The price of Terra Classic (LUNC) recently took the crypto community by storm, as it engineered a dramatic bullish rally not seen in the past months.
In particular, between November 9 and 10, LUNC grew over 45% from $0.000064 to nearly canceling a leading zero.
In parallel, its trading volume, which averaged $30 million in the previous days, grew more than ten times to over $333 million. The driving force behind the LUNC price may be attributed to a pivotal proposal surrounding USTC minting that got approval.
Specifically, the LUNC community has unanimously agreed to halt USTC “minting and reminting” by increasing the Tobin tax to one hundred percent. The proposal reportedly received overwhelming support, with 98.95% of votes in favor.
As $LUNC proposal #11868 passed (to fulfill #11784), $USTC now is no longer mintable. Stable-to-stable swaps are disabled. #LUNC/#USTC swaps via terraswap are still available of course. https://twitter.com/ColeStrathclyde/status/1723293889224732942/photo/1
— StrathCole (@ColeStrathclyde) November 11, 2023
In a statement early this month, the Terra Classic Commonwealth portal underscored that the USTC comes into circulation only via the market module.
However, it noted that the mechanism was deactivated for LUNC to stablecoin pairs by increasing the spread to 100% during the market crash. As a result, the action prevented swapping between LUNC and other stablecoins through the market module.
Also, it mentioned that when swapping stablecoin for another, the Tobin tax comes into play instead of the spread. By setting the Tobin tax to 100%, the corresponding asset’s swapping functionality is effectively disabled.
Furthermore, the report noted that in light of fulfilling the proposed USTC minting disabling, a Layer One Task Force (LITF) team had enforced a code change introducing a new governance parameter. The parameter was designed to enable the setting of “a Tobin tax for swaps to USTC.” This was the sole action that resulted in USTC minting.
Moreover, it mentioned that given the absence of a practical exit route from stablecoins other than USTC, there was a discussion about simplifying the process by raising all Tobin taxes for all stablecoins to 100% rather than implementing a code change.
Ultimately, the proposal sought to elevate the Tobin tax for all stablecoins. It effectively renders all market swapping and associated coin minting on Terra Classic non-operational.
According to the report, potential advantages of this approach include the absence of a necessity for a software upgrade. It also prevents new USTC from coming into circulation.
Following the approval of this proposal, LUNC’s value grew significantly, registering a 45% cumulative 30-day performance.