BoycottBinance was a top trend on Twitter a few days ago. It got thousands of likes, tweets, and retweets. The reason behind this hashtag BoycottBinance was its new policy to implement a 1.2% tax on the LUNC coin transaction. When LUNA crashed a few months ago, everyone was skeptical about its return to the market, but the Terra community did not give up, and they came up with another coin called LUNC.
It is again in the news due to the hashtag BoycottBinance and Binance’s tax policy. Why do Binance Exchange and the Terra community want this tax, how will they implement it, and what will be its impact on the coin’s price are the main questions that should be answered.
What is tax burn?
The Terra Classic network has come up with a proposal to implement a 1.2% burn tax on each transaction of LUNC and USTC on every exchange. This policy will help create a fixed supply of 12 billion LUNC. Once the supply reaches 10 billion LUNC, the mechanism would cease to work.
The total supply of the LUNC is around about 6.9 trillion up till now, and with this mechanism, the Terra Classic network wants to burn 99.82% of LUNC. It is challenging to achieve such a landmark. How will they do it? They have a specific mechanism for it. Will they be successful? Now that is quite debatable.
The leading cryptocurrency exchange, Binance, recently announced that they are giving to implement the 1.2% tax burn on each transaction of LUNC and USTC. Binance CEO Changpeng Zhao (CZ) wrote a blog that categorically laid out his plan for implementing the burning tax. And BoycottBinance became the top trend after the CZ announcement.
Binance is aware of its users’ reactions and the BoycottBinance trend, so they have devised a plan. The exchange is not implementing the tax without the consent of its users. According to CZ, the binance would add an opt-in button for those users who wish to apply for this burn. It would be more like a voting system.
If more and more people voted for the 1.2% burn tax, Binance would permanently add this button, and on every transaction of LUNC and USTC, the tax would be applied. However, CZ is aware of its consequences and urged other top and centralized exchanges to apply this tax. And if they do not, Binance will face reactions from users in the form of more and more BoycottBinance trends.
CZ thinks Binance users will turn to other exchanges if all centralized exchanges do not apply this tax. So having the BoycottBinance trend in mind, the Binance community comes up with a plan which will be .completed in three steps.
In the first step, Binance will add an Opt-in button on the Binance site. The holders of the LUNC will have to decide whether they want a 1.2% tax burn on each transaction. If they want, they will have to switch the button on.
According to CZ, if more than 25% of LUNC holders voted to charge the tax in the 2nd step, the tax would be applied to their every transaction on Binance Exchange.
However, if more than 50% of LUNC holders wish to apply the tax, then Binance will apply this tax on every transaction of LUNC regardless of traders’ wishes and desires. This was the primary step in which the BoycottBinance trend started.
According to CZ, Binance would not implement the burn tax on transactions in such a case. Similarly, he concluded that if within a month, the second step is not completed (50%) after the first step, the opt-in button would be erased.
Although the burn tax is suitable for a long-term strategy for short-term, it is a bit costly. Similarly, all the exchanges should implement this tax once and for all because if only Binance implements it, its users will face the consequences, and the plan would not be that productive. Those who came up with the BoycottBinance trend also had this in their mind.