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HomeCrypto NewsMarketNew Binance Terra Classic (LUNC) Tax Burn Approach May Result in Burns...

New Binance Terra Classic (LUNC) Tax Burn Approach May Result in Burns More Than 1.2% Proposed Rate

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Binance is taking a different Terra Classic (LUNC) off-chain burn approach, but data indicates the exchange might burn over 1.2% on transactions.

The Terra community has been rather vocal about wanting to see the Terra Classic 1.2% tax burn implemented off-chain. The persistence of proponents has influenced a change in the decision of the world’s largest exchange Binance on the matter. 

Binance finally settled for a compromise that would satiate everyone by assuming responsibility for the LUNC tokens to be burnt, as recently reported by The Crypto Basic. The exchange decided to convert trading fees from LUNC/USDT and LUNC/BUSD spot and margin trades to LUNC, sending the resulting LUNC to a burn address.

Speaking on the recent decision from Binance, renowned Terra informant FatMan took to Twitter to reveal some interesting metrics. According to FatMan, if Binance executes the tax burn in this manner by burning 5BPS, the approach could ultimately result in an off-chain burn towering over the 1.2% proposed rate.

FatMan’s estimates arise from a rough assessment the pseudonymous crypto proponent made, considering the resulting volume drop from on-chain burns that would amount to a 90% rate. Additionally, he considered automatic compound taxes prompted by wash trading sessions.

Since a burn rate above 1.2% would help even further by allegedly reducing the circulating supply of LUNC at a greater rate than proposed, if FatMan’s estimates are accurate, Binance would be taking responsibility for the losses incurred.

According to Fatman:

“… I ran some rough numbers (factoring in the 90% post-tax on-chain volume drop & compounding taxation due to wash trading). Assuming Binance burns 5BPS, this new plan will burn far more than the 1.2% off-chain tax, all with Binance footing the bill. Amazing.”

The accuracy of this assessment remains to be seen, but Binance might not be concerned regardless. Before the recent decision, Binance introduced the “opt-in feature” suggestion as a means to bring democracy to the scene, which most of the Terra community did not receive well.

Binance’s current decision to take responsibility for the LUNC tokens to be burnt underlines its commitment to the satisfaction of customers. The latest move from Binance has seen positive reception so far, but a self-acclaimed retired crypto trader noted that it might not be as efficient as many belief. According to him, VIP market makers are responsible for the highest volumes on Binance. 

These investors do not pay any fees for their transactions. As a consequence, Binance would not see a lot of fees from LUNC trades to burn.

“amount of burn from retail spot fees won’t put a dent in the 2 billion dollar market cap, even over one year/5 year,” he noted.

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Albert Brown
Albert Brown
Albert Brown is a cryptocurrency investor and journalist who has been in the nascent space since 2017. His love and passion for technological innovations made him delve deeper into the world of blockchain and cryptocurrencies. As a journalist, Brown has written on several crypto-related topics that have been referenced by popular industry players like Tyler Winklevoss, Binance CZ, etc.

Disclaimer: The content is for informational purposes only, may include the author's personal opinion, and does not necessarily reflect the opinion of TheCryptoBasic. All Financial investments, including crypto, carry significant risk, so always do your complete research before investing. Never invest money you cannot afford to lose; the author or the publication does not hold any responsibility for your financial loss or gains.

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