Reopen Axelar IBC Channels to Terra

Full support for this proposal and for the Phoenix Directive.

This is a fundamental step to allow Terra and its community to thrive and continue the excellent work of attracting liquidity underway with the Liquidity Alliance initiative.

I’m confident that the Axelar community will support the Phoenix Directive and the whole Terra community.

9 Likes

I am really appreciate to bring this up. I support it. I hope this proposal will approve in the near future.

8 Likes

Response to Key Concerns

We aim to address several points raised by commentators regarding the current situation with Terra assets and the reopening of IBC channels.

1. Terra Assets are unbacked

It is accurate that Terra assets are not currently backed on the Axelar escrow address. However, they are fully backed by Noble USDC and Osmosis wBTC, which are enough to cover all missing assets. This ensures there is no loss of value for users.

2. Risks of Reopening IBC Channels

- Exploit Concerns

The vulnerability that led to the exploit has been permanently patched, similar to updates on other Cosmos SDK chains. Reopening the IBC channels does not introduce additional risks to Axelar routing or other connected systems.

- Controlled Access

Reopening the channels will not immediately expose them to frontends like Squidrouter or Satellite. Only informed users will bridge assets before the unbacked tokens held in the recovery contract are burned. This controlled process is essential to execute a discounted OTC transaction that secures sufficient Axelar assets to fully restore backing on the Axelar side.

- The Necessity of Reopening

Reopening IBC channels is the only viable path to resolving this situation. It allows Market Makers to transfer funds in and supports the process required to restore the system’s balance.

3. Migration to a New Token as an Industry Standard

We respectfully disagree with the notion that migrating to a new token is a standard practice. Instead, as an industry, we should strive for the best possible outcomes for users, liquidity providers, and the broader ecosystem.

Migrating to a new channel and abandoning these stakeholders with unresolved debt is inconsistent with financial industry standards and undermines trust. Permanently closing the current channel would create a similar outcome.

4. Comparison of Options

Reopening Existing IBC Channels

Pros:

  • Existing liquidity pools with Axelar assets remain functional.
  • Inactive users unaware of recent events can recover their full value.
  • Terra retains approximately $1M worth of liquidity tied to Axelar assets.

Cons:

  • Requires a controlled and deliberate process to manage the recovery of unbacked assets. (This has been set out in our proposal above).

Creating New IBC Channels

Cons:

  • All Axelar assets on Terra become worthless.
  • Loss of approximately $1M worth of liquidity on Terra, especially in the ASTRO-axlUSDC pool.
  • Axelar would effectively exit the Terra market, requiring a disruptive and costly reboot.
  • Sets a dangerous precedent, where a single multi-sig group can disconnect an Axelar chain, rendering its assets permanently locked and unusable.

Conclusion

Reopening the existing IBC channels is the most prudent and responsible path forward. It preserves user value, maintains ecosystem stability, and upholds trust in the broader Axelar and Terra communities. Migrating to a new token or channel should remain a last resort, as it unnecessarily harms stakeholders and disrupts market integrity.

10 Likes

I’d love to see the bridge reopen. It’s important for interoperation and decentralization. I’m sure it would also be great for Axelar, because Lunatics will certainly explore and add value to the Axelar eco. GMC has a huge interest in having this bridge reopened and we don’t forget those who helped us.

8 Likes

I fully support this proposal for the following reasons:

  1. The original exploit has been fixed
  2. The Terra chain is under new leaderships where vulnerability oversights will no longer have the opportunity to manifest
  3. The Axelar assets that were exploited have been bought back & once the bridge is opened the missing funds will be fully restored
  4. Users with Axelar assets on Terra have their assets trapped through no fault of their own and given points 1-3 these users deserve restitution
  5. Axelar assets continue to have an important role to play on Terra and Axelar are missing a HUGE opportunity by not allowing Axelar assets to participate in Terra liquidity alliance to the extend they could/should do at the detriment of AXL holders

I’d like to say well done to the team @ Phoenix Directive for resolving this issue in a calm, professional & thorough manner.

