Lower the tax rate to encourage higher on-chain volume

Governance & Proposals
94

Until there is utility back on the chain there is really no need to talk about how high or low the volume is.
Regardless of whether the volume is high or low, right now there are very few dApps active onchain.
The community needs to ask itself, How did the high on chain volume help us prior to staking being reactivated??
The answer is that it had almost no benefit to the community, only to the CEXes who moved their coins to and from the chain at a low cost to them.
Currently, they are still doing so though at lower levels. It is possible that over time this volume will eventually rise regardless of the tax.
There has been one ignored benefit of the on-chain tax.
Right now the tax is helping by deterring people from sending their rewards back to CEXes and instead most people are restaking.
Otherwise circulating supply would have been rising by hundreds of millions each day, lowering the price of the coin.
This is a benefit that is currently being overlooked.

Another benefit is that the 1.2% tax will allow us to take advantage of brief periods of high on chain volumes such as when the IBC channels will be re-opened and the 41billion LUNC and 150 million USTC will be moved back on-chain allowing us to burn over 400 million coins in the case of LUNC.
We also have to look at the positive impact the 1.2%tax will have when the hundreds of billions of WLUNA will be moved back on-chain allowing us to burn potentially up to 4 billion coins.
As such, I say we keep the 1.2% on chain tax until when utility comes back on chain, that is when LUNC has been upgraded to achieve parity with Luna V2.
At that point, the benefits of utility will warrant a lowering of the tax. As such, let us review the tax in 2023
Otherwise lowering the tax just because the on chain volume is low yet the level of volume at this point in time whether high or low is not an issue because very few projects are on chain does not help the community. Indeed, what it may do is reduce the impact of the Binance burn as the proposed 0.2%tax will not be high enough to discourage people from sending their rewards back to CEXes ,raise circulating supply and thus lower the price of LUNC as the 1.2% tax is currently doing.

3 Likes
95

This is an important discussion, thank you for bring it up.
For those who strongly opposes any form of tax reduction, let’s consider the following:
a) 1.2% is not going to quickly eliminate the excessive amount of LUNC. It is not the end all be all.
b) any rate of tax is meaningless if there no on-chain volume, which has been d.ying since the introduction of the current tax.
Volume is going to be the dictating factor for the actual burn activities long term, as well as the value of the chain - number of users, this is what will to take the coin price to the moon, if ever.
The negative effect of high tax on burn, for example:
1.2% x $100 = $1.2 burned
0.2% x $10k = $200 burned
Wouldn’t you want more LUNC burned?
c) as a community, our ability to reflect, adjust, and adapt in real time, is going to be a much bigger positive catalyst than anything else.

Don’t forget Do Kwon’s mistake before the crash. He was probably reminded in more than 1 occasion that the 20% return on UST was too high. It was unsustainable and dangerous. But he wanted the short term benefits so bad he continued to risk everything and you know how it ended.

8 Likes
96

It’s early days but agree the tax has been problematic. I was optimistic about it, but we cannot have a solution which adversely impacts our critical chain functions; dApps and CEXs (as the on/off ramps). This is the lifeblood of the chain.

I’m also concerned it may discourage new dApp builders but I’m not sure on the technical feasibility of accommodating a tax in dApps (a dynamic one obviously). There’s also marketing impacts of marketing dApps with a tax. Maybe this won’t be an issue. Don’t know.

Let’s start with what we ideally need: a wide-scale burn which doesn’t impact critical functions. Personally I think rewards should be taxed. Whether on payout or on MsgWithdrawRewards (can’t recall exact syntax). This doesn’t seem to be popular, yet we have people jumping at a futile burnalot campaign.

I have much to say on CEX burns, the tax, and the rewards burn. Another day. I’ll finish with some numbers. Hypothetically we burn 3T at .0004. That’s 1.2 billion dollars. People are not thinking this way. My point is that it’s no good having a burn which impacts critical functions if it burns an insignificant amount.

