The **LUNC (Terra Luna Classic) burn mechanism** was a community-driven effort to reduce its massive supply (over 6.5 trillion tokens after the May 2022 crash) and potentially increase scarcity/value. Here's how it worked:
1. **Transaction Tax Burn (The Primary Mechanism):**
* **Implementation:** Proposal 3568 ("Tax Burn") implemented a **1.2% tax** on *all* on-chain transactions within the Terra Classic network.
* **Process:** Whenever someone sent LUNC or USTC (TerraClassicUSD) in a transaction:
* 1.2% of the amount sent was automatically *burned* (sent to a dead wallet address, permanently removed from circulation).
* The remaining 98.8% reached the recipient.
* **Goal:** This created constant, automatic deflation as people used the network.
2. **Voluntary/Market Burns:**
* **Exchanges:** Major exchanges like **Binance** played a HUGE role. They implemented the tax on *off-chain* trades happening on their platforms and periodically burned the collected LUNC. Binance alone burned billions of LUNC monthly for over a year.
* **Projects & dApps:** Projects building on Terra Classic often voluntarily burned portions of their revenue, fees, or token allocations.
* **Community Members:** Individuals could (and still can) choose to send their LUNC directly to the official burn address (`terra1sk06e3dyexuq4shw77y3dsv480xv42mq73anxu`) to permanently remove them.
* **Staking Rewards Conversion:** Some community initiatives involved converting staking rewards into burns.
**Key Points & Evolution:**
* **Initial Tax Rate:** Started at 1.2% (Oct 2022).
* **Tax Reduction:** Proposal 11111 (effective Sept 2023) **reduced the tax burn rate to 0.5%** due to concerns it hindered practical use (like staking rewards being eaten by taxes) and ecosystem growth. This is the **current rate**.
* **Burn Address:** The canonical burn address is `terra1sk06e3dyexuq4shw77y3dsv480xv42mq73anxu`. You can track burns on explorers like Terra Finder or Station.#IsraelIranConflict