Increasing the Burn Tax to Support USTC Repeg and Strengthen the LUNC–USTC Economy

Proposals
1

:bullseye: Executive Summary

This proposal aims to explore a temporary and strategic increase in the burn tax rate on the Terra Classic network. The goal is to support ongoing efforts to repeg USTC by accelerating the reduction of the circulating supply of LUNC and improving overall economic conditions across the ecosystem.

A controlled increase in the burn tax could:

  • Reduce LUNC’s inflated supply more efficiently

  • Support stabilization efforts for USTC

  • Create healthier economic conditions for any USTC repeg model, including MMU and no-mint designs

:magnifying_glass_tilted_left: Background

Since the 2022 depeg event, USTC has remained off its intended $1 peg.
The community has spent the past two years improving the chain—upgrading code, strengthening governance, adopting new economic modules (MMU), and lowering system debt.

However, the large LUNC supply continues to be a major obstacle for any sustainable repeg plan.

A carefully calibrated burn tax increase—even if temporary—could be a helpful tool in reducing supply faster without discouraging network activity, provided that it is applied transparently and evaluated properly.

:chart_increasing: Proposal Details

1. Proposed Burn Tax Increase

  • Raise the burn tax to X% (options may include 1.2%, 1.5%, or 2%, depending on community discussion).

  • Maintain the current distribution between community pool and burn wallet unless modified by consensus.

2. Trial Period

  • Apply the increased burn tax for a 90-day trial period.

  • After 90 days, conduct a data-driven evaluation measuring:

    • Total LUNC burned

    • Effects on transaction volume

    • Fees collected and overall chain activity

    • Economic health of the ecosystem

3. Review and Adjustment

  • If the increase shows positive and sustainable results, the rate may be extended or adopted permanently.

  • If it causes significant negative impact on chain activity or fees, the tax should automatically revert to its previous rate.

:wrench: Technical and Economic Rationale

  1. Accelerates supply reduction of LUNC, addressing one of the main blockers to USTC repeg.

  2. Supports MMU and no-mint economics, creating a healthier environment for stability mechanisms.

  3. Boosts the burn effect of network fees, strengthening market confidence.

  4. A flexible and reversible tax ensures the community retains control without long-term risk.

:ballot_box_with_ballot: Call for Discussion

Community members, developers, validators, and analysts are invited to provide feedback on:

  • The optimal tax rate

  • Expected short- and long-term impact

  • Interaction with ongoing USTC repeg strategies

  • Additional modifications that may enhance the proposal

:pushpin: Conclusion

This proposal is not meant to impose a mandatory tax change, but rather to spark a meaningful discussion on tools that can support the recovery and long-term sustainability of the LUNC–USTC ecosystem.
Even small adjustments, when guided by transparent governance and community consensus, can meaningfully contribute to the repeg mission.

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