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Luna Burn: Terra Proposes Token Burn and Increase in Pool Size to Stop UST Dilution

 


Luna Burn: Terra Proposes Token Burn and Increase in Pool Size to Stop UST Dilution




One proposed approach to aid Luna's recuperation is to destroy its supplies, but is this feasible?


Following the Luna crypto meltdown, the circulating quantity of Luna soared to over 6.5 trillion coins, prompting calls for a Terra Luna to burn to reduce the supply and perhaps improve its value.



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Will holders be successful in introducing Luna burns, like they were with Shiba Inu burns in the SHIB community?


Will Terra Luna deplete its resources?


While the current Terra recovery plan focuses on a possible Luna fork, some holders have ignored this, finding potential in the existing chain through a Luna burn instead.


Indeed, Binance CEO CZ appears to prefer this approach. Since the partial delisting of Luna on Binance, he has maintained constant communication with the Luna team.




Holders expect that by burning the Luna, the scarcity of their coins would grow, bringing the price back to $1. However, given the 1700 percent increase in supply in just a few days, a big burn would be required to recover this price.


It's also worth mentioning that, despite several Twitter accounts stating that a Terra Luna announcement will include a large supply burn, no official pronouncements have been made. By making statements concerning Luna's pricing and burning, accounts have a new option to improve their involvement.



A Luna burn is not supported by everyone in the cryptocurrency community. Users have questioned where TerraForm Labs or the Luna Foundation Guard would buy and destroy the supply, as some Luna holders have requested.


 


A 3 percent burn tax on transactions was proposed on the Luna Research Forums and gained traction. "Based on our current volume of roughly $3 billion, we could burn around 300,000,000,000 LUNA at the time of making this proposal if we enforced simply a 3% burn tax on each purchase and sell transaction," it claimed.


This idea is currently up for voting on Terra Station. It has received 28.83 million votes so far, but it is still far short of a quorum.


Terra has proposed to token holders that they burn approximately 1 billion UST (about $690 million) in the community pool while raising the Base Pool of LUNA accessible to 100 million, bringing the total minting capacity to over $1 billion. This will assist speed up the flow of UST out of the system, bringing it closer to its peg and lowering the price of LUNA.


"At the moment, UST burning is too sluggish to keep up with the need for surplus UST to escape the system, which is hampered by the BasePool size," the proposal states. "Removing a large portion of the surplus UST supply at once will relieve most of the UST peg pressure."


Some comments on the proposal speculated on whether this was due to a defect in LUNA's software or if it was a result of a larger market slump triggered by the price of bitcoin (BTC).


This proposal can be voted on by network validators. According to a vote tracker, the Yes side earned 50.47 percent of the vote, while the No side received 49.1 percent; 87.8% of eligible voters have already voted, and the pass threshold is 50%.

 

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