- The Terra Luna Classic community is debating whether to increase the burn tax from the current 0.5% to 1.5%, as outlined by the recent Tax2Burn proposal.
- This proposed change aims to restore the burn tax to its initial 1.2% rate, thereby accelerating burns and adding more to the community funds.
- Amid these discussions, both LUNC and USTC have seen price declines due to a market-wide selloff.
An in-depth look at the Terra Luna Classic community’s debate on raising the burn tax, exploring the potential impacts and market reactions.
Terra Luna Classic Proposes Revising On-Chain Tax
The Terra Luna Classic (LUNC) validator, JesusisLord, has put forward a proposal to increase the burn tax from 0.5% to 1.5%. This move is intended to keep the burn tax steady until the total supply of LUNC drops to 10 billion, aligning with the community’s original targets when the burn tax was first introduced.
Community Reactions and Concerns
While the proposal has garnered some support, it has also caused concern among community members about potential impacts. There is a fear that major crypto exchanges, such as Binance, might halt the LUNC burn mechanism if the tax is raised. The community is currently divided, weighing the benefits of accelerated burns and increased fund contributions against the risk of losing exchange support.
Impacts of the New Burn Tax Distribution
Under the existing system, the 0.5% LUNC burn tax is allocated 80% for burns and 20% for other purposes, with the latter split equally between the community pool and the oracle pool. The recent v3.1.3 upgrade has maintained this structure, directing 10% of the burn tax to the oracle pool specifically.
Amplifying the Burn Mechanism
If the tax rate is increased to 1.5%, the burn tax will essentially rise to 1.2% from the current 0.4%, significantly boosting the contributions to both the community and oracle pools. According to Terra Luna Classic validator, “This could substantially raise the rate of LUNC and USTC burns, enhancing the funding for community projects and long-term staking rewards.”
Market Reaction to the Proposal
The proposal’s announcement has coincided with a general market downturn, leading to a 3% drop in LUNC prices over the last 24 hours, with the coin trading at $0.00008094. The trading volume has also seen a significant drop, decreasing by 38% within the same period. Similarly, USTC prices fell by 4%, now trading at $0.01889, and its trading volume fell by 32%.
Future Steps and Expectations
Before the proposal can be put up for governance voting, it requires the successful on-chain implementation of the Tax2Gas. Genuine Labs, a core developer, has projected that Tax2Gas will go live in August. This step is critical for the proposal’s advancement.
Conclusion
The proposal to raise the burn tax to 1.5% in the Terra Luna Classic community is a pivotal decision that aims to enhance the burn rate and funding mechanisms. However, it also raises valid concerns regarding the support from major exchanges. As the community awaits the next steps, the ongoing market reaction underscores the complexity and significance of this decision for the future of LUNC and USTC.
