The New 0.2% Tax Burn Update Doubles Terra Classic On-Chain Volume

The Terra Community May Give Up Burn Tax Now to Boost Utility

Following the 0.2% burn tax parameter modification, on-chain volume on the Terra Luna Classic (LUNC) network has increased, as well-known community influencer Classy Crypto noted in a tweet on Thursday. 

There is a catch, though, even though the 0.2% tax burn seems to have had the anticipated impact of raising volumes.

The community’s implementation of the proposal to reduce the 1.2% burn tax to 0.2% has this as one of its main objectives. Significantly, on-chain volumes sharply decreased when the 1.2% tax was implemented in September.

The author of the plan, Duncan Day, remarked that it was still too early to tell in response to the development because, in his opinion, the community can only provide a fair appraisal after seven days.

“Gentle reminder that we need to measure this 7-days post-tax to give a reasonable assumption that it has increased volume on-chain,” Day wrote. “Given that I found 7-days enough to determine burn tax efficacy, it is only fair to give the same objective viewpoint here.”

Terra Burns Have Declined Despite the Increased On-Chain Volume

Even though volumes have significantly increased, it is essential to note that burns have not improved as expected. 

Notably, lowering the tax was meant to boost burn efficiency; Binance CEO Changpeng Zhao, CZ, had previously said that lower taxes result in higher burns.

This hasn’t happened yet, as burns have decreased despite an increase in volume with the introduction of the most recent tax-setting update. 

For instance, the tax burnt more than 190 million LUNC before the modification on October 18, compared to 158 million LUNC burned on October 19, with roughly twice the volume, or a 17% decrease.

With only 49 million LUNC burned by the tax on October 20, a further reduction of nearly 69%, the decline was even more pronounced. All of these are based on information from LUNC Burner.

It won’t be shocking if this pattern continues to see the community tweaking tax parameters to get the best outcomes.

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