A new proposal to reduce the 1.2% LUNC tax burn has been introduced by a Terra Classic community member known as Akujiro, and it’s currently gaining traction within the ever-growing community. Recall that Changpeng Zhao (CZ), the CEO of Binance, suggested something similar a few days ago.
As explained in a blog post by Edward Kim, the author of the 1.2% LUNC tax burn proposal, the new proposal aims to lower the taxes from 1.2% to 0.2% and take 10% of the seigniorage collected to the community pool at the end of the epoch.
In the blog post, he explained the concept of seigniorage, how it works and why the Terra Classic community needs it.
Kim said the proposal implies that the members of the community are voting to burn 90% of the total tax during the epoch. He pointed out that this burn is not limited to the on-chain tax, but also includes LUNC tokens that are manually sent to the burn wallet by members of the community.
So, Kim said, “If this passes, you should not be alarmed if you see a green “mint” candle on the Lunc burn chart. This is simply the mechanism by which seigniorage works.”
He also stated that he had once written about how funds need to be raised for the growth and development of the chain. For this reason, he said he’s fully supporting the proposal’s 10% seigniorage clause.
“A community pool can be used for emergency funds, attracting dApps and projects back to the chain, and paying developers to improve the chain. I vote yes for the 0.9 parameter change.”
It’s worth mentioning once again that the Terra Classic Proposal 5234 is meant to achieve a lower tax rate in order to encourage higher on-chain volume.
What Other Terra Classic Community Members Are Saying about the 10% Seigniorage
As expected, not all Terra Classic community members see the new proposal as a good idea, especially the clause of collecting 10% Seigniorage to reward developers, as insinuated by a controversial member of the Terra community, who is pseudonymously known on Twitter as FatMan.
In response to Kim’s opinion, FatMan tweeted, “Giving 10% of the tax to yourself is an even worse idea than the burn tax. Devs absolutely deserve to be paid – either through donations or via formal community pool spend proposals – but automatically redirecting 10% of every burn to “contributors” is authoritarian & wrong.”
Giving 10% of the tax to yourself is an even worse idea than the burn tax. Devs absolutely deserve to be paid – either through donations or via formal community pool spend proposals – but automatically redirecting 10% of every burn to "contributors" is authoritarian & wrong.
— FatMan (@FatManTerra) October 14, 2022
FatMan’s assertion prompted Kim to swiftly clarify that the 10% does not go directly to developers, but to the community pool and must be voted on via governance for distribution.
It was obvious in the comments that only FatMan has a major problem with the proposal as it has always been in the past.
Past records show that he was never in support of retaining LUNC as a Terra Classic native token. He clearly wanted LUNC to be abandoned. There was a time he tried to prove that the embattled digital token will never reach $0.01.
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