Rethinking the 1.5% Tax: A Necessary Step for LUNC’s Growth

The 1.5% on-chain tax implemented by the Terra Classic (LUNC) community was introduced with the goal of reducing token supply through regular burns. While this initiative was well-intentioned, its long-term impact on the ecosystem needs to be reconsidered. In the current stage of development, maintaining the tax could be doing more harm than good. This article outlines why removing or reducing the 1.5% tax is not only logical but essential for the future of LUNC.

On-Chain Volume Has Declined
One of the most immediate consequences of the 1.5% tax has been the decline in on-chain transaction volume. Users increasingly prefer centralized exchanges or alternative blockchains that offer lower transaction costs. This reduces the number of users actively engaging with LUNC’s native chain and discourages the use of decentralized applications (dApps), NFTs, and other community-built products.

Without consistent on-chain activity, LUNC’s network utility and real-world relevance continue to diminish. A blockchain without usage cannot thrive, no matter how strong its community support may be.

Competitive Disadvantage
In a highly competitive crypto market, cost-efficiency is a major factor for users and developers. The 1.5% tax makes LUNC less attractive compared to other blockchains that offer zero or minimal transaction fees. Developers are less likely to build on a chain that introduces friction in user interactions. Over time, this discourages innovation and slows ecosystem expansion.

To attract new builders and users, LUNC needs to reduce entry barriers—not create more of them.

Token Utility Should Drive Value
While burning tokens can help reduce supply, it is not a substitute for creating demand. True value is created when tokens are actively used across DeFi, gaming, staking, and real-world applications. If the goal is to sustain the ecosystem long term, focus should shift toward increasing on-chain utility rather than relying solely on forced token destruction.

Reducing or removing the tax can lead to a natural increase in transaction volume, which may contribute more effectively to token burns through real usage.

Community Sentiment is Shifting
LUNC’s strength has always been its community, and the conversation around the tax is evolving. More users are expressing concern that the tax is discouraging growth and turning away potential investors. Listening to this feedback is critical.

Staying rigid in a fast-changing environment can limit progress. A community-led project must remain open to adapting its strategy when the data and sentiment support it.

A Practical Path Forward
Reform does not mean abandoning the original vision. Instead, the following approaches can provide a balanced path forward:

1. Reduce the tax to a minimal level such as 0.1% to maintain a symbolic burn mechanism without discouraging participation.

2. Remove the tax entirely and introduce burn mechanics through high-utility dApps, staking models, or ecosystem incentives.

3. Refocus efforts on attracting developers, launching scalable products, and encouraging regular on-chain activity.

These changes can help LUNC regain momentum while still supporting its deflationary objectives through smarter, more sustainable mechanisms.

Conclusion
The 1.5% tax served an important role in the early stages of LUNC’s recovery. However, the ecosystem is now at a point where it must prioritize growth, usability, and long-term value creation. Removing or reducing the tax can unlock new levels of participation, attract developers, and rebuild the network’s relevance.

Burning supply should be the result of real demand, not a barrier to it.