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The stablecoin project Terra has revealed that LUNA worth $4.5 billion will be burned from its community pool. According to proposals 133 and 134, Terra’s native token LUNA will be burned and swapped for the native stablecoin of the chain, UST. The firm expects price gains for the token.
LUNA worth $4.5 billion will be burned by Terra:
Terra has passed a pair of proposals to burn LUNA worth $4.5 billion from its community pools. The burn will occur every 800 blocks produced and the main purpose of this process is to adapt the structure of the currency for the new upgrade, Columbus 5. This new upgrade is going to change the way UST is being produced. The obtained UST from the burn will be reallocated to the community pool of the Terra.
Recent tweets from Terra revealed that the first swap transaction has already taken place a few days ago. When LUNA worth $4.5 billion will be burned then the community will decide that how much funds will be used to bootstrap the Ozone (a decentralized insurance protocol on top of Terra). Terra’s official account is claiming that the approved proposals represent one of the largest burns in the crypto community.
The firm is hoping that this burn of LUNA worth $4.5 billion will help the price of the token to rise even in the long term. The CEO of Terraform, Do Kwon, has said:
The burn will simplify the narrative of Luna economics, boost staking rewards, and leave the community pool well-funded with 10 million Luna.
In my opinion, the firm is trying to burn the coin so that they can see a price rise, which is not true always. I know some of the coins burn like Ethereum after the EIP-1559 has resulted in price rise of the token. But, Charles Hoskinson has called this process useless and irrelevant.
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