To the Axelar team - open the bridge and let the liquidity flow. LFGGGGG!

9 Likes

All,

I am liquidity provider accross Cosmos and an Axelar power user.

I might be missing something here, but I strongly disagree with @Mike-LunaNova and @Georgios_Vlachos interventions here. Those interventions seem to imply that reopening the channels necessarily creates some risks for the users, but as far as I understand those risks can be 100 % mitigated using some not-so-creative solutions like creating a multi-sig wallet between Phoenix Directive (1 key), the Axelar Foundation (1 key) and another trusted party (1 key). This multi-sig would have 1 purpose: once the channels are reopened, the multi-sig will bridge the assets recovered by Phoenix Directive to Axelar and then hold the .axl assets on Terra until they are burned by a Terra gov prop.

That’s it. No risk. Maybe a bit more work (and worst case you can ask the Terra Community to pay a fee for this, I am pretty sure they will vote Yes) but that will be way better for all users and for capital efficiency of Terra.

The money is there, waiting to be bridged to Axelar. Please be a little creative here. The recovery that took place is amazing, I am not sure any other chain could have done it. Now it is your time to help Terra users, they completed the tough part already.

9 Likes

Me again, I just had another idea that would be way simpler if it works.

Can the Phoenix Directive just use the assets it recovered (USDT.kava, USDC.noble and wBTC.osmo) and swap them for .axl assets, then IBC them to Axelar Network and then simply send them to the Escrow Address dedicated to Terra on the Axelar Network (I think it is the following address: axelar1kx2k3mpugtwtajd4zsykx90cn8xawe54z6z9e4)?

By doing a direct send, there would be no new .axl created on Terra and that would back everything up on Axelar side. Then once the channels reopen, users can freely IBC out of Terra and/or redeem for native assets.

Channels just need to reopen once the balance in the Axelar Escrow Address is at least equal to the amount of .axl tokens existing on Terra. That way it is risk free for users.

5 Likes

I have literally never heard of this before reading your comment here. Can you provide some examples of where you have seen this done in the past?

2 Likes

Let’s help the Phoenix rise from the ashes! This approach is not only creative but safe and effective. I vote yes :saluting_face:

7 Likes

100% yes to expand the community

7 Likes

As a member of the Galactic Mining Club (GMC) community and council, I fully support this proposal.

The GMC mission statement is brining BTC liquidity to cosmos. And to Terra, our home chain, in particular. Being able to use axlWBTC on Terra once again opens the door for us to provide tens of thousands of dollars, in BTC liquidity.

Moreover, in the past few months the Phoenix Directive have demonstrated their commitment to revitalize the Terra ecosystem. A key component in the aforementioned efforts, was the establishment of the Liquidity Alliance module. That rewards active participants (LP providers).

On a personal note, I would like to join the wBTC-axlWBTC on Terra. Think about it… A pure BTC LP, that’s the dream.

6 Likes

This proposal is critical for both Terra and Solid’s ecosystem. Reopening the IBC channels with Axelar will restore liquidity and functionality to key protocols, enabling Solid and other projects to thrive. It’s a pivotal step toward ecosystem recovery and long-term growth. Let’s support this to ensure a stronger future for everyone involved! :raised_hands:

5 Likes

Terra survivors deserve that support. Just run it.

5 Likes

It seems like the most logical solution is as Phoenix Directive proposes, to re-open the existing IBC channels with the acquired backed amounts. As others have mentioned, this doesn’t mean the bridge option is immediately added back to frontends until the issue is fully resolved. So, I don’t really see any confusion coming about when doing it this way. Once fully resolved, frontends can add back the previously existing option and carry on. :+1:

Disclaimer: I am an Astroport contributor and my opinion is my own.

7 Likes

I’m in full support of this proposal, and I urge governance participants to vote in favor of reopening the IBC channels between Axelar and Terra.

