The 0.35% tax rate is a reason that prevents effective market arbitrage, and makes it costly to restore peg.
The trading cost for most active exchange are all lower than 0.1%. Depend on the trading volume of the trader, this can be reduced significantly lower. E.g. Binance has 0.075% trading fee for regular user, which can be reduced to 0.015% for high volume traders.
The Terra Tobin Tax of 0.35% is huge compared to exchange with efficient fees.
Would propose reduce Terra Tobin Tax from 0.35% to between 0.01% and 0.05%
The Terra Tobin Tax will need to be on par or below other trading fees, to promote effective arbitrage (not significantly higher)
Otherwise, the community could continue to see peg loss. These peg loss will be hard to recover, due to the Tobin Tax
its all about protecting arb-process from front-running. even in traditional index-based products has ±1% spread some times don’t think that will helps a lot
During the last 10 hours, the UST is consistently 40-50 bps below USDT.
Other market shows the same gap (FTX: LUNA/USD, KuCoin: LUNA/UST, KuCoin: USDT/UST)
The Terra Burn/Mint is intended to use market price of LUNA/USD to determine the market price for Mint and Burn of Luna and UST.
It is intended as the arbitrage method to bring UST to be pegged with USD algorithmically.
If the trading spread of Burn/Mint is 0.5% (50 bps), an arbitrage trade would not be possible to bring the peg to be within 50 bps, yet at the same time bear a profit for doing so.
With a large spread (50 bps), the pegging of UST and USD within 50 bps would not be based on arbitrage algorithm, but based on people’s belief and confidence.
Belief and confidence are subjective. Without arbitrage, there could be a long period of time of loss of peg of UST
