Increase liquidity and transactions on-chain will increase tax burn amount and speed up recovery for LUNC & USTC.
Liquidity can be provided by community pool as liquidity provider to liquidity pools to increase liquidity on-chain and earn swap fees for community pool simultaneously.
Detailed proposal: Create and Fund LUNC <> USTC liquidity pools by community pool to provide arbitrage opportunities and incentivize on-chain transactions - #4 by grass_haha
Put this proposal into context with numbers.
- Burn tax is at 0.2%
- CP pool has ~1 billion LUNC
- Supply of 6.79 trillion
- Circulating supply around 5.8 trillion
Burn tax has been as high as 1.2% and any split to “fund” from burn tax has been reverted.
So first you would need a proposal to split the burn tax. Which is a controversial topic already.
So perhaps you propose a liquidity tax. A separate one.
Then you would need to raise the tax by multitudes to get any sort or viable amounts from it.
Most trading occurs on Binance, that’s off-chain, so now you are having an issue with incentivizing on-chain trading since the fees/taxes are ways above what one gets charged on a CEX.
Then you will need to do some rework of the modules. L1 development costs funds unless there’s a pro-bono dev work calculated in.
And after all these hurdles have been cleared - what sort of projections do you see with on-chain trading, as we lack a native DEX to incentivize it besides our current and lacking dapp base?
Thanks for your comments.
Totally understand splitting current burn tax is a controversial topic, additional liquidity tax can be one option if community can agree on.
The split part of burn tax is the continuous contribution to invest in liquidity pools to enlarge the compounding interest received overtime. This part is flexible and contribution amount can be adjusted.
Before putting up the proposal to split the burn tax, would like to see if there are any points overlooked that may cause this idea to fail.
This idea is not to incentivize on-chain trading directly by subsidy from funds obtained from community pool or burn tax, instead by the difference of pricing off-chain ( CEXs ) vs on-chain ( liquidity pools ), providing incentives for arbitrage trading by providing larger total liquidity in liquidity pools, reducing slippage and harvesting the volatility in pricing of LUNC - USTC in the market as source of income ( swapping fees ) for community pool and increase tax burn through increased liquidity / transactions on-chain.
Pricing for LUNC - USTC in liquidity pools are calculated by automated market-maker (AMM) for example in Terraswap
Have to be honest on this one as I am not a developer, I simply do not have an answer here.
@ek826 @LuncBurnArmy May I sincerely ask for your comments and opinions on the feasibility of this idea and if possible, any rough estimates for work related in codes needed?
Yes, we currently do not have a native DEX and this is also why here is using alternatives which is liquidity pools ( native dapps we currently have ) to increase liquidity on-chain reducing burden on developers to build DEX from scratch and making good use of community’s capital to generate constant cashflow, bringing in money from outside of LUNC’s ecosystem by leveraging arbitrage traders before more developers come back to build on LUNC and provides more liquidity and utilities.