# \[Proposal\] Distribute 50% Transaction Fees to the Community Pool + Increase Proposer/Validator Rewards

**URL:** <https://classic-agora.terra.money/t/proposal-distribute-50-transaction-fees-to-the-community-pool-increase-proposer-validator-rewards/44729>\
**Category:** Governance & Proposals\
**Created:** [June 8, 2022, 2:44pm UTC](https://classic-agora.terra.money/t/proposal-distribute-50-transaction-fees-to-the-community-pool-increase-proposer-validator-rewards/44729 "2022-06-08T14:44:34Z")\
**Posts on this page:** 1\
**Showing post:** 1

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**Author:** ![dfunk](https://sea2.discourse-cdn.com/terra/user_avatar/classic-agora.terra.money/dfunk/32/5651_2.png) [@dfunk](https://classic-agora.terra.money/u/dfunk)\
**Post date:** [June 8, 2022, 2:44pm UTC](https://classic-agora.terra.money/t/proposal-distribute-50-transaction-fees-to-the-community-pool-increase-proposer-validator-rewards/44729/1 "2022-06-08T14:44:34Z")

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**Summary**  
The proposal aims to create a fair distribution model by allocating 50% transaction fees to the community pool and increasing proposer/validator rewards.

If voted yes, the following changes will be made:

- The _‘Community Tax’_ will be increased from 0 to 0.5 (50%), which will ensure 50% transaction fees is distributed to the community pool
- The _‘Base Proposer’_ and _‘Bonus Proposer’_ reward will be increased from 0.01 and 0.04 —\> 0.03 and 0.12 respectively, to increase the validator share of rewards

**Challenges with the current distribution model**  
Staking is currently disabled on Terra Classic and may not get re-enabled until it can be verified that the chain will remain Byzantine Fault Tolerant (a single entity does not hold 2/3 supply). This may take a while to verify.

With staking disabled, the [current distribution of transaction fees](https://lcd.terra.dev/distribution/parameters) is as follows:

- 5% to validators/proposers
- 95% to delegators
- 0% to the community pool

Considering, less than 0.01% LUNC is staked, this is creating an unfair distribution of rewards which is not aligning the interests of the broader community.

**Proposed changes to the current distribution model**  
In order to incentivise the broader interest, I am proposing 50% of the transaction fees to go to the community pool. The new distribution of transaction fees will look like this:

50% transaction fees to go to validators and delegators in the following ratio:

- 15% to validators/proposers of the block
- 35% to the existing delegators

The remaining 50% transaction fees to go to the community pool to be utilised as follows:

- 35% to be burned on a monthly basis via a Community Pool proposal
- 10% earmarked for Terra Classic ecosystem developers - airdropped on a monthly basis [according to their TVL](https://defillama.com/chain/Terra)
- 5% to be retained in the Community Pool for core Terra Classic development

**How this creates a more incentivised system for the community**

_Holders/Non-stakers_: 99.9% of LUNC holders currently are non-stakers. Burning 35% transaction fees will not only help the LUNC & USTC supply issue, but will also create a deflationary economy, rendering LUNC & USTC a better store of value. Needless to say, this will attract new buyers to the ecosystem.

_Validators_: The current Base Proposer and Bonus Proposer Reward is 5%. The proposal will increase this to 15%. Given that 50% of this will go to the community pool, the net rewards to validators will increase to 7.5% (50% up from current levels).

_Delgators/Stakers_: The [current return on staking](https://terra.stake.id/#/) for existing delegators is 4,340,031% per year. This proposal will see this reduce by a factor of ~2.71. However, despite this, the return on their staked LUNC for existing delegators will be 1,601,487% per year.

This is a super high return for a zero inflation chain which will dis-incentivise any existing delegator from unstaking/un-bonding their LUNC. As part of the original believers and security contributors of the chain, who lost a lot in the Luna crash, I feel such a high staking yield to the ~0.01% is justified until staking is re-enabled and security risks can be ruled out.

_Developers_: The 15% allocation to devs will ensure incentives to keep building on the Terra Classic chain, thereby growing transaction volumes and overall transaction fees that accrues to the network.

**Implementation:**  
The proposal will be a parameter change proposal which will make the following changes:

> [{  
> “subspace”: “distribution”,  
> “key”: “communitytax”,  
> “value”: “0.500000000000000000”  
> },  
> {  
> “subspace”: “distribution”,  
> “key”: “baseproposerreward”,  
> “value”: “0.030000000000000000”  
> },  
> {  
> “subspace”: “distribution”,  
> “key”: “bonusproposerreward”,  
> “value”: “0.120000000000000000”  
> }]

This is a parameter change proposal and will be implemented automatically if passed.

_Note: Since editing is disabled, please follow the comments for any updates._

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_[View the full topic](https://classic-agora.terra.money/t/proposal-distribute-50-transaction-fees-to-the-community-pool-increase-proposer-validator-rewards/44729)._