$ LUNA Holders Are ‘Literally Burning Money’ by Destroying Tokens to Reduce Supply, Says Terra Co-Founder
The co-founder of Terraform Labs, Do Kwon, has said that $ LUNA holders are “literally burning money” when they send tokens to a dead address in a bid to reduce the cryptocurrency’s circulating supply.
HODLers’ plan, Fortune reports, is to reduce the circulating supply of the cryptocurrency in a bid to prop up prices as demand remains constant or picks back up.To Do Kwon, doing this is just “literally burning money,” which seems odd in a community that lost billions earlier this month.Why would you do this
Literally burning money
– Do Kwon 🌕 (@stablekwon) May 21, 2022
Earlier this month, the Terra ecosystem collapsed after the TerraUSD ($ UST) stablecoin lost its peg over a $ 500 million sale on the Curve Protocol, which had low liquidity.The sale saw UST’s peg drop below the $ 1 mark and triggered a bank run that saw LUNA’s circulating supply inflate by over 6 trillion.
The Luna Foundation Guard, a non-profit organization set up to oversee the Terra ecosystem, deployed billions In Bitcoin reserves in a bid to defend the peg, but ultimately failed to do so.
The collapse saw both currencies lose their value in what was deemed one of the largest wealth destruction events in the crypto space, and the ensuing chaos affected the broader market.
To LUNA token holders, burning tokens is a strategy similar to the one the meme-inspired cryptocurrency Shiba Inu ($ SHIB) uses to reduce its circulating supply.As CryptoGlobe reported, the SHIBArmy burned over 22 billion tokens over the past week, partly thanks to rewards being distributed through its burn portal.
Despite not understanding the logic behind destroying tokens, Do Kwon has nonetheless published the address of the Terra burn address, to which holders can send tokens that will effectively be removed from circulation.The co-founder of Terraform Labs has, however, clarified he doesn’t think sending tokens to address is a good idea, as nothing happens except that you lose your tokens.“ To clarify, as I’ve noted multiple times i dont think sending tokens to this address to burn tokens is a good idea – nothing happens except that you lose your tokens
Want there to be no confusion whatsoever https://t.co/GrzG9cclAr
– Do Kwon 🌕 (@stablekwon) May 23, 2022
Do Kwon is notably also working on a community plan for a hard fork to the Terra blockchain to create a new network.
The plan has been met with overwhelming community support, despite warnings from crypto personalities including Binance CEO Changpeng Zhao, who said the split will not magically create value.
Investors have since the collapse of the Terra ecosystem sued Terraform Labs’ CEO and his co-founder Daniel Shin for damages, and are reportedly considering bringing fraud charges against the company over Anchor Protocol’s promised 20% returns on UST deposits,
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The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice.Investing in or trading cryptoassets comes with a risk of financial loss.
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