Work by the Phoenix Directive, Terra’s new community-run chain management organization, has fully addressed the exploit that occurred in July. They have patched the vulnerability, passed a blockchain-wide governance proposal to fully fund the recovery from the exploit, and secured $3M in funds to rectify the current imbalance. Reopening the IBC channels aligns with these recovery efforts, while also encouraging arbitrage and trading activity to help finish the job.

To ensure fairness and transparency, Terra (as led by Phoenix Directive) will burn the recovered Axelar assets. This will restore the integrity of the Axelar-Terra bridge, and maintain parity across both chains. Furthermore, Terra will convert any non-Axelar assets to Axelar equivalents, reinforcing stability and trust in the network.

Reopening IBC channels is not just a win for Terra; it also supports the broader Axelar network. Reactivating the channels will create opportunities for traders and arbitrageurs to capitalize on discounted assets, driving activity and value for both ecosystems. This mutual benefit strengthens the interoperability and financial health of both chains.

Reopening the Axelar channels allows important frontends like Axelar and Squid to resume seamless routing of assets to Terra. This will enhance user experience, making it easier for participants to transact, trade, and engage with the Terra ecosystem. Functional integrations are essential for attracting new users, retaining current participants, and fostering innovation in defi more broadly.

The Phoenix Directive continues to demonstrate its implacable commitment to restoring Terra with patience, professionalism, and integrity. Since taking a leadership role in the community, it has rectified this exploit, improved security, created the very successful Liquidity Alliance to propel the growth of cross-chain liquidity on Terra, and given direction and hope to a sizable community of die-hard defi stalwarts who still believe that a decentralized economy requires decentralized money.

Please vote in favor of reopening the IBC channels!

7 Likes

Please reopen Terra channels as the chain is now community run and incompetent TFL is no longer involved. The fact that developer negligence on a partner chain could lead to infinite minting AND this current outcome for axelar assets is a shame almost as equally on Axelar as it was on TFL… what chain is next to have you lock out all Axelar assets and make them worthless? I assume every axelar asset on every chain faces the burden of suffering the same fate as Axl Terra assets… and that’s very scary.

You could have stepped up and communicated and worked with Terra on this but the only action that has been taken has been by the Terra community.

Do the right thing and open IBC bridges or never hear the end of how dangerous axelar assets really are

2 Likes

As a developer on Terra, I strongly support the proposal to reopen the IBC channels between the Axelar network and the Terra blockchain. This move is vital for the health and functionality of existing liquidity pools and the protocols on Terra.

The Phoenix Directive has successfully acquired the assets needed to refill the escrow, demonstrating their commitment to maintaining a stable and secure environment.

Getting these channels reopened is a crucial step for continuing progress with the redevelopment of Terra after the dissolution of TFL. I urge Axelar to act quickly and support this proposal to restore the backing of Axelar bridged assets currently on Terra and allow Phoenix Directive and the larger Terra community to move on from the exploit and focus on growth rather than recovery.

Thanks!

2 Likes

Phoenix Directive posted a chain upgrade that will burn the first batch of acquired assets:

https://common.xyz/terra/discussion/26042-Terra%20Chain%20Upgrade%20v2.13

2 Likes

Hello Axelar team and community!

Thank you for your time and open arms for this proposal. I think it´s really in favor to both users.

As both proposals passed successfully on, there seems to be no obstacles to reopen bridge channels to Terra, right?

Could anyone give the timeline when both communities decisions will be executed?

I am absolutely sure that many users are waiting for it.

Thank you in advance!

Hi everyone, the terra-2 channel has been re-activated.

Terra paths will show up on satellite.money frontend after the excess supply on Terra is burnt. In the meantime, users can use a 2-hop IBC flow (eg Ethereum mainnet->Axelar->Terra or Osmosis->Axelar->Terra) to bridge axlUSDC and other assets to Terra.

3 Likes