Summary
This proposal aims to deprecate the Seigniorage Reward Policy (effectively stopping LUNC re-minting from burns) and increase gas fees by 5X to capitalise the Community Pool and increase Validator/Staking Rewards.
Note: This proposal has been built upon the “Stop LUNC Reminting From Burns” proposal by @Cryptoking_NFT and also inputs from @godoal on the “Refactor Burn AnteHandler and deprecate Seigniorage Reward Policy” proposal by @ek826
Motivation
- The on-chain burn rate has drastically dropped in the last 4 weeks and looks to further reduce with Binance cutting down on burns
- A total of ~1B LUNC were burned in the last 4 weeks
- Considering the current Seigniorage Reward Policy of 10%, a total of ~100M were re-minted in the CP in the last 4 weeks
On the other hand:
- ~2B LUNC was accrued in Transaction Fees in the last 4 weeks
- Considering the current Community Tax of 50%, a total of ~1B LUNC were sent to the CP in the last 4 weeks
As illustrated above, the Seigniorage Reward Policy has become a pretty defunct source of funding for the CP, and is causing more harm than benefit to the community.
As a result, the Seigniorage Reward Policy should be deprecated immediately and the CP should continue to be completely funded by the existing Community Tax that was passed in Prop 4080.
Further Capitalisation of the Community Pool
In order to further capitalise the CP to meet the funding requirement of devs, I further propose to increase the current gas fees by 5x.
This will not only further capitalise the CP for dev funding, but also increase the staking rewards of validators/delegators.
A Note on Gas Fees
- The gas fees for a MsgSend transaction on Terra Classic is 0.894277 LUNC, which translates to $0.0001375398 at current market value of LUNC.
On the other hand:
- The gas fees for a MsgSend transaction on Terra 2.0 is 0.001943 LUNA, which translates to $0.00253446318 at current market value of LUNA.
At current market value, gas fees on Terra Classic is 18.42x cheaper than Terra 2.0
Even after increasing the gas fees by 5x, Terra Classic gas fees will still remain 3.68x cheaper than Terra 2.0
Why this proposal works
- No mints, therefore more burns
- More rewards for stakers/validators
- More funding for devs from the CP
Implementation
This would be implemented as 2 separate proposals to be voted upon independently.
-
The first would be a Text-based Proposal to increase gas fees by 5x by validators as stated here: https://fcd.terra.dev/v1/txs/gas_prices.
-
The second would be a Parameter Change Proposal, that would make the following changes:
{
“subspace”: “treasury”,
“key”: “RewardPolicy”,
“value”: “{“rate_min”: “1.0”, “rate_max” “1.0”, “cap”:{“denom”: “unused” “amount”: “0” }, “change_rate_max” “0.0”}”
}
Comments and feedback are welcome.
Note: As per @godoal there is a discrepancy between the data provided by StakeBin and the data from LUNC Penguins. However, the conclusion to deprecate the Seigniorage Policy and increase gas fees by 5x to capitalise the CP and increase validator/staker rewards stays the same.