The former Terra network’s native token, Terra Luna Classic, is seeking to make a powerful comeback from the dead. Despite the significant sell-off of Terra ecosystem tokens, LUNC has managed to recover along with the cryptocurrency market.
While the strategy continues to revitalize the chain and entice investors, the most recent spike has been more than 100% in the last week following the tax burn confirmation. LUNC was trading at $0.00056 at the time of writing, representing a daily gain of about 55%.
According to the new 1.2% Tax Parameter Change proposal, taxes will be paid and burnt for on-chain actions such as LUNC and USTC transfers between wallets and smart contracts. The idea basically proposes to levy a 1.2% token burn tax on all transactions in order to turn LUNC into a deflationary asset. If Terraform Labs (TFL) approves, the 1.2% tax burn will go into effect on September 20.
If the plan is rejected, the ecosystem’s new development team, Terra Rebels, will create an unauthorized website, desktop software, and mobile app to assist tax burning. KuCoin noted in its most recent announcement that if the community does not approve the plan, its services relating to LUNC and USTC will be impacted.
To avoid rising deposit fees, the Seychelles-based crypto exchange has advised customers to deposit all Terra Classic tokens. Other cryptocurrency exchanges, like Gatei.io, MEXC Global, and CoinInn, have all expressed support for the forthcoming network update.
What Happened to Terra Luna
When the UST stablecoin lost its dollar peg in May, the Terra ecosystem imploded. In combination with the LUNA token, UST used an algorithmic pegging method to limit supply and demand, and therefore its price.
Users are encouraged to mint LUNA and burn UST when the price falls below $1. Massive amounts of LUNA were minted when the price went considerably below the peg price, boosting supply and sinking the token price.
As a result, large amounts of money left the Terra ecosystem, resulting in a liquidity crunch that impacted the rest of the market. Numerous fraud charges have already been lodged against Terra founder Do Kwon and his top staff. This includes money laundering via shell businesses as well as the siphoning of users’ monies.
Do Kwon’s suggestion to fork the chain and establish Terra LUNA was accepted by the community. The initial chain was renamed Terra Classic (LUNC) and handed over to the community for further development and administration. Many expected LUNC to go away, but recent initiatives have seen its token price skyrocket, propelling it to the top of the market cap rankings.