Lower the tax rate to encourage higher on-chain volume

[wrapped_dday]

Understand that CEXs are landlocking the funds because of the tax, not in spite of. They cannot be coerced to implement anything we ask of them on-chain; they, in fact have greater leverage to do so for us because they generate the majority of the volume due to high-frequency trading (HFT).

Blockchains are redundant technology to private database money remittance at this rate if there are no good financial reasons to transact on-chain. There are, in fact, several appealing reasons, namely HFT, but the tax is so expensive for these users (the majority of the validator’s income) that opting for 0% on Binance was the preferred play. Can’t think of anyone who likes paying taxes — give them a compelling reason to do so.

Using 7 days trailing stats potentially introduces a high margin of error, which was addressed in the primary post. On a good day, tax revenue-to-chain transaction volume is not better than 0.85% in historical data. There needs to be a reason to encourage traders to come back on-chain and use it while we plan to set up working dApps, otherwise the tax will push out the rest of what little we have left.

[xXx]

I’m not saying don’t reduce the tax.

however 7 days of data is not enough to define a more suitable rate.

if you have time, it would be very important to read the article Burn and Rebuild Luna Classic. On September 15th, Terra Classic… | by Edward Kim | Sep, 2022 | Medium

we need to build a Light Client Daemon (LCD) server, we need to create our own Station wallet and many other things that need funds for its development.

I recommend that part of the tax, mostly on-chain, goes to Community Fund to develop these features and pay our developers.

this must be taken into account when setting the new tax %.

Regarding CEX, nothing guarantees that they will implement a lower tax, but I recommend contacting the main CEX to see what percentage would be acceptable for them to implement the tax.

We need the tax to finance new projects, to pay our expenses.

[Vegas]

100% I believe that is room to adjust. But trust me is not the time.wr still don’t have enough data. Alot of dapps wallets cexs and dexs are not working properly. And the timing wait.rome was not build in one day . I will support but not now.

[marcelo]

I LITERALLY started my statement with “My opinion”. Everything that I said is my opinion. At any point I stated otherwise.

My point is, the purpose of this tax is to lower the supply, thus increasing the Lunc price. And most people are still around because of that: they expect the price to go up. If the tax gets lowered, the rate of Lunc price increase will reduce. So it is only natural to assume that people will leave because they are not willing to wait a longer time.

And I agree with your statement:

@1tdts

Increasing tax revenue by lowering tax rates has been proven successful on numerous occasions.

But I am not sure that this will happen in this case. The burn tax is not like any other tax: it is not used to fund services, or to keep an essential structure in society running. It is used solely to burn currency to increase its price. And most people are here expecting this increase in price. So I am not sure if lowering it will have the intended effect.

As @Noctis65 said:

@Noctis65

Whatever action we take next, we need to ensure the implications are fully explored before jumping in feet first.

So my contribution to this discussion is to put in question whether this proposal will have the intended effect. And people against this proposal (me included) are not against the adjustment of the tax; we are just pointing out that we don’t have enough data to fully understand the repercussions that it will have

[wrapped_dday]

I agree. Remember that the tax is not directly funding anything. By removing LUNC from the supply, the money consolidates to existing LUNC holders. So, the money, by default, is directed to those holders. This is why it’s a popular community notion.

However, if the goal of the community is to push the price of LUNC up solely to sell it and become a millionaire, the tax cannot achieve this goal in and of itself. Given that taxes are generated through transactions, we are in a sticky spot with regards to asking the core users of the blockchain (HFTs) to pay higher taxes - even though they were, and are, the only users of Terra Classic right now.

Traders are willing to pay taxes if they can see benefit from it. But since the taxes are forced extraction of their funds to idle LUNC holders or delegators looking to exit at their personal price targets, they do not see it reasonable to pay taxes.

There is a saying when it comes to lending money in liquidity pools - “everyone works but the idle LP position.” (suzuha)

It would be very prudent to, at minimum, apportion taxes like you mention to help continue the blockchain’s functionality. Otherwise, what’s the point?

[413x_45h4w]

These are the kinds of things that could’ve been answered weeks ago, had the pro-tax wing presented evidence-based arguments, expectations, and targets. But it refused to do so – many, many times.

Starting with reported volume from 9/28 (yesterday’s 14bn LUNC traded), the on-chain data is comparable with what came 2+ weeks before. Major bugs with gas fees have been fixed, or have seen a best-efforts attempt to be fixed. Zombie dapps were important for USTC volumes, but not for LUNC’s. 14bn LUNC traded yesterday vs 118bn 2 Wednesdays ago: an 89% drop in volume. Cex’s moved money around their wallets on Sept 8-9 to centralize from many partitions to a tiny number, to reduce their own blockchain interactions to the bare minimum.

