Voting is now open on a proposal to launch a protocol-level DEX to generate revenue for the Terra Classic network.
Proposal 11049, a proposal to build a decentralized exchange that will generate revenue for the Terra Classic network and help burn Terra Luna Classic (LUNC), is now open for voting, according to a tweet from community influencer Classy (@ClassyCrypto_).
Another community influencer, Asobs (@Asobs CNG), confirmed it earlier today. As Asobs pointed out, the proposals seek community pool funding to build a DEX to draw liquidity from the Oracle pool. As a result, transaction fees will be paid to the network, and proposers propose that these fees be divided among replenishing the Oracle pool, funding the community pool, and reducing the LUNC supply.
Proposers to Decide on Percentage Allocations
It is worth noting that the proposers have yet to decide on the percentage allocation of these fees to the three outlined locations. The proposal states that the community will decide on these parameters in a future governance proposal.
Notably, the developers intend to support LUNA and ATOM in addition to LUNC/USTC pairs. While it emphasizes that it is not looking to compete with Osmosis or force users to use LUNA, it believes these additions are necessary, recalling that LUNC holders received LUNA tokens through airdrops.
Furthermore, in the spirit of innovation, developers intend to expose users to indices as part of Terra Indices. It will allow users to exchange LUNC or any other supported token for an index token that will always contain a portion of LUNC, with the proposers demonstrating a LUNC and LUNA Index with a composite weight of 50% LUNC and 50% LUNA. It offers an intriguing way for users to broaden their exposure.
The proposers stress that no new LUNCs will be issued. Instead, LUNC is burned in fees when users obtain an index token. The portion of LUNC tokens represented by the index is set aside until redeemed, effectively reducing the circulating supply. According to the proposal, the only thing minted is the index token.
Furthermore, developers intend to allow the network to profit from arbitrage opportunities with flash loans. According to the proposers, the DEX will generate approximately $40k per day in network fees from the LUNC/USTC pair alone, citing a simulation of how the DEX will operate using SHIB/WETH.
There Is a Cost
All of this, however, comes at a cost. The proposers, who claim to be a three-person team comprised of two senior developers and one senior quantitative analyst, are requesting a total of 825 million LUNC ($125k), with the option of an additional 825 million LUNC in bonuses if the DEX meets certain performance criteria.
Notably, the developers intend to seek funding in batches so that the community can see the results before moving on to the next stage of development. The team requests 330 million LUNC ($50k) in the first community spending proposal, which is currently up for voting. It will cover the cost of constructing the basic DEX without flash loans or indices.
The idea of a DEX has piqued the interest of members of the community. As previously stated, a DEX is high on the list of projects Terra Classic community members want to see on the network.