TL;DR Breakdown:
- Terra will burn almost 88.7 million LUNA tokens worth $4.5 billion.
- It will be burned and swapped for the stablecoin UST.
- This burn will prepare the altcoins structure for the Columbus 5 upgrade.
Terra, the algorithmic decentralized stablecoin project will burn $4.5 billion worth of its native coin LUNA from its community pool. The decision was taken through Terra’s on-chain governance system. According to their Twitter announcement, LUNA will be burned and swapped for UST, which is Terra’s native stablecoin.
The burn will take place on every 800 blocks generated by the smart-contract based project. With this burn, Terra is planning to ease the native coin into its new upgraded structure Columbus 5. The UST stablecoin generated from the burn will be reallocated and distributed to the community pool. There’s still no announcement as to what will be done with the reallocated UST.
Terra has stated that the burn will leave the community pool with 10 million LUNA tokens, which should be sufficient to meet the community demand. This massive burn will simplify the algorithmic altcoins rather complex economics and enhance its boost staking rewards.
LUNA prices are expected to go up
As with any cryptocurrency, large volumes of token burning usually results in a price hike. After the announcement on Terra’s official Twitter feed, LUNA’s market price has already started to go up. The altcoin is up by over 7% in the last 24 hours.
LUNA has already hit a new all-time high last week, after reaching $54.77, followed by a sharp decline in the $47 range. According to Terra’s governance proposals 133 and 134, the project will use LUNA to bootstrap its decentralized insurance system Ozone. But how much of it will be allocated to bootstrap Ozone will only be determined after the whole stockpile of 88.7 million tokens are burnt and swapped for UST.
The altcoin is currently trading at $50.98, inching towards its previous all-time high.
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