I truly belive both sides have extremely valid arguments.
In the end I don’t know enough myself to say for sure what’s best for the future.
What I know for sure is if the tax was homogeneously applied on-chain AND off-chain, everyone would be happy and no downside to transacting on chain (relatively speaking)…now how do we help achieve the goal of applying the tax everywhere? Who can lead the way on this…would CZ risk implementing a 0.2% vs. 1.2% without fearing sending his business away?
Contributors should be rewarded and ecosystem infrastructure should be adequately financed.
But, lowering the tax rate to 6 fold, while the chain development is still in place – IBC, new validators, USTC re-peg, etc,… are yet to come, is way too early. The burn tax effect is not fully manifested yet.
So, the proposal should be split into two, one for contributors reward and the other for reducing tax rate.
If that’s the case, I would vote YES for contributors reward and “BIG NO” for tax reduction.
no ibc
burn is in full swing
you want to reduce the tax now?
i suggest a 90 day waiting period from oct 15 to jan 15 before making any major decisions. it looks like a joke protocol if we keep changing the taxes so often. we need more time and data to see the real effects of the tax burn. after jan 15 if the burn slows down or if there are problems with the apps we can reconsider it then. but doing it right now is completely wrong. reducing burn by 6x at such early stage will only do harm. we can’t rush this we need to be cautious.
Don’t you think that implementing 1.2 percent tax is being desperate. It should be lower to at least 0.2. This way the community will use it to transfer fund on chain. You have a burning mechanism that is not desperate while you are attracting more people to use and trust Luna Classic. 1.2 percent tax on something that has no use is a bad idea. People pay for good service. You destroy the very service of this coin with that tax.
Here is the AMA recording, where CZ from Binance clearly in favor of lowering tax.
Most importantly, low tax is essential to high volume, which is the precursor for high burn amount, if ever.
1.2% sounded exciting but it is unsustainable. Name one successful POS chain, with 2.4% minimum cost to staking (charge on both ways = 1.2x2). We are forcing people to stay on exchanges with this much tax, rather than staking with the chain and become long term holder.
Let’s lower the tax, do what is best for the future of $LUNC .
How can you guarantee that when you lower the tax, the volume will increase? Have you ever looked at the volume before the accident?? How did you decide that the current situation is bad … it takes some time … what will happen if there is no new system? A new offer for 2 weeks?
You forget that the Binance exchange has the right to introduce absolutely any tax on its own.From 0.1% to 100%
But for a reason unknown to us, the Binance exchange does not impose any tax.
Why?
Binance does not impose a tax because it owns 2.34 trillion LUNK tokens.
After all, with an increase in the price of the token, the Binance exchange will have to sell them.And then this exchange will not be able to control the price of the token and earn endlessly on the volatility of LUNK.
Plain and simple, this is a NO.
Too many changes and waffle all in the one proposal.
Each change needs to go in its own separate vote.
P.S.
Taxing the community pool is not ideal.
Changing the on chain % will not in any way directly alter any CEX whose primary volume is off chain. This makes the assumption that by way of virtue signalling only that because onchain tax is reduced that somehow all other CEXs will get the ‘feels bad’ and voluntarily introduce the same tax on their transactions or donate their transaction fees to the burn like Binance. There is zero garuntee of any change to CEX’s. These are businesses who we do not have any regulatory power over.
My 2 LUNC.
Economically it does not make sense because it is not generating money or it is not in circulation? Everyone must keep in mind that the objective is to remove tokens from circulation and eventually this implies burning money just as you say throwing it into the fire. It is not possible to circulate that money or think about creating new projects when we have a problem. I would not spend another 1 euro even if there are new projects if the problem has not been solved yet. You have to burn those tokens as fast as possible and reducing it to 0.2% doesn’t help at all. It only increases the time needed to reach the target.
Currently 717,183,378 LUNC per day are being burned
CZ does not want 1.2% on its CEX. But the volume in chain has not decreased.
The excuse of the long -term holder does not care. If I am short term, I keep on the CEX, if I am a long term for staker, I will look at what I earn in Staking. The 1.2% tax is recovered quickly. And if I am short term but still want to put on the channel, I don’t want a tax.
It only helps the short termist and especially the big whales who want to go out for free and which in addition to stake even.
Those who opposes tax reduction, you are not doing the math.
Long term holders “does not care” but only because the investment was already staked.
You have everything to gain from excessive tax rate, at the cost of everyone after you.
However, this is only “good” for early adopters in theory. It is wishful thinking and unrealistic.
We CANNOT look at this only from the point of people who already invested in LUNC.
You MUST take it from a new investor’s perspective if the chain ever wants to grow its userbase!
Userbase is everything in the age of internet.
Userbase is the reason why, Binance with a merely 0.1% rate on trading fees, ended up burning more $LUNC than the current 1.2% tax ever did!