Doubling down every time the data blows up your thesis is not a plan

[Akujiro]

Thanks for your opinion Vegas!
I can only ask again to provide a timeline, and a list of said dApps because the 2 dApps you mentioned can barely be called utility and are never responsible for billions of onchain volume.
Yes, Rome was not built in a day but Rome was also not under heavy siege and burning from the inside while being built and right now we are in that situation.
We do not have the luxury to wait and the all the data mentioned in the text as well as shown in Terra Station supports that claim.
I would also like to mention again that none of the TR DEVs are really pro burn-tax, especially not a burntax that high!

So in this case I will stick to the facts and data that’s been presented so far as well as the opinion of the DEVs.
The number 1.2 is a number that isn’t and wasn’t backed by facts or data. That proposal was only put up to unite the community. Now that the community is united, that number is obsolete and serves no purpose anymore. We can lower the burntax to something healthier for the chain and will see a significant rise in volume again!

[xXx]

Perfect!

I liked the analysis you did, I think it would be prudent to reduce the tax, but we need more data.

From day one I defended the tax together with @Vegas
I talked to several validators, some laughed, others blocked me and some gave a vote of confidence and today we have the tax implemented, maybe it’s not the perfect rate but we can get there, we can readjust.

I ask Mr @Vegas as difficult as it is to talk to the representatives of the main CEX, to see what would be an acceptable rate for them.

we will correct the rate but an opinion from the main cexs would be important.

let’s separate a slice of the pie to finance projects, pay expenses.

Mr @wrapped_dday
could you wait at least 1 month of data? Many dapps, cexs and dexs wallets are not working properly.

@413x_45h4w it was impossible to predict all the scenarios that would happen, because there was no data to analyze.

from that moment we can do our analysis, because now we have data, I always said that if we didn’t try we wouldn’t know the results, we tried and now we are getting the results and we can make the necessary adjustments.

You take data from 118 billion from 2 wednesdays ago, but forget to mention that at that time lunc was in the FOMO of tax implementation, these data are out of the ordinary.

And again you get data from 14 billion LUNC traded yesterday where it was told by @Vegas that Many dapps, cexs and dexs wallets are not working properly.

So again I say the data is not enough for analysis, I defend a tax reduction, but we still don’t know what the most appropriate rate would be.

[Pascal]

As a community we have implemented the 1.2% burn tax, overwhelmingly voted for it. Only days ago it took effect! it took months of dedicated work by so many people! And now just a few days after the fact you want to FUD out? This community is still fighting to get it all implemented.

We have made our bet, now lets play it out. 3 months as it is at least to collect some idea of how this is working. No more rash ideas and quick implementations.

The tax as implemented is working AS EXPECTED. Nobody thought you would be a millionaire over night did you? Everybody with a brain on their head could see it coming that volume would be huge leading up to it and quiet down afterwards for some time. Until it explodes with the next bull market. Yes that’s right and our timing is perfect in the market cycle. This tax needs to run at 1.2% until you cannot remember it even exists.

LUNC needs to drop in value from here - ideally by quite a bit. Because after that, with all the FUDders gone and the value low - when the market kicks back in - the burn tax will be so much more effective. The last thing we want is a high price to impede on the tax.

Everything is perfect. No need to fud it up. Where do you think all the developpers will go which did this work for us for free - if they find out we back stab them days later? Its just NO on so many levels. NO.

Where do you think the off chain burning will go to which we are fighting for if they found out the core community is pulling out? It is NO. What do you think Binance would do which is just abut to start burning? No way - if you want to make any money from LUNC. You are right about one thing. This is LUNC’s last chance. We have placed our bets, now is the time to hold our breath and ride the wild waters. Rien ne vas plus!

So thank you - but NO NO and NO. You have my sincere veto vote.

[StrathCole]

I thought a while before posting here, because I think that indeed we have not that much data yet due to the problems with the gas fees recently.

But:
I checked the chain data and I won’t really let the argument about “non-working” dApps count.
Why? Because from my data (and I will gladly let someone prove me wrong) in the week from Aug 29th to Sep 4th when comparing MsgSend (so coin sending) and ExecuteContract (so dApp contracts) was 99:1. So only 1% traffic for the contracts.
During the last week this was ~1.5% of traffic for the contracts mainly because transactions with contracts failed fewer times than sending coins.

