Luna Classic, the original token of the failed Terra blockchain, appears to be making a comeback following an announcement that the world’s largest crypto exchange, Binance, has a plan to cut the token’s supply.
The token, which trades as LUNC, is up roughly 40% in the last 24 hours, according to CoinGecko, making a miraculous return to the top 35 cryptocurrencies by market cap.
Still, its recent gains will likely not mean much to the Terra bulls who bought in at over $100 in April. At the moment, LUNC still only trades for $0.0003.
“Binance will implement a burn mechanism to burn all trading fees on LUNC spot and margin trading pairs by sending them to the LUNC burn address,” the exchange announced on Monday.
“Burning” a token means sending it to a cryptocurrency address that isn’t controlled by any user. This effectively removes coins from the circulating supply, which is typically bullish for price action.
The reverse happened in May: As redemptions for the algorithmic stablecoin TerraUSD (UST) hit record highs, more LUNC needed to be minted to compensate holders. This only put downward pressure on LUNC, requiring more tokens to be minted to compensate UST holders with each consecutive redemption.
Initially, Binance planned to implement an opt-in button for LUNC traders who wanted to voluntarily help burn the token’s supply at the exchange. Users would volunteer to pay an additional 1.2% burn fee on every trade, which would only kick in if enough users had agreed to partake in the process. Terra Classic launched a similar mechanism on-chain last week.
However, as CEO Changepeng Zhao (CZ) explained on Monday, the approach wouldn’t have worked in reality. “Our traders won’t vote for it,” he tweeted.
The Terra community wasn’t happy with the initial plan, either. Some Terra community members called to boycott Binance after claiming CZ had “reneged on his word” to implement a unilateral burn.
By contrast, the new plan makes all LUNC/BUSD and LUNC/USDT trades contribute to the supply burn—while not charging users any additional fees.
“This way we can be fair to all users,” said CZ. “The trading experience and liquidity remain the same, and Binance can still contribute to the supply decrease of LUNC, which is what the community wants.”