Blockchain is the best representation of internet technology.
How to value internet companies?
Amazon, Facebook, Google, YouTube, Twitter… It is all valued base on traffic and user numbers.
In blockchain, this is: on-chain volume, number of wallets (active, new, old, etc…).
The current 1.2% tax is an effective deterrence in keeping new investors / users away from staking, away from having a wallet on the blockchain other than centralized exchanges.
How much do you make on staking? quantify this with APY rate.
If the APY rate is 4%, then effectively, it is actually 4%-2.4%=1.6% return only for somebody who plans to hold for 1 year. So in this case why should anyone take the risk and even tries to hold long term?
(In reality it is much higher than 2.4% because you pay exchange service fees for withdraw, plus the 2nd 1.2% tax will be deducted from both your initial investment and your interest payment.)
Now the argument that a lower tax is going to create exit opportunity for whales is just outrageous.
Like it or not, whales are part of any financial ecosystem. At the very least, they contribute valuable liquidity to all the other market participants. It is an obvious flaw if an ecosystem cannot sustain the growth requirement needed for professionals & institutions. Do we want $LUNC stay as a “penny stock” forever? That will certainly k.ill any chance for 10x growth, let alone 100.x or 1000x as many moon boys are calling.
The current market cap of $LUNC is around 2B USD. Let’s be honest, is this is a lot of money in risk assets? How many institutional investors are in this? Probably not a lot. Exactly! Our problem is NOT whales leaving, our problem is that whales are afraid to even join the game! Of course, imagine taking a 2.4% guarentee lost on a already risky investment.
Do realize that we are competing with 2 groups:
Group #1 - centralized exchanges, as they offer 2 things:
1 - instant exit option, in case of short term pump or dum.p
2 - Flexible savings program WITHOUT the 2.4% minimum surcharge, without 20 days lock up period, users gets to keep all the interest payment! Current rate range from 2.5% to 10%. Variable rate can get as high as 20% on OKX when the market demand increases.
Source:
Group #2 - other cryptos, mostly PoS chains offering staking rewards plus potential for growth
Why should a new investor join the $LUNC network while the future for the chain is extremely uncertain, but a minimum loss of 2.4% on equity is guaranteed? This is just a bad deal!
Now, everybody says they want $LUNC to go to the moon. 10x, 100.x, if not 1000x in value.
But, how do you even manage that? By earlier adopters holding and not selling forever?
That is only half of the equation.
The marginal buyer has all the power, without new buyers holding the line, the price can only go down.
To sustain a high rate of growth, we need to have constant waves of new buyers / users of the asset.’
We need more users on-chain. Higher counts of high value wallets, new wallets, and active wallets. These are the determine factors that will attract investors and developers to join the ecosystem.
We need the people to stake on Terra Station, and remove liquidity off centralized exchanges, making it more and more expensive / risky for speculators to create short term pump and dum.p.
Wouldn’t you want to short squeeze the F out of $LUNC short sellers?
A high tax rate is working exactly against all that.
I don’t trade within the network because DEXs don’t offer me the tools that CEXs give me. Order books, charts, stop limit, etc. That’s one of the reasons why I only stake on the network. There is nothing that motivates me to circulate my money there. And it’s not because of the 1.2% rate. It doesn’t mean anything to me to pay that.
See, perfect example, we have minimum on-chain value to the real users of the crypto world.
People are most incentivized to leave their $LUNC on CEXs and speculate price actions.
When are we going to start building on-chain use case?
The next bull market?
By the time it would have been too late.
It’s false. It is precisely the old Staking who we interview to see the tax dropped. With 1 million staked before crash, in 3 months, they have x 250 more. ( 25000% in 3 months )
ex: Terra Finder
Binance made in the 800,000,000 daily volumes of daily lunc. We chain in the 20,000,000,000. It is 40 times less.
For burn the same thing we chain that the current one, we would have to increase the volume by 6. If we had to burn the same thing we chain as binance, we must increase the volume we chain with a tax at 0.2 per 240.
Do you think that the volume we chain will make 6 by what the tax has dropped?
In many countries, however, there will be a 20%tax, and they still sell
OK but the current APR is more than 38%, so even more for APY not 4%. It takes around 21 days to recover the tax and return completely.
If the APR decreases or is seen too low, we can redirect 10% of the tax to the oracle and lowered the repayment rate of the community pool from 50% to 40% for example. And without having to lower the tax.
There is nothing scandalous that gains of 25,000% in 3 months be taxed by 1.2%. They made free money on the back of all the little ones, and all that did not have staked
All liquidity was completely off chain.
It is not the tax that prevents liquidity on chain but the utility that must be found.
l’APR ( no APY ) is of 38% on chain.
