Tiered Undelegation Periods for Terra Classic

This proposal introduces fee-based tiered undelegation periods of 7 and 14 days, in addition to the existing 21-day option. The goal is to give stakers greater flexibility while accelerating the LUNC burn rate. While the current 21-day undelegation period supports long-term staking, its rigidity can limit liquidity and discourage potential participants. Shorter, fee-based options would improve the staking experience, appeal to a wider range of stakers, and create an additional mechanism to burn LUNC.

Proposed Solution: Tiered Undelegation with set Fees

To balance flexibility with network stability, we propose three undelegation options with defined durations and fees. All fees collected from the shorter undelegation options will be burned immediately, creating an ongoing supply reduction mechanism:

7-Day Fast-Undelegation:

• Set Fee: 1% (double the current 0.5% on-chain tax), entirely burned.
• This option offers fast access to liquidity at a transparent cost, while significantly boosting the LUNC burn rate.

14-Day Fast-Undelegation:

• Set Fee: 0.5% (equal to the current 0.5% on-chain tax), entirely burned.
• A middle-ground option that delivers quicker liquidity with a burn rate stakers already know.

21-Day Standard Undelegation:

• No Fee (unchanged).
• Remains the default choice for users who prefer longer-term staking commitments.

By introducing these tiers, stakers can opt for faster unstaking if needed, while contributing to a burn that benefits the entire community.

Benefits

• Enhanced Liquidity & Staking Participation: Adding 7 and 14-day options provides users with greater control over their staked assets, which may attract a broader group of stakers and increase the total amount of LUNC staked.
• Accelerated, Measurable Deflation: Fees from the new tiers will create an additional and consistent burn stream, complementing the existing tax. This new, trackable burn source directly supports the community’s goal of rapid supply reduction.
• Governance: This proposal establishes stable and predictable parameters through the use of set durations and fees. This framework is designed to be adaptable and can be amended by the community at any time through the standard governance process.
• Competitive Position: Offering multiple undelegation periods balances flexibility with supply reduction goals. This approach is not common across Cosmos-based blockchains and may help Terra Classic attract and retain more stakers

Security & Stability Measures

This tiered system is designed to improve user experience without compromising network security. Several measures are built in to protect the integrity and stability of Terra Classic:

• Fee-Based Safeguards: The implementation of fees for the shorter 7-day (1%) and 14-day (0.5%) undelegation periods acts as a direct deterrent against speculative and large-scale, coordinated unstaking. The cost of a quick exit makes it less appealing for malicious or volatile actors to manipulate the system for short-term gain.
• 21-Day Standard Maintained: The existing 21-day undelegation period remains the default, fee-free option. It serves the needs of investors and validators who prefer a long-term, fee-free staking commitment, which benefits the overall health of the network.
• Defined and Transparent Timelines: The 7, 14, and 21-day undelegation periods provide clear, predictable timelines, ensuring transparency for all unstaking events. By excluding immediate undelegation, we prevent chaotic exits and ensure that any unstaking still involves a waiting period that can be monitored.

Community Support and Path Forward

This framework is introduced with set durations and fees to provide clarity and predictability from the start. However, we recognize that real-world conditions may require adjustments over time. The community, through governance, can fine-tune the undelegation periods or fee rates as needed based on network performance, security considerations, and user feedback. This adaptive approach ensures the system remains balanced, secure, and aligned with Terra Classic’s long-term vision for sustainability and growth.

Overall, the proposal offers the LUNC community a new burn mechanism. By adopting tiered undelegation options, we can improve staking liquidity, increase participation, and accelerate LUNC burning through a predictable, on-chain system.

This proposal is intended to gauge community interest and gather feedback on the concept. If the community supports it, BLV Labs will submit a follow-up technical proposal detailing the implementation plan, costs, and development timeline for review and approval.

By voting YES, you support giving stakers more flexibility, increasing liquidity, and accelerating LUNC burning through a new fee-based system. A NO vote means you do not agree with the proposal. Choosing ABSTAIN means you’re neutral but want your vote to count toward quorum. A NO WITH VETO means you strongly oppose the proposal and believe it could harm the network.