In addition the main CEX Binance (deposit/withdrawal) is already working again.
During the above-mentioned week the deposits to Binance were around 273B LUNC. While during the last week this was only 53B. And the amount is shrinking (only 2.4B yesterday, which would be 16B in a week when just taking it times 7).

Withdrawals from Binance have been 498B during the mentioned week while only 16B last week (~3.3B yesterday, ~2.8B the day before).

The pure send volume during the above week was around 2.22T LUNC. The Binance deposit and withdrawal made nearly 35% of all traffic. And this does not even take into account the internal traffic in binance wallets, which has been another ~619B. So Binance alone caused ~63% of all on-chain traffic (send only) pre-tax.

So in my opinion currently dApps and utility won’t solve any volume problems and such tax problems anytime soon.

[413x_45h4w]

great work as always @StrathCole , the community’s lucky to have you

[Vendrugo]

CEX do not burn tokens on a daily basis. Some may do it in X time or are still waiting and looking at the data obtained

[StrathCole]

We are not talking about CEX burns. We are talking about on-chain volume and the related tax-burns. And about decreased volume that might or might not recover due to new utility and fixed dApps/CEXes.
CEX burns (Binance left aside, which is not a 1.2% tax-burn as they pay all burns from their pocket) are not really much compared to the on-chain burn.

An addition to my previous post:
Why did I choose the week Aug29-Sep4? Because the week after that, Binance made some huge moves of coins on-chain which would have been unfair to compare. Still it was quite a high-volume week, but it doesn’t change the relations much.

[wrapped_dday]

Interesting. Do you have any public-facing databases for chain analysis here by type of message sent?

This makes sense since the only thing that makes sense to do without dApps is to just swap back and forth between LUNC and USTC to capture arbitrage profits, but with native swaps off, arbitrageurs have a dampened or no effect on supply control. Seems like a Catch-22: turn swaps on, open up validators to governance attacks. Leave swaps off, tax dodging forces traders to some centralized version of swapping (e.g. Binance) and validators earn reduced block commissions.

The core idea I’m trying to illustrate is that the most vocal investors in favor of the tax do not trade actively, and so to diversify use cases where eligible swaps can happen is an easier route than it is to ask Binance to Pay Up Because We Said So. Why resolve to saying “it’s ok if CEXs don’t use the blockchain because Maybe Eventually they will burn LUNC”? Why have a blockchain at all? We might as well just appropriate Terra Classic to Binance Smart Chain in that case, and if so, kind of a waste of time to deal with all of this tax nonsense in the first place, no?

It’s great and all that some investors are committed to the success of the chain by not selling, but the available liquidity that they provide through delegation or idle holding is not perpetual. Terra experienced this problem 2-3 times already before the major crash and I am not going to watch it happen a fourth time because we were too stubborn to change things that don’t work or make sense pragmatically.

[yetanothersite]

Its only been in a short time, maybe give it a full month ?
Coins like this need constant interest from the world of crypto investors so there are plenty of reasons why volume drops off.

[X-fileperseek]

How to post a proposal? I couldn’t find the write button

[pivo4et]

The tax rate should remain at 1.2% until the very end of the burning.

[StrathCole]

@wrapped_dday
No, I have no public data. But I can provide some on request of course. Just contact me on TG or Twitter.

@Koch

if we bring that into our chain people will pay whatever price to own a piece, even a high tax

No they won’t. There are plenty of chains out there. Terra is one of the biggest competitors and attracting lots of new projects. Classic needs to be able to compete and not just because of “emotional bondage”.

@ yetanothersite

maybe give it a full month

In theory, yes. But utility will not be there in a matter of just a month. And if we don’t see significant volume recovery in a week, this is a strong sign it won’t recover soon.

@ pivo4et

The tax rate should remain at 1.2% until the very end of the burning.

That is not a factual based statement. It’s just saying “I want it, so make it”.

[Nigel80sKid]

Great discussion, I’m fully aligned with what is written here.

For clarity we will need a timeline, how long are we going to observe and gather data, somewhere in Q4 is not enough, imho. We as a community will also need to have a comprehensive and up to date dApps list.

Questions I currently have what are we expecting the 1.2% to burn with and without cex support (long term), with and without dApps support (long term).

Most of the ecosystem either migrated or has sunset their service or are just broken because of ustc being unpegged and not linked to LUNC, Swaps being disabled. This is just my opinion, maybe a tax in general should have waited till after reconstruction of USTC/IBC/Swaps. Above is why this concerned citizen of LUNC is concerned to let the tax just go on as is.

[pivo4et]

Want to lower your tax?Create a vote and vote for it with your tokens.Are you afraid to do it? And rightly so.Because 99% of the votes will be against your proposal.