Terra project is officially dead as the blockchain gets halted at a block height of 7603700. While the reason quoted by them is to prevent the blockchain from governance attacks, we all know that there is no recovery from this. The price of Luna has fallen to $0.0108, and the so-called stablecoin UST is trading at $0.1741. Twitter has already been filled with everyone claiming this is the biggest crash ever witnessed in the crypto industry. To give some context, $1 million in Luna 10 days back will be nearly $100 right now.
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
Why there is no going back?
To understand this, let’s get some idea of how Luna and UST work. UST is an algorithmic stablecoin, and let’s use swap 1 UST for $1 worth of Luna no matter the market price. So, in case UST gets depegged, it creates a serious arbitrage opportunity. When 1 UST is swapped for Luna, Luna gets minted, and UST gets burned, while the opposite is also possible.
So, when UST got depegged and fell below $1, investors started to swap their UST for Luna and get out. While for some, that was the only reason most investors were taking advantage of the arbitrage opportunity, which led to a death spiral. The supply of Luna increased like crazy, from billions to Trillions.
Luna Foundation is trying, but they killed the community itself
In their attempt to recover the UST peg, Terra foundation accelerated UST burn, which means more minting of Luna. For those who were holding the coins means, their money vanished in a few days. The foundation knew this would happen, but there was supposedly no other way. The coin that was trading near $90 a while back is below 1 cent, all because of the rapid supply increase. The inflation that happened in Luna is even higher than in the 3rd world countries we use as an example when talking about hyperinflation.
Now even exchanges are delisting Luna, and Binance has already removed it from futures. Very soon, investors might not even be able to trade their tokens. This failure will be regarded as one of the biggest ones in crypto history.
What are your thoughts as Terra blockchain gets halted and the project is officially dead? And do you think the team could have done something differently to prevent this? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.