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The Terra Classic community is currently engaged in a pivotal vote on a proposal aimed at reviewing the LUNC burn tax to fund the Oracle pool.
The ongoing proposal has roots in an earlier proposition, Proposal 12098, presented by StrathCole in April. While the community endorsed this initial proposal, it served only to express support for the idea rather than implement it.
Background and Details of Proposal 12098
Proposal 12098 suggested a modification in the allocation of the burn tax, keeping both the tax rate and the portion designated for burning unchanged. Currently, Terra Classic imposes a burn tax of 0.5%, with 80% allocated for burning and 20% for distribution.
This distribution is further divided, with 10% set aside for rewards and another 10% to the Terra Classic Community Pool. These percentages are influenced by the current block proposer rewards, which are scheduled to be eliminated with the upgrade to SDK 0.47.
StrathCole’s proposal aims to modify the burn tax distribution to allocate 80% towards burning, 10% to the Community Pool, and 10% to the Oracle Pool instead of rewards. This adjustment seeks to create a more equitable distribution of the tax, ensuring that block rewards solely consist of gas fees.
Furthermore, the proposal would redirect the tax to rewards for staking through the Oracle Pool, potentially bringing stability to the system. The Terra Classic community widely supported this idea, with an overwhelming majority voting to approve Proposal 12098 two months ago.
Introduction of Terra Classic Proposal 12114
Building on the foundation laid by Proposal 12098, Frag, a former L1 Joint Task Force developer, introduced Proposal 12114. This proposal, if passed, will enact the changes detailed in Proposal 12098.
Submitted on June 9, Proposal 12114’s voting period is set to conclude in three days. As of now, it has not reached the necessary voting threshold for approval, largely due to the abstention of major validators, including Allnodes, which holds 14.66% of the voting power.
Despite the hesitance from larger validators, some smaller validators have shown strong support. Of the 25 validators who have cast their votes, 24 have voted in favor, with one abstaining. This indicates a significant level of backing from a portion of the community, though the proposal’s success hinges on broader participation.
One notable supporter is Terra Classic community member Christopher, who runs the JESUSisLORD validator. He expressed his support on X, endorsing Proposal 12114 and emphasizing the importance of funding the Oracle Pool.
I have voted YES on #LUNC governance proposal #12114. This is a proposal by former L1TF developer Frag to take up the work to implement proposal #12098 for a very reasonable cost, which I supported, and already passed governance. #12098 was a proposal to adjust the tax split so…
— JESUSisLORD (@ForTheCross_CH) June 10, 2024
Christopher pointed out that the Oracle Pool currently lacks a funding source and is being depleted. He argued that directing 10% of the burn tax to this pool is crucial for long-term staking rewards. Although this change might slightly reduce the APR, he believes the long-term benefits outweigh this drawback.
Implications of the Proposed Changes
The proposed changes aim to streamline the rewards system and achieve a fairer distribution of the burn tax. By allocating 10% of the tax to the Oracle Pool, the proposal will strengthen staking rewards for the long term, thereby decreasing dependence on block rewards that currently incorporate gas fees.
This adjustment is projected to slightly decrease the APR of staking rewards by approximately 0.5%. Moreover, the change requires an L1 coding, as it cannot be achieved through simple parameter modifications. The introduction of a new “oracle_tax” parameter, akin to the existing “community_tax” parameter, is necessary to facilitate this shift.
Meanwhile, LUNC currently changes hands at $0.00009862, having recently collapsed below the $0.0001 threshold amid a 6.3% drop over the last 24 hours. These discussions come on the back of sustained burn campaign to bolster LUNC price.