Navigating LUNC’s Burn Tax Changes: What Investors Need to Know

3 min read
  • The Terra Luna Classic (LUNC) community is implementing a new burn tax distribution model, reallocating the current 20% share from validator rewards to a newly created Oracle Pool and the Community Pool.
  • This change, supported by 99.97% of voters, aims to enhance long-term staking rewards but may reduce the Annual Percentage Rate (APR) for current stakers.

The Terra Luna Classic (LUNC) community is taking a significant step forward in its ongoing development by implementing a previously approved change to the LUNC burn tax distribution. A new proposal, authored by developer Frag under the name “Text Proposal 12114,” seeks community and validator approval to move forward with the revised structure outlined in proposal 12098, which was passed earlier in April.

Currently, a 0.5% burn tax applies to all LUNC transactions. Under the existing model, 80% of this tax is directed towards burning LUNC tokens, with the remaining 20% split equally between the Community Pool and validator rewards. Proposal 12098, and subsequently proposal 12114, aim to modify this distribution by allocating the entire 20% to the Community Pool and a newly created Oracle Pool.

This shift will eliminate the direct allocation of burn tax towards validator rewards. Instead, the Oracle Pool will serve as a source of long-term staking rewards, potentially improving the overall attractiveness of LUNC staking for validators. However, there’s a potential downside for current stakers: the Annual Percentage Rate (APR) for staking LUNC is expected to decrease by around 0.5% due to the removal of the direct burn tax allocation.

Community Support and Market Reaction

Proposal 12114 has garnered overwhelming support from the community so far, with 99.97% of votes cast in favor. Major validators like Interstellar Lounge, JESUSisLORD, and StakeBin have also endorsed the proposal. However, votes from some other top validators are still pending.

The broader market sentiment appears to be influencing LUNC’s price at this time. Despite the ongoing developments within the LUNC ecosystem, the token’s price has dipped by 5% in the last 24 hours, currently trading at around $0.0001024. However, a rise in trading volume and open interest suggests increased activity surrounding LUNC and its futures contracts.

For investors, the proposed changes to the burn tax distribution could have mixed implications. On one hand, the shift towards funding the Oracle Pool might enhance the long-term sustainability and attractiveness of staking rewards. On the other hand, the immediate reduction in APR might deter some stakers, potentially affecting the overall staking participation rate.

As the LUNC community continues to evolve and adapt, these changes reflect a broader effort to optimize the network’s economic incentives and ensure the long-term viability of the ecosystem. Investors should keep a close eye on the developments and market reactions, as these will likely influence LUNC’s future performance and appeal.

More From Author