The Terra Classic community wants Osmosis to carry out off-chain LUNC burns.
Cosmos Capybara, a Terra Classic community member, has published a signaling proposal on agora with the intent of the Terra Classic community showing that it wants Osmosis to support the burning of Terra Luna Classic (LUNC) off-chain.
@reXxTerraRebels, AKA reXx, brought the proposal to the community’s attention in a tweet yesterday.
https://t.co/VjePOXwjj5@osmosiszone is signaling support to burning #LUNC.
Please read more details below in the agora post.
— reXx™ (@reXxTerraRebels) December 2, 2022
If passed, it signals to the leading Cosmos Automated Market Maker (AMM) that the Terra Classic community wants it to support burns for LUNC and TerraClassicUSD (USTC) swaps. As an incentive, Cosmos Capybara suggests that Osmosis keeps 10% of the collected tax and sends only 90% to the Terra Classic burn wallet. Per the proposal, Osmosis can keep the collected 10% in its community pool or a smart contract under its community governance control.
The proposal asserts that before the ecosystem collapsed in May, the Terra Classic community and Osmosis enjoyed a deep and mutually beneficial relationship, with Osmosis serving as the primary off-chain source of liquidity, excluding centralized exchanges.
According to Cosmos Capybara, in the past, LUNC holders offered a continuous stream of swap fees for liquidity providers in exchange for deep liquidity and sophisticated yield farming techniques. Consequently, the author believes it is only right that Osmosis consider this request for support which has the potential also to be mutually beneficial.
Unlike Cosmos Capybara’s previous proposal that requests to allocate 50% of all LUNC burns at the end of every epoch to the community pool to fund development, this one has received significant community support.
One user commenting on the proposal described it as “awesome.” Meanwhile, another user asserted that the proposal had “zero downsides.”
Terra Classic network validator @lunc_nymh highlights that it is only a signaling proposal. As a result, even if it passes, Osmosis will still have to pass a separate governance proposal to implement it. “It’s up to them at the end of day,” the validator tweeted.
The latest proposal comes as the Terra Classic community edges toward the re-opening of Inter Blockchain Communication (IBC) channels. As previously reported, the code is expected to go live on December 5. Notably, it will allow trapped LUNC liquidity in Osmosis to flow back into the Terra Classic network.
It bears mentioning that, in anticipation, some community members supported a proposal to increase the on-chain tax parameter to 1.2% to maximize burns from the increased activity. With developers believing that a tax increase could potentially kill the chain, should Osmosis support the proposal by Cosmos Capybara, it could serve as an equitable compromise by increasing burns while maintaining the 0.2% tax.
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