Terraform Labs Halt UST, LUNA Transactions on the Terra Blockchain, Works On A Bailout Plan
The collapse of the Terra ecosystem and its native LUNA cryptocurrency this week has sent shockwaves all across the crypto space. On Thursday, May 12, the parent company Terraform Labs announced that it will halt the entire blockchain.
Meaning no more processing of UST and LUNA transactions. The official announcement reads: “The Terra blockchain has officially halted at block 7607789.Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come”.
This happened for the second time in less than 24 hours as the LUNA price has crashed to $0. As of the press time, UST remain de-pegged from the U.S. Dollar.
Following the recent events, several popular crypto exchanges have started taking corrective measures. Amid the fall of Terra LUNA and all the mayhem in the market, popular crypto exchange Coinbase reported several outages.
At the same time, crypto exchange Binance said that it shall start delisting the spot trading pairs for UST and LUNA. With exchanges backing off from trading the LUNA crypto, things can exacerbate going ahead.
However, despite all the turmoil, Terraform Labs is working on a bailout plan to get out of the abyss. As per the latest report, Terraform Labs is currently in talks with Swiss-based leading asset manager GAM Holding to help support the Terra stablecoin.
As a result, GAM has offered to invest $2-$3 billion to absorb the excess supply of UST from the market and re-establish UST’s peg to the USD. GAM CEO Peter Sanderson said: “Our interest in supporting UST reflects our interest in supporting a vibrant, innovative, and resilient crypto market. We firmly believe in Terra's ecosystem. Just as importantly, we believe in UST's algorithmic approach to valuation. When investors have proper incentives, they naturally trade in ways that maintain price stability. When black swan events impact markets, opportunities blossom. We see opportunity in UST's recent activity, and continue to see promise in Terra's broader strategy.”
-edit- The bailout turned out to be fake news.
The recent collapse of the Terra ecosystem has affected other participants from the decentralized finance (DeFi) space. Two DeFi protocols - Blizz Finance and Venus Protocol - announced that their platform were affected due to the difference in the LUNA price feed as Chainlink paused the LUNA oracle. These DeFi protocols have reported losses in millions of dollars.
It will be interesting to whether if the people behind the Terra ecosystem can work out a mechanism to restore the UST peg.