The price of Luna Classic (LUNC), formerly known as Terra, has risen by almost 35% after it was announced that Binance would back a proposal to destroy the project.
Binance, the largest cryptocurrency exchange in the world by trade volume, announced on Monday that Terra Classic, the older version of the doomed blockchain, has a new way to burn itself.
The Terra community has come up with a plan to charge a 1.2% tax on all on-chain transactions in order to bring down the number of LUNC that are being made. The cryptocurrency exchange Binance has already indicated its partial support for the scheme. A decision to increase support was made after hearing from the community.
According to an announcement made on the platform’s blog today, trading commissions for LUNC spot and margin trades will be eliminated. The first payment to LUNC’s burn address will be made between September 21 and October 1, 2022.
The exchange will update this notice every week until further notice with the exact amount of LUNC that will be burned, its value in USDT, and the transaction ID on the chain.
New burning mechanism
Since its spectacular fall in May, which wiped out at least $40 billion from the crypto market, the Terra community has been working to bring the project back to life. After it went out of business, Terra quickly came back. This time, its old chain was called Terra Classic, and its LUNA coin was now called LUNC. Meanwhile, a new iteration kept the name and kept on.
In order to make LUNC a deflationary asset, the community has been working to add a 1.2% tax rate to all network transactions through a new burning mechanism.
Transactions tax
All transactions in LUNC and USTC between wallets and smart contracts on Terra’s blockchain will now be subject to this additional “tax.” Burning is the sending of tokens to an unreachable address, which effectively eliminates them from circulation. As a result of combustion, LUNC becomes scarcer.
The idea was accepted by a governance vote of the Terra community and started being effectively implemented on September 21 of last year.
Even though spot trading wouldn’t be affected by the requirements of the plan, a number of cryptocurrency exchanges, including Binance, have backed it. Even so, a number of exchanges, including KuCoin, Gatei.io, MEXC Global, and CoinInn, have shown their willingness to use the burning mechanism voluntarily.
A U-turn by Binance
When it came to Binance, though, things were a little different since the massive platform had already made it clear that this method would be completely discretionary. On Friday, Binance CEO Changpeng Zhao announced on Twitter that the exchange would implement a 1.2% tax on the trade of LUNC.
Zhao said that the 1.2% tax will be enforced for all LUNC transactions if traders who elect to pay the tax achieve 50% of the total LUNC transaction volume on the exchange, leaving the option up to the platform’s clients.
Zhao, however, pointed out the problems with his idea not long after it was published. In light of these things and the fact that many people in the Terra community were unhappy, Binance changed its plan to support the LUNC burn on Monday.
So, the exchange will immediately and completely destroy any trading fees it gets from its LUNC/BUSD and LUNC/USDT spot and margin trading counterparts. The funds will be translated into LUNC and sent to the proper location for filing. The CEO of Binance has stated It is his belief that this would be the “fair” thing to do for all users, and that by doing so, Binance might assist in the decrease of the LUNC supply.
Cover: Gas burning – Universal public domain.
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