Impact of Burning Luna

Taking a leaf from Ethereum’s EIP 1599, Terra proposals 133 & 134 were introduced to burn LUNA tokens. As part of a popular proposal, the Terra community voted to burn about 88.7 million Terra (LUNA) tokens, valued at about $4.5 billion, and mint about 4 million to 5 million TerraUSD (UST) tokens. Burning, or removing the tokens permanently from circulation, took place over the course of two weeks, starting with a burn of 520,000 LUNA on November 9th. 

Do Kwon, Terra’s co-founder, launched the initiative to fund new services within the Terra ecosystem, such as Ozone, a platform that “facilitates levered coverage of technical failure risks” in any decentralized finance (DeFi) protocol on Terra. In this post we are are going to explore several metrics like LUNA Price, Number of UST holders, Number of LUNA holders, etc before and after burn.

As one of the goals of burning LUNA was to increase UST supply in the ecosystem. Let’s look at the supply of UST in terra ecosystem pre & post burn events. As you notice in the graphs, we see an increase in the UST supply as expected. How about the impact on LUNA price?

We don’t see much impact on the price of LUNA during the period of burn as it was already factored in by the market when the plans were announced.

Lets see if there is any change in the LUNA account holders around the burn period? Not really! The growth is holding steady and does not seems to be changing drastically due to the burn.

How about the number of accounts hold UST! Based on the chart below it looks the growth is also steady and continuing the trend.

Leave a Reply