1 Like
97

I personally think it is too soon to be lowering the tax, more data is required, but also i still believe there are alternatives to work through

98

NO WITH VETO, I will wait for the Terra Rebels to make a proposal, like @Vegas if they deem necessary. Not a bunch of proposals from people that disagreed with the community and refuse to give up the ghost.

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99

Although vegas is a very smart and hardworking man bringing alot of talent to the team he does not have the background that would enable him to make a fully informed decision on this issue…
The devs have expressed that the tax is too high and are mostly in favour of it either not being there or it being reduced.
The tax was good for bringing the community together however there are so many things coming in the future that imo mean that we may aswell address this issue sooner rather than later.
Imo it is better to be proactive rather then reactive and i am worried if we leave the high tax in place too long it will have detrimental impacts to the chain that may be harder to repair than just dealing with it now while its still early.
I am 100% for lowering the tax, even binance said it was too high and it would be better to align with the CEX then going against advice from other big players that are actually supporting us.
I am sure we may also get more clarification in the Ama

3 Likes
100

Just to add to this as well - the people dismissing this proposal because it has been brought forward by a community member rather than TR team member need to remember what we are trying to acomplish.
This type of proposal is exactly what we are looking for on a community governed chain.
A Well thought out and researched community driven proposal!
I am sure TR devs would agree

4 Likes
101

It’s way too soon to even think about lowering the tax. At least let Binance post their new burn numbers. What’s the rush? I’ll be voting no on this. Let the current tax breathe for a little bit it’s been what, a week?

2 Likes
102

TR has brought forward many proposals, and it is my opinion that if they thought it would be best for the community, then they would once again bring forth this proposal. They didn’t, therefore it must not be the right time to do so. If it becomes the right time, I am sure they will.

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103

You throw out confidence interval, and standard deviation as though they represent anything other than your confidence that you assessed the correct measure parameter. That is to say you are 95% confident there is a cat in this picture of a cat with a 30% margin of error.

In other words all your confidence level and margin of error is saying you were 95% confident that the trading volume at such a date was so many billion while also stating youre 30-40% likely to be wrong in your analysis.

That is all that you have said.

Additionally, a 95% confidence interval with a 30% margin of error shows some serious calculation issues you may want to revisit.

Your standard deviation is significantly high which is expected with the outliers attached to the de-peg which initially caused a surge in volume followed by a drastic drop in volume. Both outliers skew your standard deviation significantly inflating it more than it already is.

Additionally, you’re comparing old transaction volume of pre crash with most d-apps working and billions of funds supporting the system to a post crash, high debt, few utility chain that is actively being repaired and is making significant improvements (such as an impending listing by coinbase) and the further development of utility, and dapps. In addition to discussions centering around re-peg, recollateralization, debt repayment, ibc, prism etc.

You’re understandably upset an execution glitch made the tax incompatible with many dapps thus significantly reducing volume and therefore the burn. Take solace that this is being rectified by the devs/community.

However it is willfully dense to be critical of the fact that the 1.2% tax (which is substantially low compared to some projects) hasn’t burned a noticeable amount of a 6T supply in a little over a week.

Additionally, it is important to remember this is not a get rich quick scheme, it is a long term phoenix rebirth process in which increasing utility, re-peg, recollateralization, and the onboarding of new and old developers will offset the losses of the 1.2% tax. It is basic delayed gratification you can have one marshmallow now or you can have a whole bag in a few years.

As the price increases, volume will increase, more devs will come, and more funds will sustain the ecosystem. This will occur in a positive feedback loop until the tax parameters have been hit and the supply is reduced until the desired point. At which time the project will stabilize to pre-crash use (though likely not the same volume or price)

TR just released their roadmap for the ecosystem and one of the noted plans is a tax re-assessment at the end of this year.

TLDR:
Those words dont mean or represent what you think they do. It is okay to be upset and concerned about the success of the burn but it is important to have patience when it comes to such a monumentous goal that this community shares. Finally there are a few hundred factors which will determine the success of the burn tax. one of which is volume but that is a latent variable (which means it is impacted by many more significant ecosystem features such as utility, collateralization, etc.) Volume is not standalone nor is it all inclusive/representative as to the impending success of a project.

