- Terraform Labs set to initiate burn of 88.7M LUNA.
- At current rate this will result in the burn of $4.8B worth of LUNA.
- 88,675,000 LUNA from the stablecoin community pool will be burned to mint 4-5 billion UST (depending on its price).
Prnewswire reported today that around 4-5 billion UST will be released, with half going to the Community Pool and the other half going to the bootstrap insurance system Ozone (see chart below).
In accordance with Terra proposal #44, which was approved by the community earlier this year, the stablecoin community pool will burn 88,675,000 LUNA, resulting in a mintage of 4-5 billion UST (depending on its price).
The UST generated by the LUNA burn will be given to the community pool, where users will be able to vote on how it will be distributed to the various groups. The trade will take place every 800th block for the next two weeks, with swaps taking place every two weeks. Following the completion of the burn, there will be another governance period to coincide with the introduction of Ozone, during which community members will choose how much will be allocated to the decentralised insurance protocol, which will be implemented after the burn is completed.
According to Terra founder Do Kwon, “the burn will simplify Luna economics’ storey, enhance staking incentives, and leave the community pool fully funded with 10 million LUNA.” “Since the Col-5 update, all on-chain stablecoin exchange fees have been allocated to the oracle rewards pool for validators, and we anticipate that this will keep LUNA staking rewards profitable.”
Incorporating the Cosmos SDK and the Tendermint consensus, Terra is a blockchain intended specifically for specialized applications. The Terra protocol makes use of a collection of algorithmic, fiat-pegged stablecoins, such as Anchor, CHAI, and Mirror Protocol, in order to create a thriving DeFi ecosystem. It is Terra’s native staking and governance asset, LUNA, that absorbs the short-term volatility of Terra’s stabilized coins. Demand for Terra’s DeFi ecosystem is a function of demand for Terra’s stablecoin (for example, US dollar) and thus contributes to the value of LUNA via seigniorage.