protocols (DeFi), which had a capital flight of more than USD 25,000 million. Anchor is the most recognized and used among these DeFi protocols.

One of the alternatives to “save” the UST stablecoin is to remove a part of its circulating (10%) to reduce the supply and thus raise its price. At the time of writing, UST is trading at USD 0.16. Such a value is 84% of its ideal price, which is one US dollar.

Some exchanges, such as Binance, ByBit and BitMEX, decided to delist the two Terra crypto assets. However, these were still available on some decentralized exchanges until the network was paralyzed.

As this whole debacle unfolded, other cryptoassets such as bitcoin (BTC) and even a stablecoin such as tether (USDT) have also suffered the consequences of the losses caused by Terra. Also, many people have reported suffering huge losses after the capital they had invested in UST and LUNA disappeared in just a matter of days.