The crypto exchange Binance’s planned “burn” of luna classic (LUNC) – the remnant cryptocurrency of the failed blockchain project Terra prior to its reboot – was supposed to boost the price. At least, that was the speculation of many crypto traders.
But the impact turned out to be underwhelming.
Since the mechanism was implemented a week ago, Binance destroyed – “burned” in crypto terms, or a reduction in the outstanding supply – $1.8 million worth of LUNC, based on a tweet Monday by Binance CEO Changpeng Zhao. That amount represents only 0.08% of the total supply of the token, too minuscule to make any measurable impact on the tokens' hyperinflated supply.
The price of LUNC dropped 12% in the last 24 hours, to $0.0003037, according to cryptocurrency price tracker CoinGecko.
— Tree of Alpha (@Tree_of_Alpha) October 3, 2022
LUNC is the native token of the Terra Classic blockchain, which imploded this May, wiping out $60 billion in market value; the project’s algorithmic stablecoin lost its peg to the dollar, and LUNC, the token that was supposed to be its stabilizer, fell into hyperinflation. While most crypto developers and projects left the blockchain, some community members attempted to bring new life to the network by introducing a scheme that reduces the bloated supply of the token.
LUNC almost doubled its price last week after Binance, the world’s largest crypto exchange by trading volume, unveiled its own supply-reduction scheme, CoinDesk reported last week. The crypto exchange implemented a mechanism that destroys the same amount of coins as the fees it collects from trading LUNC.
The burn was calculated based on the token’s trading volume between Sept. 21 and Oct. 1. So Binance took 5.6 billion tokens out of circulation by sending them to a “burn” address, according to blockchain data.
Given that there are more than 6.8 trillion tokens in circulation, the burn rate works out to a meager 0.08% of the total supply – extrapolating to only a few percentage points of reduction on an annualized basis.
Binance's scheme “is meaningless in its direct impact,” a crypto trader, who goes by the pseudonym of Ogle, told CoinDesk in a Telegram chat, adding, “At this rate, assuming the volume continued to be as high as now (which I doubt), it would take 15 years to get to the total burn goal.”