We come back that it is the usefulness that is important. And for investors more at risk, the potential of reversal and future earnings. With while waiting for the 38 APR (or more if you want). FYI, Luna V2 just as risky see more is 14%
But , 1,2% is low tax.
He just told you that the 1.2% represent nothing. When you draw to win 10, 15, see 200% lever. 1.2% tax is nothing
How can you guarantee that when you lower the tax, the volume will increase? Have you ever looked at the volume before the accident?? How did you decide that the current situation is bad … it takes some time … what will happen if there is no new system? A new offer for 2 weeks?
The non-guarantee is outlined several times in the proposal:
Volume prior analysis, cc @Mysolo:
The data suggests that the most volume in September occurred prior to the tax implementation, and then there was a sharp drop-off after it did. So any data that uses a monthly tx/volume bar in September will account for this. That’s why it looks like “there was more” in September. Again, still need to cross-check this data with outgoing sends, as I am not sure where to find that data yet.
I am setting up a validator to fund on-chain projects which you can delegate to if you are ok with 100% commission setup - it is called Onyx and you can find my announcement here: https://twitter.com/wrapped_dday/status/1573572470551896064
and the v0.2 prospectus here, which is to be revised so that my salary will 100% be self-bonded to the validator (ie waiving pay until it’s profitable for delegators): Onyx Validator (Polymer) - Google Docs
You forget that the Binance exchange has the right to introduce absolutely any tax on its own.From 0.1% to 100%
But for a reason unknown to us, the Binance exchange does not impose any tax.
Why?
Binance does not impose a tax because it owns 2.34 trillion LUNK tokens.
After all, with an increase in the price of the token, the Binance exchange will have to sell them.And then this exchange will not be able to control the price of the token and earn endlessly on the volatility of LUNK.
Your validators have the right to do the same as outlined on their page. AllNodes, for example, the validator with the highest voting power, can impose 100% commission with a max daily change of 1%. Some other validators, like LUNC DAO, can only charge a maximum of 20% with a 1% daily change. CEXs generally charge 100% with a 100% max daily change.
Binance additionally burns all revenue they make from 0.1% trading fees. So they earn no money with LUNC being traded.
Taxing the community pool is not ideal.
None of the community pool is taxed. The proposal, in fact, takes 10% of all taxes and sends it to the community pool. This is outlined under the parameter change in RewardPolicy and was reviewed by Ed before this went up for voting.
There is zero garuntee of any change to CEX’s. These are businesses who we do not have any regulatory power over…My 2 LUNC.
That’s my point. We can’t force CEXs to do anything, so why not just change what we have on-chain to match theirs? Then actually see some of the tax money back to use for funding on-chain?
By the way, I do like your use of “my 2 LUNC.”
Economically it does not make sense because it is not generating money or it is not in circulation? Everyone must keep in mind that the objective is to remove tokens from circulation and eventually this implies burning money just as you say throwing it into the fire…
You have to burn those tokens as fast as possible and reducing it to 0.2% doesn’t help at all. It only increases the time needed to reach the target.
I’m wondering why it’s so important for 1.2% proponents to 1) contract the supply and 2) do so without taking any revenue for themselves or the ecosystem. It doesn’t make sense to me. I’m trying to understand the logic but we are not solving any problems by unwittingly contracting supply for the sake of contracting supply.
It only helps the short termist and especially the big whales who want to go out for free and which in addition to stake even.
Again, the stakers are benefiting the most here. They are tax-exempt on-chain and anyone shorting can use the yield to continue funding their levered perps. Meanwhile, whales like Binance throw away all revenue in good faith, and spot holders cannot spend their money on-chain reliably without paying taxes.
You can act in the short-term with a long-term view. Don’t get this mixed up.
I don’t trade within the network because DEXs don’t offer me the tools that CEXs give me. Order books, charts, stop limit, etc. That’s one of the reasons why I only stake on the network. There is nothing that motivates me to circulate my money there. And it’s not because of the 1.2% rate. It doesn’t mean anything to me to pay that.
Exactly. What I am trying to articulate with the 10% tax revenue apportionment to the community pool is that people can actually direct their money to building these kinds of things. Some dApps have actually left the ecosystem, and I’ve been paying taxes on failed transactions due to contracts that aren’t updated on DEXs. (quite literally burning with no positive benefit to me)
OK but the current APR is more than 38% , so even more for APY not 4%. It takes around 21 days to recover the tax and return completely.
Keep in mind staking APRs represent in-kind yield. That means you could receive a yield of +38% APY, but if LUNC price drops too far, you’ll effectively have made no money.
Yes but in crypto we do not calculate the APR/APY on the Fiat value but on the number of coins/tokens. As the 1.2% tax which is low in fiat value for a lunc so low.
