CZ believes the lower the fees, the greater the burn, and he has the numbers to back it up.
In a recap of an AMA held three days ago shared by the Terra Rebels, Binance chief Changpeng Zhao, fondly called CZ, asserted that lower fees would produce greater burns.
“…to burn more and more LUNC, we need to have a minimal fee so that our LUNC fee revenue becomes the highest, and then we burn all of all revenue,” said CZ explaining that higher fees discourage trading activity. “Just charging more fees does not mean we have more income. Very often, charging more means you have less income. I think most of LUNC members think that if we charge 1.2%, Binance will burn more LUNC, but it is a mistake.”
He also said:
“… we burn all of our revenue. We do not make any money from LUNC trading fees. We burn it all.”
He also encouragesd other exchanges to burn LUNC but said he do no control them.
“I also encourage other exchanges to do it… But I and LUNC community do not control other exchanges. So it’s up to every body else; we have done our part.”
— Terra Rebels (@TerraRebels) October 11, 2022
It bears mentioning that despite earlier pressure from the Terra Luna Classic (LUNC) community to apply a 1.2% tax to off-chain activity, Binance opted to burn the 0.1% fees it obtains from trading instead. While this is a considerably lower fee, it has managed to burn almost twice as much as the 1.2% tax within the same period, with about 8.5 billion LUNC burned so far.
Notably, despite the hype surrounding the 1.2% burn tax on on-chain activities, the tax has failed to meet expectations. For example, Terra developer Alex Forshaw highlighted in a recent blog post that the on-chain volume has declined by as much as 90% since its implementation.
Consequently, a new proposal has been launched to reduce the tax to 0.2% while reserving 10% of the tax obtained for the development of the chain. The proposer, known as Akujiro, hopes that the proposal can attract people who moved to central exchanges to avoid the tax back to on-chain activities.
#LUNCcommunity Proposal 5234 is up!
Lower the tax rate to 0.2% and set aside 10% of tax revenue to finance ecosystem infrastructure and contributors
Happy voting everyone!🚀🦾🥳
— Akujiro (@Akujiro2) October 10, 2022
Notably, Vegas, one of the most popular rebels, has said he thinks it is too early to change the tax parameter. However, the Terra Rebel has launched a poll opting to vote in favor of the community.
Vote on the poll regarding the Proposal 5234 ,I personally believe that is to soon,but is not my choice. I will vote on the direction that the community decides . #lunc #decentralized #community https://t.co/D42bhC2XJr
— Vegas (@VegasMorph) October 11, 2022
On the other hand, Alex Forshaw, who has always been opposed to the tax, hopes that the lower tax rate combined with the CosWasm update will attract a flurry of decentralized applications (DApps).
I accidentally voted “no” and now I can’t change it 🤣
But, looks very promising! I hope this + cosmwasm upgrade will allow serious dapps to build on LUNC & restore some on-chain liquidity. (.2% >> 0 still, for CEXs who move $ on-chain everyday; I don’t expect full rebound 1/2 https://t.co/WxWvvbG2wA
— 4lex_4sh4w_TR (@4lex_4sh4w_TR) October 11, 2022