Lifecycle of a LUNC Transaction

[arunadaybasu]

Jesus inspired me to draw this by hand to explain what is happening with a transaction on LUNC because of the taxes.

I am breaking it down into parts and explaining though it’s quite clear.

The first part shows that the transaction (as an example) starts when:

Market Cap = $ 1 billion
Circulating Supply = 6.5 Trillion

The second part is also self - explanatory considering 0.2% taxes/gas/whatever you wanna call it.

That’s split into 2 parts:
10% to Community Pool
90% to Burn

I am just writing Burn here cause even if this is going to OP, the same thing that is happening in this diagram will happen there, so for sake of simplicity, just consider that it’s burnt for the time being.

Now let’s come to the last part which is obviously the most important part.

You can see what happens here when CP is taken out.

For sake of simplicity I am considering that the entire 10% is taken out though this actually happens over a period (and which is why you guys can’t see it in the data by eye).

Please note that I haven’t even considered that the same happens to the rest of the 90% also, but forget that for the time being.

Now see for yourself what happens now.

Basically you have already removed the Market Cap while removing the supply. So we all know what’s gonna happen after that to the price per LUNC.

Obviously this is a simplistic explanation since the market cap could increase or decrease.

Say it doesn’t increase, and it decreases.

I think you can understand what happens to this calculation then.

Now apply the same thing to the OP if the 90% had not been burnt and had gone to the OP only to be withdrawn 21 days later.

This is probably my simplest post yet on Agora so it should be easy to understand.

This is not your post @JESUSisLORD so you can reply here and write whatever you want freely
@godoal please check whether I am correct or not

P.S. Avoid the semantics for the time being while discussing this. Apologies for the bad drawing skills and handwriting.

[godoal]

Only the Tx TAX is split 10/90.

50% of Tx Gas Fees go straight into the CP as per the community_tax distribution parameter in https://terra-classic-fcd.publicnode.com/cosmos/distribution/v1beta1/params

[arunadaybasu]

Yes so what you are saying is that:

0.2% TX GAS is split 50-50:

1. 50% to CP
2. 50% to OP

Fine.

BURN TAX (again, semantics cause it’s the same calculation as in my hand drawing) is split into:

1. 10% to Validators
2. 90% to Burn

In that scenario, I can draw it again, but I think you know what’s happening.

Cause only the 2nd point of the 2nd part is the part where it is actually mattering.

The rest of the 3 places where the gas/burn fees is split, is basically adding to the supply later, while superficially cutting off the supply initially so that people FOMO. They don’t know what’s gonna happen 21 days later.

Same thing. Different approach.

Now, you are racing against time and supply. This is a never ending race technically speaking where we are racing against a market cap which we are reducing via gas and burn fees from one end and trying to increase from the other via trade.

Now, whoever does this faster is gonna win this race. But as you see from the split above, I don’t think anyone is winning, or to win, might take longer than expected.

P.S. I deleted that CP comment cause I was wrong and if it’s 50% of 0.2% then it should be 5 million in CP. So, it’s showing correctly on LUNCDash.

[godoal]

@arunadaybasu

Yes so what you are saying is that:

0.2% TX GAS is split 50-50:

1. 50% to CP
2. 50% to OP

Not quite…

Tx Gas Fees are applied to ALL transactions, there are no exceptions. From the gas fees collected 50% goes to the community pool.

The 0.2% TAX is applied ONLY to on-chain transactions (only TAXable Msg*) on the number of coins transacted. So, 10% out of that 0.2% is added over and above the Tx Gas Fees collected 50% into the CP.

[arunadaybasu]

Yes you and I are saying the exact same thing.

Just that what you are not saying is that when the coins go into CP and OP (which I have shown in the diagram) it is cut off from supply.

If the price per LUNC is low then the value being removed from market cap is minimal.

When the coins come back into supply (when the price of LUNC is high) instead of being diluted 1x we are getting diluted 2x because of all the coins collected in CP and OP when the price was low.

Try to understand this properly.

You guys are concentrating on the supply, I am concentrating on the Market Cap. So concentrate on that only for now.

You will understand this example better, it you DON’T take out the coins from CP for the next 10 years.

After 10 years, when the price of LUNC is high, and when you take out the same coins which were put into CP when the price was low 10 years back, do you know what is gonna happen to the Market Cap?