Your proposal from me will be a NO until that tax reassessment date at the very least.

2 Likes
104

The proponents of this proposal can’t be using the metrics from post live on station as pre-burn, because the numbers are very skewed. Everyone knows that the staking reward percentages were artificially astronomical. Myself included, rushed to move lots of volume to station to capture those rewards. Ambiguity if anything hurt vol not the burn.

By the time the burn was implemented, the whales already moved, and many started to keep funds liquid on CEXs, because weary of those floating vulnerable old luna proposals trying to relive the past, and of course having DK on the run but not running.

You can also overlay the vol charts vs. the previous rally, and then the decline. All had nothing to do with the burn. Just some sorry actors that want to ruin it all for the rest of us who can exhibit patience, and see the vision. Glad they have LUNA v2 as alternative.

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105

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How do we measured a chain growing? As I see after 1.2% tax rate live on board. A number of active wallet going decreased. A volume on-chain also going decreased.

1 Like
106

Hiya. Just wanted to say that I appreciated the level-headed, non-charged critique of the analysis; it is a first (and perhaps only) in this thread and in discussing burn efficacy in general, of which those goalposts are inherently indeterminate outside of ‘10b circulating supply’ (a value that is not possible within the currently bonded LUNC values and really within my own lifetime via projections).

I did tell @Akujiro this, as it is going to be his proposal in the end (I am helping draft it to the best of my ability), but the conclusions that I included in the draft sent to him were omitted from the post. I had made it relatively clear (perhaps, at least in my opinion) the omitted text the following, which I have yet to edit into all of the first comment I have made, at least outside of Agora, but I will include it here because it is necessary and overdue:

The parameter change clamps the tax rate to 0.2%. No changes are made to the actual burn parameters under the RewardPolicy value in the treasury (rate_min and rate_max). While it is encouraged to lower the tax rate further to the more accurate target of 0.16332%, we round up in accounting for the margin of error in a small sample set. If the change in tax produces excess revenue, it is encouraged to distribute this back to the chain economy, community, or elsewhere in a separate positive motion of action.

Implications of lowering tax rates

Pros
Encouraging higher volume on-chain through basic swaps on Astroport and TerraSwap, two of the last dApps remaining on-chain
Increasing pay for validators on-chain as long as transactions occur
Retaining partial taxation on-chain (at 0.2%), meaning LUNC is still burned
Potentially encouraging traders to move back from CEXs to on-chain (“opting into the burn”)

Cons
Less tax rewards (burn) overall
No guarantees that users on CEXs will move their LUNC or USTC back on-chain, or that they will increase or change taxes to the newly proposed rate
May still not generate taxes or encourage transactions due to lack of transactional outlets (like available dApps)

Neutral Observations
Validators may alter their commission positively or negatively to reflect tax rate changes

Transactional Necessity On-Chain
As mentioned, transactions are necessary for block production, which is how validators are paid. Several are running at a net loss, meaning their validator is unsustainable for long periods of time - this is especially true of 0% commission validators. Lowering the tax will not solve the issue of drastically lowered transactions alone, so I encourage people to consider how we can encourage more transactions to happen on-chain. This can include dApp ideas and implementations, or perhaps something more novel.

I understand that simple regression modeling is not going to be enough to justify the statistics presented, as well as many other flaws that are glaring to me since receiving public input (of which I’m grateful for). I do want to make note, here, that I am happy to assist in drafting proposals to the best of my ability to ensure people who are less technical or well-versed in doing their own, as I believe that education can help foster decentralization in the community.

Personally, I do not think the burn tax is going to be efficacious long-term unless we start onboarding dApps sooner rather than later. The momentum of rolling the tax burn boulder up the hill is done, and we have to go back to the bottom and roll it up again.

Essentially, I mean to say that this proposal is to call to attention certain aspects of the burn tax that are either disorganized or myopic, such as what determines its success and how we can achieve that, two things that are sorely missing from the discussion on a broad level. Additionally, there is uncertainty with how many dApps are looking to onboard, as multiple parties are privatizing this information, or providing a non-determinate number.