The why we often ask to have an APR/APY with 2 digits for the risk taken
The entire counter argument to lower tax on-chain still revolves around someone who already made their investment in the $LUNC network, it is not helping. Think about how this chain appeals to new investors, this will make or break the project.
There is no argument on how a 1.2% tax is going to make the network more competitive versus every other chains. Is it going to make transaction on the network cheaper? Is it going to make dApps on $LUNC more user-friendly? High tax is clearly counter productive.
The point on LUNC after lowering tax, not able to match Binance off chain volume to sustain current burn amount, this is precisely the mentality for short term price gain over long term growth in value.
Yes, you could have burn more next week by keeping the 1.2% tax, or better yet, let’s double it if you think 1.2% is not a lot already, but the question is at what cost? The obsession for short term figures which contributes virtually nothing to actual utility is alarming.
Most people are pro burn only because the simple equation of “Supply X Unit Price = Market Cap”. Individual investor’s wealth are strictly determined by the unit price, now since to raise the market cap of a project / company is very difficult, which takes uncertain amount of time and hard work to inject true value; let’s play trick and destroys the supply and call it a day.
I do not oppose burning. I very much welcome it just like most LUNC investors. But the problem is at what cost. Right now we are getting a bad deal with 1.2%. Supporters of high tax seems to justify anything at any cost as long as the burn amounts are good. With all due respect, this is very narrow minded, and time and time again it has been proven that it only worked in the short term.
Burning is nothing new, not just in the crypto world, but also in traditional finance as well. Many large US corporations participated in yearly stock buy back plans. Burning is exactly that. Spending cash flow to buy back and reduce the amount of shares available to be public.
But who benefited from it? Did Apple dominated the smart phone industry by buying back shares? Or did Tesla changed the entire automobile industry by buying back shares? Did Boeing save their falling stock price by buying back shares? None of them did.
The evidence is clear. While CEOs and corporate executives profited from short term price pump because they had stock price increases as part of their KPIs / contract agreements. Investor’s interest were hurt because the money could have been better used for talent acquisition, for research and development.
And this is exactly what this proposal #5234 is proposing. While we reduce the tax rate due encourage real use case, we will also continue to burn, and furthermore dedicate 10% of tax proceeds for future development of the chain. This is a much sensible plan than spending the entire cash flow of a company on stock buy backs, which has never worked.
Current 38% APY is a bad argument. It is actually a great indicator why the 1.2% tax must be lowered to encourage higher rate of staking. If you compare the staking ratio of LUNC to other successful PoS chains, you will see the risk we face. It is existential. We need to increase the staking ratio ASAP.
Also I would like to remind everyone that how $LUNC crashed in May initially. It all started because Do Kwon got greedy on his offer of 20% APY on $USTC. Anyone with any sort of common sense in finance knows that it is doomed to explode, it was impossible to pro long the life span of a system like that. Numerous times people asked him to lower it to a more sustainable figure. But he didn’t. Because the short term benefits of such policy was too great to say no. And look the consequence of that? The price for expediency has always been unbearable. Now, after everything that has happened, families destroyed and lives were lost, and we are back to square one and advertising an even greater unsustainable APY of 38%!?
I suggest we proceed with caution. Think carefully.
Comparing 1.2% tax on LUNC transaction versus 20% sales tax in real life is also a terrible argument (sorry, no offense). I have debunked this on Twitter:
Sales tax is 6.35% or higher in other regions of the world, only because every business in that region pays the same cost.
Can you say the same about $LUNC ?
How much does it cost to make transactions, run dApps on competing blockchains? Is 1.2% making $LUNC more user-friendly?
Thank you for your honest response.
No, you don`t need to rescind the offer by Zaradar based on my opinion. If you can provide value for the team, go for it. And yes, if you become part of the Terra Rebels team, you should also be compensated (and not only the devs).
But my point remains: lowering the tax and setting aside a percentage to finance the ecosystem should be two different proposals
That is not the point I made. No one is exploiting anything. My point is that the 1,2% tax was originally intended to only burn Lunc and if anyone wants to allocate a percentage of the tax to any other purposes, it should be thoroughly discussed by the community, which was not. This was not in the signal proposal. This was not discussed. The proposal went live to vote without proper input from the community. And because of that, this must not be used as an argument to change the tax.
This is not how smart & experienced investors think. Certainly not how professionals manages their money.
The first thing in investing is always about risk management.
1.2% tax or 2.4% tax in reality is a confirmed risk. It will happen for sure until we make the sensible choice to lower it. Your estimate of 10x or 100.x is nothing but expectations, which may or may not happen, on top of that it needs to be discounted by market risk and the specific project / coin risk.
This is why, 1.2% tax is making a $LUNC a bad deal. As it destroys the risk to reward ration the big money are most concerned.
Saying that 1.2% fee is nothing because you could win 1000x is just like advocating lottery purchase for serious investment.
It is not gonna work.
