The Terra Classic community is grappling with a critical proposal (Proposal 12114) that could reshape the project’s burn tax distribution and impact staking rewards. This proposal builds upon an earlier concept (Proposal 12098) that received overwhelming community support but didn’t enact any changes.
Rethinking the Burn Tax: Burning Bright or Spreading the Wealth?
Currently, the Terra Classic network imposes a 0.5% burn tax on transactions. This tax is split: 80% goes towards burning LUNC tokens, and the remaining 20% is divided between the Terra Classic Community Pool and staking rewards. However, with the upcoming SDK 0.47 upgrade, block proposer rewards (a portion of the 20% allocation) are set to vanish.
Proposal 12114 proposes a redistribution of the remaining 20% after the upgrade. Instead of allocating it solely to the Community Pool, it suggests splitting it evenly between the Community Pool (10%) and a newly created Oracle Pool (10%).
The Oracle Pool: A Controversial Savior?
The Oracle Pool aims to provide a sustainable source of funding for oracles, external entities that feed data into the Terra Classic network. Currently, this pool lacks dedicated funding and is reportedly running low. Proponents of the proposal, like community member Christopher, argue that a well-funded Oracle Pool is vital for long-term staking rewards.
However, this redirection of funds comes at a potential cost. The proposal is expected to decrease the annual percentage rate (APR) for staking rewards by roughly 0.5%. This has caused hesitation among some validators, particularly large ones like Allnodes which holds a significant portion of voting power.
The Verdict: Still Up in the Air
While the community overwhelmingly endorsed the initial concept (Proposal 12098) two months ago, Proposal 12114, which seeks to implement these changes, faces an uphill battle. With only three days left in the voting period, the proposal has yet to reach the necessary threshold for approval due to abstentions from major validators.
Also Read: Terra Luna Classic (LUNC) Set to Revamp Burn Tax Distribution: What It Means for Investors
Smaller validators have expressed strong support, but broader participation is crucial for its success. The next few days will be decisive for Terra Classic’s future, as the community weighs the potential benefits of a more stable system against the drawbacks of reduced staking rewards.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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