The Terra Classic community approves proposal 5234 to reduce the tax burn from 1.2% to 0.2% to boost development and restore on-chain volume.
After a week of voting and discussions, the idea was approved on Monday. The proposal’s author, a community member by the name of Akujiro, recently tweeted a confirmation of the news.
Even without 58 of the network’s 85 validators, the proposal drew about 83% community participation, according to LUNC developer Alex Forshaw, who provided specifics about how the voting went. Remarkably, the plan was supported by around 92% of non-abstainers.
The Proposal is a Desperate Attempt
Proposal 5234 recommends that the community reduce the 1.2% tax burn parameter to 0.2% while diverting 10% of the collected taxes to the community pool to finance development initiatives.
For supporters, it represents a last-ditch effort to recover lost on-chain volume and development while maintaining the ability to burn LUNC quickly. Unfortunately, since the 1.2% tax parameter went live, LUNC on-chain volume has dropped nearly 90%.
It is noteworthy that the new tax parameter will become active along with the new epoch, which is anticipated to occur on October 19 at about 12:50 PM UTC.
What Does This Mean for the Terra Community?
Although some community members initially opposed the initiative because they thought it was premature, it gained backing from significant community members. For instance, it was endorsed by KuCoin, Edward Kim, Alex Forshaw, TerraCVita, and Classy Crypto, a community influencer.
It is important to note that there is also the possibility that the decrease in the tax burn parameter will motivate exchanges to burn LUNC as a result of trading activity.
Notably, Changpeng Zhao, the CEO of Binance, stated during an Ask Me Anything (AMA) session that the larger the burn, the lower the fees.
The largest exchange has incurred more losses from its 0.1% trading fee—approximately 11 billion LUNC—than it has made from the 1.2% tax over the same period, roughly 6.5 billion LUNC.
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