I will touch on these in an AMA with DefiRidge on the 9th. This proposal will go up nevertheless and I encourage everyone to vote as they see fit. Thanks for your generous feedback.

3 Likes
107

I’ll give you an idea because it could have gone down. Considering users who live in Europe. When the euro falls below the dollar when exchanging the euro for dollars there is a loss

108

Another issue is not many people post about economic factors. It’s all micro analysis. For example, since the burn tax went live, markets have nose dived. I’d be very surprised if this wasn’t factor in the lower chain volumes.

In case the Binance CEX burn is a factor in your vote:
How much will Binance burn? CZ will burn enough such that he has made recompense for his faux pas; his initial tweets about burning vs forking and all events since then. He will recompense more than enough such that no person, no CEX, or mindless social influencer can every say that Binance didn’t do their bit. His burns will dwarf anyone else heretofore and future. After that, CZ never has to think about this again. I’m guessing 500B max. Which still leaves us at 6.3T.

Now maybe I’m wrong. Maybe CZ will burn 3T or 4T just because he wants to. This would be the exception, not the norm. He has made it clear that as a CEX their business is about being a CEX and not some rescue vehicle for coins.

People assuming Binance will burn long term are totally deluded. As though a CEX is somehow obligated to heed the will of the community. There are no economic or social reasons significant enough to suggest a CEX has to heed.

1 Like
109

Nah I don’t agree, imo the huge volume had to do with staking being enabled and through this governance was restored.

110

For the time being, a high on chain volume is of zero benefit to the community. There are very few dApps and projects currently on chain and the high volume people loved seeing belonged to CEXes and towards the end of August, from staking.
I am not against a reduction, but that is something that should be done as the roadmap highlights, after LUNC has been upgraded and reached update parity with the rest of Cosmos or after we achieve interoperability with LUNA V.2 which will bring dApps back to the chain.
Right now the high tax is serving the community, not just in burns, but also because it is deterring people from sending their coins back to CEXes and thus circulating supply is not going up. People are restaking their rewards instead.
A lowering of the burn tax will see circulating supply rising each day by hundreds of millions of coins, diluting the price gains we have achieved so far even though total supply will de dropping.
As such, this is not the time to talk about reducing the burn tax, especially when it has not even had a month for us to fully assess its impact.

111

The trading volume for the last day is about $1 billion.This is the fourth place among all cryptocurrencies.Next week, trading volumes will be even higher.The token burning rate will gradually increase.And the price of the token will rise.

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112

0.1% x $20k = $200
10% x $2k = $200
5% x $4k = 200$

lmao lets just invent numbers and present has solutions

m8 check 6 months volume, cherry picking data is just being stupid

113

Thank you for your input!
Low onchain volume means less rewards for validators and less rewards for delegators, and that’s only one of the many negatives a low onchain volume brings, which is basically the lifeblood circulating through the chain.

Claiming that we do not need the onchain volume high for now and therefore are ok to completely wreck it because no dApps are there yet or the cosmos version is not updated, is not a very responsible way of thinking towards the future of the LUNC chain and signals to investors that we’re willing to sit in a pit we dug ourselves, lighting it on fire and watch it burn right with us in the middle of the center.
For the sake of returning the volume back to the pretax state, this reduction to 0.2 is needed, now and not later.

I saw the Terra Rebels roadmap and I like it. That doesn’t mean that the community has to strictly follow it or comply with it.
The LUNC coin is decentralized and therefore anyone in the community can put up a proposal.

This discussion is happening right now and it won’t stop. The proposal is being put up by me on the 10th of October.
People should vote their conscience, nothing more and nothing less.
Data is provided and will be collected further until the 10th and will be presented again with the proposal.

When we start seeing a fire breaking out, we do not sit around and wait until it extinguishes itself or try to analyze it’s behaviour and get more data on how best to tackle the problem, we grab the fire extinguisher and put out the fire.

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