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- Terra governance system has approved a pair of proposals
- The proposals asked to burn $4.5 billion worth LUNA from community pools and swap for UST
- The obtained UST from the burn will be reallocated to the community pools
- The burn will boost LUNA price, staking rewards, and leave the community pool well-funded
Terra is a blockchain protocol founded in 2018, and uses stablecoins to power global payments systems. The project combines the price stability and wideadoption of fiat assets with the censorship-resistance of the flagship cryptocurrency. Notably, the network offers fast and affordable settlements. Recently, the on-chain governance system of the project has taken a decision to burn its native crypto token, LUNA and swap it for the native stablecoin of the chain, UST. The decision came following the proposal 133 and 134, which will now burn $4.5 billion worth of LUNA coins that will notably boost the price of the token.
Terra passed a pair of proposals
The smart contract-enabled algorithmic stablecoin project, Terra has recently commenced burning LUNA. The project’s governance system has passed a pair of proposals that asked to burn $4.5 billion worth of LUNA tokens. Notably, the tokens will be burned from the community pools of the network. Indeed, the burns will occur after every 800 blocks mined.
The burning event has a purpose to adapt the structure of the virtual assets for the upcoming Columbus 5 upgrade. It is also noteworthy that the upgrade will change the way fiat-pegged UST tokens are produced.
LUNA will be swapped for UST
According to the approved proposals, Tera will burn LUNA, for its native fiat-pegged digital asset, UST. According to the plans, the obtained UST from the burn will be reallocated to the community pools. Notably, the reallocation will be made with the governance responsible for deciding what to do with the funds.
Earlier this week, the first transaction took place. After the network burns the whole stash of LUNA, there will be another scenario where the community will have to decide how much of the funds will be used to bootstrap Ozone, a decentralized insurance protocol.
Major Layer-1 crypto assets burn in history
According to the brains behind Terra, the execution of the proposal sees one of the major Layer-1 asset burns in the history of the industry. Indeed, following the burning events, analysts are observed being bullish on LUNA. According to analysts, the event might boost the price of LUNA in the longer time-frame, as the coins will get more scarce.
According to Do Kwon, the CEO of Terraform Labs, the firm behind Terra, the burning of LUNA will simplify the narrative of its economics. Moreover, as the coin gets more scarce the staking rewards will boost, and leave the community pool well funded with 10 million LUNA.
