Developer of Terra Classic Says Community May Have to Give Up Burn Tax to Promote Utility.
Rex Harrison, also known as Rexzy, a member of the Terra Classic development team, shared a blog post on Medium today that suggested that to attract lost utility, the Terra Classic chain might have to give up its on-chain burn tax.
Rexzy thought that utility would have to take precedence over the burn tax parameter.
The developer claims that Terra Luna Classic (LUNC) has no intrinsic value since the ecosystem collapsed in May by referring to it as a “Tulip” in the article.
In addition, he claims that the burn tax parameter has made LUNC into a meme coin that is only held in the hopes that its value will increase exponentially through a reduction in supply in the future.
Rexzy thinks the burn tax parameter, which developers had intended to encourage activity on the chain again, has had the opposite effect by discouraging both existing builders on the chain and potential new builders.
“The ravaged ecosystem was pretty much sterilised, and other than a few dApps, no regrowth has occurred,” wrote Rexzy speaking on the effects of the tax. “Not only this, but exchanges have struggled with maintaining trading volume, and essentially the tax has put out the fires it had hoped to create.”
Recovery Would Require the Burn Tax Parameter Sacrifice
However, the developer maintains that there remains a clear path to recovery, but it would require a sacrifice of the burn tax parameter.
Notably, with the v23 upgrades coming in December, the network is set to achieve technological parity with LUNAv2.
Consequently, decentralized apps building on the new Terra chain can quickly deploy on the Classic chain.
These DApps are motivated to do so, as Rexzy explains because the Terra Classic chain currently houses the consumer base that the new chain lacks.
He clarifies that for them to do so, the community must abolish the tax burn rate because these projects must also generate revenue from their DApps through taxes, and imposing a tax on the burn rate could turn away users.
The developer claims that even after the community removes the burn tax parameter, burning will still occur. As he notes, the tax burn does not account for most of the total LUNC burns.
Also, TerRarity data reveals that only about 27% of burns have been tax-related, with the majority being philanthropic to gain support from the community and competitive advantage.
Rexzy claims that, as a result, this will continue to be the case. The developer asserts that new DApps with the financial means will keep working hard to gain this competitive edge.
Rexzy claims that there are also more efficient ways to burn LUNC.
Remember how Tobias Andersen, a.k.a. Zaradar, argued that the network could burn LUNC at a rate comparable to the crash if swaps were re-enabled and chains were useful in the right market environment.
To achieve this practical utility, attracting DApps is still essential.
The Terra Classic community lowered the tax burn parameter from 1.2% to 0.2%, according to The Crypto Basic, after data revealed that on-chain volume had significantly decreased.