Terra Luna Classic: What’s Behind the LUNC Burn Narrative?

The collapse of the Terra (LUNA) network marked one of the biggest disasters the cryptocurrency space has ever experienced. The protocol crashed, forked, and rebranded simultaneously, creating a diverse ecosystem in the aftermath, the Terra Luna Classic communities.

At first glance, they share the same goal: revitalizing the Terra protocol. But if you look closely, you can see that each has its hidden interests.

DailyCoin decided to look at the trending narratives across Terra Classic communities and who is behind them.

Backstory: The Terra (LUNA) Collapse

In early May 2022, Do Kwon, co-founder and CEO of Terraform Labs, the company behind Terra (LUNA), allegedly unstaked and withdrew $3.9 billion worth of TerraUSD (UST) algorithmic stablecoins from Anchor, the lending protocol built on Terra’s blockchain.

The massive liquidation triggered a TerraUSD price decline, whose $1 peg was directly supported by the supply of Terra’s native governance coin, LUNA. The LUNA supply varied to keep the TerraUSD’s stable $1 value.

When Terra’s stablecoin de-pegged, more LUNAs were minted, pushing the supply to unprecedented highs and consequently crashing the price. TerraUSD and LUNA lost over 99% of their value in less than a week. This sent shockwaves across the whole cryptocurrency market and crashed the price of almost all digital assets, including Bitcoin (BTC).

The same month Do Kwon proposed to fork from the compromised network, its validators voted “yes,” and thus, the new Terra Luna 2.0 (LUNA) project was born. The old one kept functioning, rebranded as Terra Classic, maintained the same stablecoin, and renamed itself TerraClassicUSD (USTC).    

Do Kwon abandoned the crypto project and eventually disappeared due to charges of fraud, illegal fundraising, and tax evasion in South Korea. Thousands of investors were consequently left bereft of their life savings. 

LUNC Burning Initiative: Why Is It So Important?

As the Terra protocol victims searched for ways to survive, they eventually clustered into specific communities that shared the similar goal of reviving the network. The initiative to contribute to LUNC token burning emerged. 

The key idea behind cryptocurrency burning is to remove tokens from circulation. The digital assets are sent to the wallets so that they can not be recovered, thus reducing the supply. Lower supply automatically means a higher price of the crypto. 

At the time of writing, the total circulating supply of Terra Classic governance tokens is over 6.87 trillion, and only 36 billion are burnt. This represents a mere 0.52% of the token’s total supply. 

If the burning keeps proceeding at a similar rate as of the time of publishing, it may take more than 73 years for the Terra Classic community to burn trillions of tokens and reduce supply to at least 10 billion. 

Hence the blockchain-based community came up with the initiative of applying the burn taxes on every on-chain transaction of the network’s governance token to speed up the process. If implemented, the upgrade should have taken a big step forward, especially if Binance or other major cryptocurrency exchanges that generate substantial volumes agreed to support the idea. 

For the deal to be implemented, the network first needed someone to develop its protocol.

Terra Rebels (TR) Took the Wheel… and Crashed

Volunteer developers Terra Rebels (TR) took over running Terra Classic after Do Kwon and TerraForm Labs abandoned the network. 

They came up as a decentralized non-profit organization to revitalize the Terra Classic ecosystem, gain independence from TerraForm Labs, and “provide and deliver software clients to community and validators” through the efforts of volunteers. 

Terra Rebels supported the narrative of adding a 1.2% burn tax on LUNC transactions to speed up token burning, although it later retreated to 0.2%. 

Simultaneously TR declared plans to develop the protocol’s infrastructure, like the community-owned wallet called Rebel Station, which appeared to be necessary after TLF announced plans to suspend transferring LUNCs on its Terra Station wallet. 

The Rebels collected nearly $150K in donations from the Terra Classic community to implement their plans and ideas. Soon after, it was disclosed that they were extorting crypto donations and sharing them between team members instead of investing in blockchain-based infrastructure.

Source : [Terra Luna Classic: What’s Behind the LUNC Burn Narrative?](dailycoin.com/terra-luna-classic-lunc-behind-burn-narrative/) by Simona Ram - DailyCoin by Simona Ram / January 24, 2023