LUNC Burn and Binance
Disclaimer: The thoughts and feelings presented in this blog were accurate at the time of publishing (Friday, September 23). After listening to community feedback and carefully considering the situation, Binance has since decided to implement a Terra Classic (LUNC) burn mechanism on its trading fees. For more information, refer to our announcement and CZ’s LUNC Twitter thread.
“Will Binance support the LUNC burn of 1.2% for every trade on Binance?” I got asked this question on my Twitter space today. I spoke for a few minutes about it, but I want to take some time to answer this more in-depth, and actions we will take.
A while back, I was asked about the LUNC burn on Twitter, and I responded that the project needs to implement it on chain first. This comment was a bit open to interpretation, and many people thought this meant that if it happens on-chain, Binance will implement all LUNC burning off-chain too. This is a wrong interpretation. I didn’t make any promises. My comment was simply that, as a business, we wouldn’t even consider implementing something that isn’t done on the protocol level first. Now, let’s consider it.
Taxes on Centralized Exchanges
We need to think about the game theory involved. Everyone may want all platforms and chains to burn 1.2% at every transaction. People want to see supply decrease, but things change when it directly impacts their balance. Unless we can get every centralized exchange worldwide to implement this, it will not work.
If Binance charged 1.2% per transaction, I don’t think we would burn very much because most LUNC traders would go to other exchanges that don’t have the burn. I could be wrong.
So, we will listen to our community. We will do the following:
Step 1. We will implement an opt-in button, for people to opt-in to pay a 1.2% tax for their LUNC trading.
Step 2. When the opt-in accounts reach a holding of 25% of the total LUNC held on Binance, we start to charge 1.2% tax for all opt-in traders when they trade LUNC. This prevents people who don’t hold LUNC to affect the votes. It also gives the early adopters peace of mind that they are not the only few paying an extra 1.2%. The tax only kicks in at 25% quorum. This should encourage them to opt in more easily.
Step 3. When the opt-in traders reach 50% of the total LUNC trading volume on Binance, we will roll out the 1.2% trading tax for all LUNC trading. This prevents large LUNC whales who may hold large amounts, but don’t actively trade to influence votes.
If the threshold for Step 2 cannot be reached within a month of the completion of Step 1, or falls back below the threshold in the future, we will remove the opt-in feature to keep to a simpler user-experience.
We believe this is the most scientific way to “vote” by our traders. We listen to and protect our users. Thank you for your support!