Wednesday, June 19, 2024
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Terra Classic Votes to Revise Burn Tax Distribution

The Terra Classic (LUNC) community is currently engaged in a crucial vote regarding modifying its burn tax distribution. This proposal, submitted by developer Frag of Genuine Labs, aims to reshape the current structure to enhance the long-term viability of the network’s staking system.

Proposed Burn Tax Distribution Changes

Under the existing LUNC burn tax mechanism, a 0.5% levy is applied to transactions on the Terra Classic blockchain. Currently, 80% of this tax is designated for token burning, with the remaining 20% divided between the community pool (10%) and validator rewards (10%).

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Proposal 12098, which garnered community approval in April 2024, advocates for an adjusted distribution model with a 10% allocation each for the community pool and a newly introduced oracle pool. This aims to strategically channel some burn tax revenue towards bolstering long-term staking rewards for validators.

Implementation Details and Timeline

Frag’s proposal outlines a comprehensive implementation plan encompassing various technical adjustments. The core aspects include updating the network’s code (ante handler) to reflect the revised distribution logic, modifying relevant parameters, and tailoring proposal types and handlers to align with the new structure.

Additionally, rigorous testing phases are factored into the plan, involving the creation of unit tests and both local and testnet deployments. Finally, a coordinated mainnet rollout with a temporary chain halt is envisioned to ensure a smooth transition. Frag estimates a completion timeframe of 56 hours upon approval, with an anticipated cost of $3600 in LUNC.

Potential Impact on LUNC Price and Staking

The proposed changes will have a two-pronged effect. The block rewards distributed directly to users will be reduced immediately, but the reallocated burn tax will be directed to the Oracle pool, increasing long-term staking rewards for validators.

This shift may incentivize more validator participation, strengthening the Terra Classic network’s security. While validators may see higher staking rewards, delegators may experience a slight decrease (about 0.5%) in the Annual Percentage Rate (APR), depending on on-chain transaction volumes.

The proposal to implement a burn tax on Terra Luna Classic (LUNC) has received overwhelming support from validators, with a 99.97% approval rate. Notable validators like Interstellar Lounge, JESUSisLORD, and StakeBin have voted in favor, but some top validators have yet to participate.

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Despite the support, LUNC’s price has dropped by 6.7% in the past 24 hours to $0.00009789, possibly due to a combination of factors. Trading volume has increased, suggesting heightened investor interest.

The proposal aims to balance reducing the token supply with creating a sustainable staking ecosystem, which may lead to short-term decreases in user rewards but potential long-term benefits for network security and validator participation. The outcome will become clearer as the remaining validators cast their votes in the coming days.

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Solomon Odunayo
Solomon Odunayo
Solomon is a trader, crypto enthusiast, and analyst with over four years of experience in the industry. He strongly believes that crypto assets and the blockchain will continue to gain prominence. At, he focuses on news, articles with deep analysis of blockchain projects, and technical analysis of crypto trading pairs.

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