The Binance exchange will introduce a subscription to a transactional tax on Terra Classic (LUNC) trades. If the trading volume of participants in the program reaches 50% of the asset’s total on the platform, the levy will be extended to all customers, Binance CEO Changpeng Zhao said.
LUNC Burn and Binance | Binance Blog https://t.co/z4cAjssGsO
— CZ 🔶 Binance (@cz_binance) September 23, 2022
On August 26, 2022, Terra Classic activated the v22 upgrade, which embedded a 1.2% transaction tax into the blockchain. The cryptocurrency accrued from these fees is burned by the network, exerting deflationary pressure on LUNC’s supply.
The Terra Rebels, the initiative group behind the update, at the time stressed that the team could not levy the tax on off-chain transactions, notably on centralized platforms.
The tax has been in effect since September 21. On the first day, the system burned more than 80 million coins.
This will be slightly different for individuals in different time zones from me: 00:00 — 23:59
1.2% burn tax update:
Day1: 80,598,500
Day2: 380,650,755 + 372.3%
Day3: 455,274,187 + 19.6%
Day4: 95,829,604 : 11hrs remaining
👇🏻
Day?: @binance offchain : BILLIONS
👆🏻#lunc #optin— LUNC Burn (@LunaBurn_13) September 24, 2022
Some crypto exchanges, such as KuCoin, backed the introduction of the levy. However, Binance initially stated that this tax would not be charged on the platform.
According to Zhao, the company ultimately decided to listen to the community. The transaction tax will be introduced via a two-stage subscription feature, if thresholds are met at each stage.
Binance will begin collecting the tax from subscribers to the program when their LUNC trading volume reaches 25% of the platform’s total asset volume. After reaching the 50% threshold, the levy will be extended to all traders on the exchange who interact with Terra Classic.
«If the specified thresholds are not reached within a month after the subscription’s implementation or in the future fall below this level again, we will remove the feature to maintain a simpler user experience», Zhao added.
Some community members supported the exchange’s decision. Yet there is also a polarized view. For example, an analyst nicknamed FatMan called the move “pretty silly”.
This is pretty silly. Anyone who wants to burn 1.2% can go right ahead and send 1.2% of their balance to the burn address. No one is stopping them. You don’t need a Binance feature for that.
To be honest, most of these people want *others* to burn. They won’t burn themselves.
— FatMan (@FatManTerra) September 23, 2022
«This is pretty silly. Anyone who wants to burn 1.2% [LUNC], can safely send the relevant percentage of their balance to the burn address. No one is stopping them. You don’t need a Binance feature for that. Honestly, most of these people want others to burn. They won’t burn themselves», wrote he.
One of Terra Classic ecosystem validators noted that Zhao’s proposed mechanism “has near-zero chances of success”.
«In his latest article [Zhao], he gives the impression that the subscription approach is a sensible democratic process, though logically he realises that the probability that it will ever work is almost 0%», he wrote.
According to the validator, taxes work only when they are universal and apply to everyone. He emphasised that the Terra Classic community has already voted for this.
In May 2022 Zhao revealed that Binance is one of the largest investors in Terraform Labs.
In September, a South Korean court issued an arrest warrant for Terraform Labs CEO Do Kwon.
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