The blockchain behind the collapsed TerraUSD stablecoin and the affiliated Luna token stopped processing new transactions for the second time in less than a day.
Terraform Labs said in a tweet from its verified Twitter account that validators, the entities responsible for verifying transactions on the blockchain, had taken the step to “come up with a plan to reconstitute” the Terra network.
TerraUSD was one of the largest and most closely-watched algorithmic stablecoins before its intended 1-1 peg to the dollar disintegrated this week. The unraveling sent shock waves through crypto, triggering deep losses before sentiment stabilized.
On Friday, a tweet from a Terra developer that was reposted by Terra’s verified account said the community was weighing several options to recover the ecosystem. Those options include restoring the Terra blockchain to where it was before TerraUSD crashed, in an apparent attempt to swiftly undo the damage caused by the event.
Another proposal the developer tweeted was “fully collateralizing” TerraUSD, or UST, and drafting new mechanisms for how to redeem it against sister token Luna. The tweet didn’t include any details on how the proposals would be accomplished.
The relationship between UST and Luna was central to attempts to maintain the former’s $1 peg. Traders could swap a unit of the stablecoin, whether it was trading at, below, or above $1, for one unit of Luna, and vice versa. The effect of unloading UST at prevailing prices was to dramatically increase the supply of Luna, further depressing the price of that token.
The developer also appeared to suggest that ending Terraform Labs’s control of the Terra ecosystem was under consideration. “We must salvage the remaining value in the ecosystem and community and rebuild the right way,” they wrote.
Representatives for Terraform Labs’s main backer Do Kwon and the Luna Foundation Guard didn’t immediately respond to a request for comment.
The stablecoin was trading below 20 cents on Friday morning in London, according to Bloomberg data. The Luna token has sunk to virtually zero, compared with its all-time high of $119.51. Wider crypto markets recovered, with Bitcoin rising as much as 8.4%.
“A quorum among validators is attempting to halt the network in order to avoid a DECIMAL crisis due to exponential depreciation of LUNA,” read one post on the Terra Validators Discord server, seen by Bloomberg prior to the transaction shutdown.
The total amount of Luna tokens in circulation is up from 1.46 billion yesterday to more than 6.5 trillion on Friday morning, according to data from CoinMarketCap.