Terra Blockchain Officially Halted to Prevent Governance Attack
12 May, 2022•1 min read•Blockchain
Terra validators have reportedly decided to freeze Terra’s blockchain due to LUNA’s collapsing market price. The team argues that at such low costs, a whale buyer could easily commit a governance attack on the network.
The chain was officially frozen at block 7,603,700, making native transactions on Terra’s blockchain impossible. Terra (LUNA), which has seen a price collapse of over 99% within the past week, also serves as the protocol’s governance token. Governance tokens let holders submit and vote upon the governance proposals related to upgrading a blockchain protocol. However, if one gains control of over 50% of a governance token’s supply, he could theoretically alter the protocol in a malicious way. Fortress protocol was struck by such an attack last week when a hacker effectively bought out its governance for under $20,000. Today, LUNA has a circulating supply of roughly 3.45 billion. Trading at only a penny, half of the supply would cost just a few hundred million dollars shared between a few wealthy collaborators. Terra’s collapse is largely due to the destabilization of UST’s peg to the dollar, which led to conversions of UST for LUNA en masse. The coin’s price is now less than it was during its ICO, meaning early investors are now underwater if they held their positions. Amid broader stablecoin panic, even Tether began to lose its peg earlier today, though not to the same degree as UST.