Terra To Burn Tokens Post This Upgrade, Another LUNA & LUNC Price Rally Ahead?

Terraform Labs reveals a major governance proposal for the Terra blockchain, fueling discussions over its potential impact in the crypto community. The proposal, which will mark the final chain upgrade under TFL’s direct oversight if approved, is expected to boost the LUNA and LUNC tokens’ prices. It involves several upgrades, including a major token burn proposal among others.

It’s worth noting that as of writing, the majority votes were cast in the proposal’s favor, with no votes towards a “No” or “No with Veto”.

Final Upgrade Proposal Of Terra

The TFL’s governance proposal, known as Proposal 4818, started on August 22 and the voting will end on August 29. It aims to upgrade Terra’s mainnet to version 2.12.4. Notably, this move comes as TFL said that it is winding down its operation following an SEC settlement and implementation of its Chapter 11 plan.

This upgrade, if approved, will mark the final development by TFL. In other words, the TFL will no longer support future chain updates, and the blockchain’s future will be left in the hands of community-driven initiatives like the Phoenix Directive.

Meanwhile, one of the major aspects of this upgrade is the enforcement of a 5% minimum commission rate for validators. This follows a previous governance decision under proposal 4803, which established the global minimum commission rate. Notably, the upgrade will ensure that all the current and new validators follow this rate, which would help in enhancing the network’s integrity.

However, the most notable change, which is already gaining traction, is the burning of TFL’s LUNA holdings. TFL aims to burn LUNA that it had in its possession, complying with the bankruptcy court order. This would include assets locked in a vesting contract, which will be burned directly following the upgrade.

In addition, the TFL plans to address the issue of compromised wallets and illegally minted assets from the IBC exploit. It will help ensure that the assets are permanently removed from circulation, reflecting a step towards users’ safety and transparency.

Meanwhile, the removal of the blacklist functionality is another significant change with the upgrade. It which was initially implemented to prevent further withdrawals by the IBC attackers.

LUNA And LUNC Prices To Rally?

The decision to burn a substantial amount of LUNA has fueled optimism among investors and the Terra community. Token burns typically reduce the circulating supply, which can create upward pressure on prices if demand remains constant or increases.

Having said that, many are speculating that LUNA and LUNC could experience a significant price rally following TFL’s latest announcement. Notably, 98.55% of the total votes were cast in favor of the proposal, with only 1.45% vote for Abstain.

Meanwhile, as TFL steps back, the Terra blockchain’s future will increasingly rely on community-led initiatives. The Phoenix Directive, set to take over operational responsibilities, will play a crucial role in guiding the network’s evolution.

However, as of writing, LUNC price was down nearly 5% to $0.00008412, with its trading volume declining 52.56% to $17.81 million over the last 24 hours. On the other hand, the LUNA price was down 3.83% to $0.3707, after touching a high of $0.3889 in the last 24 hours.

Simultaneously, the LUNA Open Interest (OI) dropped over 7% to $4.96 million, while the LUNC OI plunged 11% to $7.57 million, CoinGlass data showed. Despite the recent downturn momentum, the community anticipates a rebound in the prices, given the optimism over the major token burn ahead.