The Terra community voted in favor of a proposal to reduce the LUNC burning tax to 0.2%. In addition, the community took a positive decision to allocate 10% of the tax revenue to fund ecosystem development and payments to contributors. A vote in favor of the relevant proposal garnered the necessary 75% of votes in LUNA tokens.
There were several reasons for such an initiative. The decision follows a significant 91.67% drop in on-chain transaction volume after the initial burn tax was implemented. In addition, there were concerns that LUNC stakers and spot holders were excluded from the process of burning cryptocurrency through the tax and only contributed by sending them directly to "dead" addresses. Moreover, a burn tax in the form in which it exists now would have to work for 20 to 60 years to bring the LUNC supply to the desired supply of 10 billion.
Key reason for tax decrease
The main reason, however, is the zero use of tax revenue. According to the proposal, the number of LUNC burns does not justify the cost of implementation, carried out by Terra enthusiasts for free. The new proposal, on the other hand, implies a withdrawal of 10% of tax revenue to pay for infrastructure development and incentives for contributors.
Now that the vote has passed, it remains to be seen what the reaction of the centralized exchanges that introduced the tax will be. The LUNC price has not reacted to the event so far.