A contentious proposal within the Terra Luna community seeks to increase the burn tax from 0.5% to 1.5%, with community members divided over its potential impact on network activity and token value.
The Terra Luna community has embarked on a voting system to decide on a proposal on whether to raise the burn tax from 0.5% to 1.5%. This could help reduce the supply of LUNA Classic LUNC $0.000060 24h volatility: 1.4% Market cap: $325.86 M Vol. 24h: $11.83 M and USTC $0.0115 24h volatility: 6.9% Market cap: $64.06 M Vol. 24h: $10.54 M tokens, increasing their prices and providing more funds for community projects.
The voting is based on proposal 12149, “Set On-Chain Tax Rate to 1.5%,” on the Station wallet, which suggests increasing the on-chain tax rate from 0.5% to 1.5%. The tax rate would stay at 1.5% unless the total supply of LUNC reaches 10 billion LUNC.
The 0.5% LUNC burn tax is divided into 80% and 20%. The 20% is then split equally, with 10% allocated to the community pool and 10% to the oracle pool. If the proposal passes, the new tax rate will allocate 1.2% of the tax to burning tokens, while the remaining 0.3% will go to the Community and Oracle Pools, which fund future developments and provide staking rewards. This change would increase the funds available for these pools, potentially boosting the ecosystem’s growth.
Terra Luna Community Divided as Voting Continues on Impact of Higher Taxes
Many in the community are opposed to the increase, leading to division. Top figures, such as Binance co-founder Changpeng Zhao, have suggested keeping the burn tax low. Others believe it’s time to update the tax rate.
A user named “Terra Classic Validator by Lunanauts” noted that he voted against raising the Luna Classic tax to 1.5% because he believes it could harm the network. He argues that higher taxes might reduce on-chain activity, as users may avoid transactions due to higher fees. This could lower the expected burn rate, harm market sentiment, and potentially decrease LUNC’s value. The user also mentioned that similar tax hikes in the past have failed. He stated:
“We’ve seen similar tax hikes fail in the past, like the brief 1.2% tax which was eventually reduced due to negative effects on the ecosystem… While burning the supply is important, we need to focus on long-term sustainability, not just short-term burns. The tax increase might backfire by discouraging participation and harming LUNC’s growth. ”
Similarly, another user on X stated that increasing taxes adds no value to the LUNC blockchain. The results of the vote showed that 43% support the tax increase, while 16% oppose it, and more than 41% voted “No with veto,” further highlighting the split opinion among community members.
The price of LUNC has depreciated by more than 7% in the last 24 hours, which could be attributed to the broader market downturn. However, the token’s trading volume has increased by more than 40% in the last day, as of the time of writing, indicating that people are still actively trading LUNC.
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