After a drastic drop in transaction volume on its blockchain, the Terra Classic (LUNC) community has passed a proposal to lower the on-chain burn rate by around 1%. A decision partly encouraged by Changpeng Zhao, the CEO of Binance, which is a major contributor to the burn of LUNC tokens.
Terra Classic (LUNC) lowers its burn rate
Following a governance vote initiated on October 10, the burn tax on LUNC, which previously remained at 1.2%, has been lowered to 0.2% on on-chain transactions.
According to the issuer of the proposal, the volume of on-chain transactions on the Terra Classic blockchain dropped by 91.67% following the implementation of the initial burn on 21 September under proposal 4159. This tax was put in place to reduce the number of LUNC tokens in circulation, as their volume had completely diluted the intrinsic value of the asset following Terra’s collapse last May.
So while the initial move was encouraging, it seems to have been enough to put off the majority of investors. The proposal thus issued on 10 October aims to convince them to use the network while participating in the LUNC burn in a more painless way.
The proposal was accepted with 75% of the votes in favour. According to the author of the proposal and a member of the LUNC community, 82% of the members cast their votes and he also notes that the KuCoin exchange also participated in the vote.
Proposal 5234 just passed! ❤️
This was a community proposal brought forward by community members which passed governance!✅ @kucoincom voted for the first time
Had an 82% vote rateWe are decentralized, I encourage everyone to start discussions and take action!❤️
– Akujiro (@Akujiro2) October 17, 2022
Let’s also note that in parallel to the on-chain tax reduction, the proposal also aims to use 10% of the collected taxes to pay contributors and fund various activities of the ecosystem.
Edward Kim, the co-author of the proposal we’re talking about here, explained in more detail on his Medium blog how this reduction could benefit blockchain in the long run.
A decision encouraged by Changpeng Zhao
Binance had been struggling to decide whether to implement the 1.2% tax on LUNC transactions taking place on its platform. However, following community demand, the exchange agreed to proceed with the burn, which had the direct effect of pushing up the token’s price by around 60%.
In a recent Q&A session, Binance CEO Changpeng Zhao asked the Terra Classic community to review its burn rate, especially since the exchange had already contributed to the burn of more than 11 billion LUNC tokens.
According to Akujiro, this request from CZ would have further motivated this proposal, as he states on Twitter:
@kucoincom @binance @cz_binance the proposal 5234 passed and will go live soon!
We listened to CZs AMA and took his advice to heart!
The community followed and now we need an answer:Will you burn? kucoinburnlunc pic.twitter.com/p64USxaGcl
– Akujiro (@Akujiro2) October 17, 2022
The exchange issued a statement on 19 October confirming that it would now be performing a 0.2% burn directly on its users’ deposits and withdrawals, in line with the Terra Classic community’s decision.
LUNC’s share price does not seem to have been influenced by the news at the time of writing, with a very slight drop of 0.1% over the last 24 hours.
