The tax parameter update for Terra Classic is now active after several weeks of anticipation and excitement. Users will therefore pay a 1.2% tax on all on-chain transactions, and the fees they are charged will be paid to the Terra burn wallet in order to reduce the supply of extra LUNC. A Terra Rebel named reXx made the announcement in a tweet:
Evidently, this tax rate will remain in effect until there are only 10 billion LUNC tokens available overall. To put things in perspective, there are around 6.9 trillion LUNC in circulation at the moment. The asset supply will need to be cut by 99.82% in order to meet this objective.
It Will Take Time to Burn the Entire Supply
It is important to note that according to prior analysis, which took user feedback into account, if volume can be sustained and the price is kept low, it will take around ten years to burn up the entire supply of LUNC to reach 40 billion.
According to this estimate, the asset might be able to reach the $1 price point in seven years with a notional market valuation of $40 billion. Notably, The Coin Perspective’s analysis utilizing the same fictitious market size and a 10 billion supply shows that the asset quadruples this price estimate and might actually reach the $4 price point.
The network’s ability to maintain high volume and a cheap price even as supply declines will be intriguing to watch, though.
Hours before the burn went live, around 4.1 billion LUNC had been burned without the parameter adjustment, as noted by LUNC Burn, an unofficial Twitter account monitoring LUNC burn activity. It will be intriguing to observe how this figure evolves over time.
Interestingly, the coin is currently in third place on Binance in terms of 24-hour trading volume with $210 million.
The 1.2% tax burn idea was backed by two more trading platforms, but with radically different implementations. While eToro may also apply it to off-chain transactions (Trading), spreading the tax rate among buyers and sellers by adding a 6% charge on top of their usual 1% tax for both parties, Crypto.com will only charge for deposits and withdrawals.
At the time of publication, the price of LUNC is $0.0003036, which is 0.55% less than it was yesterday.
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