On Tuesday, the Terra community accepted a popular proposal that suggested the burning of 88.7 million terra (LUNA) tokens. At current prices, that amount is equivalent to about $4.5 billion. The proposal also includes creating a 4-5 million terra USD (UST) stablecoin to provide an additional boost to the Terra project.
Terra is the fourth largest smart contract platform with a total locked value (TVL) of $11.36 billion, according to DeFi Llama. The LUNA token is part of an algorithmic balancing system of the Terra blockchain that allows stablecoins to be pegged to fiat currencies at a 1:1 ratio.
On Tuesday night, Terra permanently removed 520,000 LUNA tokens from circulation. The rest of the tokens are scheduled to be burned within the next two weeks. Following this development, the token reached an all-time high of $54.95 on Wednesday. At press time, the LUNA is trading at $548.98, down 2.1 percent in the last 24 hours.
Terra launches LUNA token burning feature
The token burning mechanism was initiated by Terra co-founder Do Kwon, the proposal was propounded by him. This mechanism aims to financially support new services on the stablecoin payment platform such as the Ozone protocol. Additionally, according to Terra’s official Twitter account, the incineration is one of the largest in the history of major tier-1 projects.
Recently, the DeFi industry has been grappling with an increasing number of cyber attacks. The Rekt database recently revealed that over 50 attacks have occurred on DeFi protocols in the past two years. These are some of the problems Terra hopes to solve with the combustion system.
However, some doubts have arisen about the token burning mechanism as illustrated on the proposal’s page. Some users questioned whether it was too much to destroy around 89 million.