The team behind Terraform Labs is well known. The project was started in 2018 by Do Kwon and Daniel Shin. Do Kwon previously worked at Microsoft, while Shin is known in Korea as the founder of one of the largest e-commerce platforms, TMON, and now works as the CEO of CHAI, a partnering online payments platform on Terra. In the middle of December 2021, almost three months after the Columbus-5 update was introduced, a bug allowing bots to make millions on incorrect asset price differences was discovered by the network's arbitrators. Due to the lowered oracle price of Terra's native asset, LUNA, arbitrageurs took advantage of an upgrade introduced with Columbus-5 to keep the TerraUSD Stablecoin (UST) price stable. Compensating for its price by buying or burning undervalued LUNA, arbitrageurs created a large gap in the LUNA to UST price ratio, taking advantage of the LUNA price on the TerraSwap DEX and on-chain mismatch. Such manipulation brought them hundreds of thousands of dollars per transaction. LUNA's unusual behavior, caused by these spikes and reflected in the chart by long wicks, was noticed by users and reported to Terraform Labs co-founder Do Kwon. "You guys are getting worked up over a relatively small arb," Do Kwon responded on Telegram and explained his position by saying that a two-million-dollar arbitrage would not hit the twenty-billion-dollar Terra network. The project's co-founder also joked about panicked users on Twitter, writing, "Its called an arb - arbs make markets more efficient. You should do it too!" However, Do Kwon then took heed and acknowledged the problem. Anchor Protocol also signaled the problem with bLUNA being priced way below the market price. In May 2022, while being the largest stablecoin on the market, UST lost its peg to the US dollar and never managed to recover. Terra’s unique mechanics allowing users to exchange one UST for one dollar worth of LUNA tokens to help restore the peg, didn’t manage to fulfill its task, and in just a couple of days billions worth of digital assets were erased in the collapse of the LUNA token from nearly $100 to less than $0.0001. On May 7, 2022, the UST token’s value went to $0.98 and kept that level longer than the arbitrage theory around which the algorithmic stablecoin’s mechanics were based, this led to large amounts of the digital asset being removed from various protocols. Although this may be attributed to FUD growing on crypto Twitter, some attributed the Terra bank run to a coordinated attack. The Luna Foundation Guard, established months prior, had been accumulating bitcoin since its creation to put it on the market and restore the peg of the stablecoin if needed. In a highly promoted campaign on social media, and through various news outlets, the LFG was boosting it had managed to amass the impressive $1.2 billion worth of BTC and other digital assets. The funds gathered by the Foundation started being converted to UST by it, and BTC was transferred to Jump capital to enter trades with the Foundation in large size and on short notice. Three days later, these efforts didn't bring any fruits and although there was a small restoration in the peg of the stablecoin for a brief moment, it likely triggered the remaining UST holders to trade their tokens, once again depegging the digital asset. In a “last-ditch effort” the Foundation sold 33,206 BTC for an aggregate 1,164,019,521 UST, and later swapped 883,525,674 UST for 221,021,746 LUNA which was staked across a range of validators to protect the network from a possible governance attack as the amount of LUNA kept increasing. Since none of the efforts to restore the UST peg were successful, the LUNA token inflation kept growing, thus reducing the cost of a governance attack, the Terra validators decided to halt the Terra chain temporarily on 13 May, 2022. Around nine hours later, when the blockchain was resumed, validators were asked to disable on-chain swaps and IBC channels. This didn’t stop LUNA’s plummet and the Terra blockchain was officially halted at block 7,607,789 while a plan to reconstitute the network was being created. Around the end of May 2022, Do Kwon, Terra’s infamous founder, announced the release of Terra 2.0 - a hard fork of Terra that isn’t pegged to UST and is governed by a new  LUNA token. The new token is to be airdropped to the original LUNA token holders in various schemes depending on their holdings, the platform used for keeping the assets, and other factors. At the same time, the old version of the blockchain is to remain in its state, but under the name Terra Classic and its LUNA token is to be renamed to LUNC.