The Terra team had reacted, as best they could, following this violent crash of the crypto during May 2022. The plan then was to restore the image of the crypto by renaming itself “Terra Classic”. With the help of a fork, the new blockchain Terra Classic was born with its token Luna Classic (LUNC). Three months later, and against all odds, LUNC surprised investors, it was up 330% a week ago.
What is the LUNC tax burn?
Terra Classic has implemented a new mechanism for burning the on-chain transaction tax on LUNC and USTC. Valued at 1.2%, this tax would be the right solution to the LUNC oversupply.
Since the stock market crash in May, people have been worried about the amount of Terra Classic available. The 1.2% tax should help solve this problem. All blockchain Terra Classic transactions will incur a 1.2% fee. This also includes wallet and smart trac interactions. However, trades on an exchange may not be eligible for the fee. The idea behind the tax is to help reduce the glut of Terra Classic . One of the main drawbacks is that blockchain trading will become more expensive as a result.
While the community is leaning more towards accepting a deflationary price, it remains to be seen whether or not developing projects will find this difficult. Thus, the 1.2% tax cut proposal was successfully passed by the community, receiving over 99% of the votes in favor. The 1.2% tax cut was applied to the block of 9,475,200 21 06 on September 20.
While some exchange platforms have agreed to play along, others are a bit more reluctant to do so. Like the case of Kraken which joined the list of exchanges accepting the “tax burn”, but for an application… only on-chain of it, that is to say deposits and withdrawals of LUNC on Kraken. Kraken accounts for nearly 1% of LUNC’s daily trading volume, which is a far cry from what Binance (44%) or Kucoin (10%), the two main crypto exchanges on which the token is traded, represent.
Here is the list of crypto exchanges that support the tax burn: KuCoin, Kraken, Huobi, Crypto.com, eToro, Gate.io, MEXC Global CoinInn, BTCEX and LBank.
Indeed, the community has asked Binance to announce support for a 1.2% tax cut for off-chain transactions. However, the plan is still under review on the Binance side.
Changpeng Zhao replied!
Binance is the platform that is expected to be the first to respond to LUNC’s tax burn. It is indeed the most popular site in relation to crypto-currency exchanges. According to CoinMarketCap, it alone allows the exchange of almost 50% of the volume of LUNC tokens, so it’s almost all on its shoulders!
In his AMA Twitter space, Changpeng Zhao answered the question about LUNC. In his opinion, it would be ideal to implement a feature that allows users to opt for a 1.2% transaction fee for burning themselves. Then we would have to see how many members of the voting community do it first.
Indeed, eager to contribute positively to the LUNC project and its community, the CEO said that if Binance applied this tax off-chain, the result could be negative for the community, since the large portion of LUNC traders are on Binance so to avoid paying the 1.2% tax on each transaction. Thus, CZ would avoid lowering the volumes of LUNC and reduce the usefulness of the token.
An announcement not without consequence on the price of LUNC, since in the aftermath, the token fell from $0.00027 to $0.0002 with a red wick of more than 10%.