Rexzy believed the burn tax parameter would have to give way for utility.
In a tweet today, a member of Terra Classic development group TerraCVita, Rex Harrison, AKA Rexzy, shared a medium blog post where he suggested that the Terra Classic chain may have to let go of the on-chain burn tax to attract lost utility.
Seems everyone is on the LUNC medium bandwagon so thought i'd drop in a long one.
I just published LUNC is not from Amsterdam https://t.co/h7FULhuPru
— Rexyz (@RexYellerBelly) November 4, 2022
In the article, the developer describes Terra Luna Classic (LUNC) as a “Tulip,” arguing that it has had no intrinsic value since the ecosystem collapse in May. In addition, he posits that the burn tax parameter has turned LUNC into a meme coin driven only by the desire to hold it in hopes that it would one day grow exponentially through reducing supply.
While developers proposed the burn tax parameter to spark activity on the chain again, Rexzy believes that it has achieved the opposite by discouraging the builders left on the chain and new builders interested in building.
“The ravaged ecosystem was pretty much sterilised and other than a few dApps no regrowth has occurred,” wrote Rexzy speaking on the effects of the tax. “Not only this, but exchanges have struggled with maintaining trading volume and essentially the tax has put out the fires it had hoped to create.”
However, the developer maintains that there remains a clear path to recovery, but it would require a sacrifice of the burn tax parameter. Notably, with the v23 upgrades coming in December, the network is set to achieve technological parity with LUNAv2. Consequently, decentralized apps building on the new Terra chain can easily deploy on the Classic chain.
As Rexzy explains, these DApps are incentivized to do so as the Terra Classic chain currently hosts the consumer base that the new chain lacks. However, he elaborates that for them to do so, the community has to get rid of the tax burn rate, as these projects have to make a profit from their DApps through taxes as well, and adding a tax on the burn rate could discourage users.
Meanwhile, the developer asserts that burning will continue even after the community removes the burn tax parameter. As he points out, the tax burn is not the highest contributor to the total LUNC burns. Notably, TerRarity data shows the tax burn has only contributed about 27%, with most of the burns being philanthropic to gain community support and market advantage.
Consequently, Rexzy asserts that this will remain the case. According to the developer, new DApps that can afford it will continue burning to achieve this market advantage. In addition, Rexzy also asserts that there are more effective ways to burn LUNC. Recall that Tobias Andersen, AKA Zaradar, had argued that with swaps re-enabled and chain utility with the right market environment, the network could burn LUNC at a pace comparable to the crash.
Attracting DApps remains key to achieving this real-world utility. As reported by The Crypto Basic, the Terra Classic community reduced the tax burn parameter from 1.2% to 0.2%, as data showed that on-chain volume had significantly declined.