Validators decided to stop the network to prevent attacks on the management after LUNA depreciated significantly.
On Thursday, May 12, Terra’s LUNA token lost more than 99% of its value during the day. As of 7:00 (GMT+3) on May 13, its price fell to $0.008. The fall occurred after the FUD attack on the UST algorithmic stablecoin. As a result, the asset lost its peg to the US dollar. This situation provoked an avalanche-like fall of LUNA quotations, which was supposed to maintain UST stability.
Despite all the measures taken by Terraform Labs, the drop in LUNA quotes began to threaten the network’s management. Therefore, the network’s validators decided to halt the blockchain’s operation. After some time, the network was planned to restart, disabling the delegation of control provided by the Tendermint Delegated Proof of Stake (DPoS) consensus mechanism. Shortly after the restart, however, the validators halted the network again to develop a plan to restore it.
The Terra team’s actions and the announced plans have not calmed the cryptocurrency community, and LUNA has locked at its lowest levels. The value of UST stablecoin during the day on May 12 rose to $0.65, but amid the first shutdown of the Terra network also fell to $0.38. After the second shutdown, it fell to the minimum value of $0.19. The rumors concerning Terraform Labs CEO Do Kwon is one of the anonymous creators of the Basis Cash (BAC) algorithmic stablecoin, which collapsed in January 2021, add fuel to the fire.
We discussed the situation with LUNA, UST and BTC in more detail in a separate article. Cryptocurrency crises have affected the stability of many major stablecoins, including Tether (USDT).
