The Terra blockchain has resumed block production after being halted for around 2 hours.
The ongoing UST crisis has caused the LUNA supply to rise exponentially to nearly 34B tokens as UST holders rush to redeem their tokens, from around 350M on May 9. The resulting runaway inflation has seen the price of LUNA fall 98% to just $0.02 at the time of writing.
Terra uses a Proof-of-Stake consensus mechanism that requires the majority of LUNA tokens to be staked with trustworthy validators who secure the network and process legitimate transactions.
At the current market cap of roughly $700M, the risk of governance attack on the blockchain has increased substantially. Such an attack would entail buying a large chunk of LUNA at these depressed prices and delegating it to malicious validators, who could then process transactions to potentially steal all the assets held on Terra.
And so, the Terra team decided to preemptively halt the blockchain and have deployed an emergency upgrade that disables new delegations. The blockchain was restarted after two-thirds of the validators came back online.
The majority of UST and LUNA trading continues to take place on Binance, which has delisted LUNA futures and has said it will delist LUNA if it drops below $0.005.