The price of Terra Classic token rose rapidly until it failed to impose transaction tax. The on-chain activity on the Luna Classic seems quite lost as the network coin of the failed and abandoned Terra chain due to the imposed of 1.2% tax on transactions that is burned from supply.
It must be noted that the price of LUNC rose rapidly after the governance proposal which advocate for the burn mechanism. It went live on September 1, 2022, with the coin LUNC move forward with 250% for more than eight days.
While some of the investors suppose the move could provide LUNC deflationary, which means more tokens got destroyed than issues tokens as rewards to validators.
On the other hand, the critics also raise the question whether on-chain activity would survive, once users are taxed 1.2% on their transactions. As inflation with $162,000 worth of LUNC entering supply each day, the network requires to maintain $13.5 Million worth of daily activity to offset LUNC’s staking rewards.
The LUNC Burn
Additionally, a well-known crypto influencer, Lightcrytpo, stated on September 22, 2022 that “Only $2,503 LUNC was burned in the seven hours after the tax and burn mechanism went live.” In the Twitter post it added, “The LUNC burn is a catch 22 — the token needs usage to support the narrative but no one wants to pay 1.2%. You end up with a dead chain… Economic activity on the network has ground to a halt.”
Furthermore, a prominent Terra whistleblower, FatManTerra, reacted that the upgrade introducing the burn mechanism caused widespread errors for dApps, wallets, and exchanges, and also slowed on-chain activity.
Source: https://www.thecoinrepublic.com/2022/09/23/on-chain-action-of-terra-classic-fade-away/