The same thing that is happening to the Market Cap right now in a much smaller and miniscule scale that requires a magnifying glass to detect it also.

It’s like the Earth rotating around itself. When you zoom out, it’s rotating extremely fast, and when you zoom in, it’s rotating extremely slow. Like how it appears to us from the ground. You do not see it rotating. Cause you are stuck on to the Earth.

This is nothing else but perspective, but the cutting off the supply for CP and OP is eating away the Market Cap one year later. Not immediately which is why you can’t notice it.

P.S. The reason for initiating this conversation is also so that we can determine what happened to the price currently after the Binance burns. My premise has always been that if burning is useful then what happened after Binance burnt this time? Nothing? Or was it like a drop of water in the ocean? If that is so, then why are we burning at all and not saving that money of customers? Why are we ri(pp)ing them of their money if it doesn’t make any difference? It’s literally real money of customers that they burnt. So we have to justify that. Or not do it at all.

[godoal]

@arunadaybasu

You guys are concentrating on the supply, I am concentrating on the Market Cap. So concentrate on that only for now.

We concentrate on the supply because Market Cap is a function of the circulating supply.
So,
Market Cap = Current Price x Circulating Supply

[arunadaybasu]

You are again concentrating on semantics since we all know the following is also correct,

Price of LUNC = Market Cap / Supply

It’s fine. I know you have already understood what I was trying to say. That is enough for me.

Now, the community can come to this thread at any point of time and justify why we need to burn.

If it’s justified, then fine, I am not gonna comment on any burn prop that comes through, but otherwise I will only go to the respective threads and link back to this thread unless a proper answer is received for the following question:

WHY do we need to burn when it does not make any difference in like 1-2 years?

Why are we wasting customer money? For what joy?

P.S. My prop has burning in it cause I am doing it in a controlled manner by holding exactly 1:1 of what I am burning. So the burning makes sense in my plan. Not in general cause we don’t have any reserves in any burn plan till now apart from mine.

Also, I have provided my suggestions in the Vision $1 thread what can be done about it so there is nothing more for me to say.

If anyone wants to justify burning, they can come here and justify it, and they are free to do so.

This is an open thread for pitching burn reasons. Pitch your best one…

[godoal]

@arunadaybasu

what you are not saying is that when the coins go into CP and OP (which I have shown in the diagram) it is cut off from supply

I am not certain if coins in the CP (OPs are used for rewards so they are going to delegators anyway, so most re-stake them) are considered as being removed from circulation and don’t count in the Circulating Supply…you can verify that in practice using as marking points the days that the recent spend proposals were actioned and check if the effective CS did increase at that time by the number of coins that were taken out of the CP.

[arunadaybasu]

That is almost next to impossible since no one is recording that data.

In fact, LUNCDash doesn’t even have data in April and May, 2023. Forget about having granular data to the minute.

This is a terrible state of on-chain data aggregation and analytics.

You and I are both guessing with the data since none of it is proper.

Even you know what the off-chain data is showing all the time. It has a difference of about 1 billion LUNC with on-chain data. And the L1 transfer was 223 million.

Currently, I don’t even know which data to trust .

Which is why I am using pure logic.

[godoal]

They do have data up to 2023-03-12, until that point there were two major payouts.

[arunadaybasu]

How do I know with one single figure every day?

How do you know whether anyone was burning the supply while releasing the payment?

How do you know how much was transferred to CP from gas in a specific transaction?

And how is the circulating supply in the system being calculated even? I have to check the code for that.

I don’t think there is such data available. Is there?

One more thing is that the exchanges are not calculating the price of LUNC using this on-chain data so it’s better to analyse off-chain data.

[arunadaybasu]

@godoal check this out

http://luncdashboard.us.to:3001/

It’s running a server to get the circulating supply every minute. The last 100 records are shown here, which should be the last 100 minutes, if nothing gets skipped.

I will extend this dashboard, graph and the UI, etc.

This is extremely barebones but it started from your idea of checking out the Circulating Supply, so I am sharing it with you.

If you want any data on this dashboard specifically, you can let me know.

I am going for more on-chain data including whether we can see how much is going to CP, OP, etc. Let’s see. I will keep developing this but you can use this to track the circulating supply for now.

[godoal]

I like the clean design