Introduction
The Terra community has officially passed Proposal 3568 and Proposal 4159, introducing a significant update to the Terra Classic (LUNC) network. These proposals implement a 1.2% tax burn mechanism on all transactions involving LUNC and USTC tokens. This mechanism is designed to reduce the circulating supply of these tokens over time, potentially increasing their scarcity and value.
OKX, a leading global cryptocurrency exchange, has announced its support for this initiative. The tax parameter change from 0% to 1.2% applies to all token types currently available on the Terra Classic chain. The mechanism is scheduled to activate at block height 9,475,200 on the Terra Classic network.
This guide explains what the changes mean for OKX users, detailing the impacts on deposits, withdrawals, and other trading services.
What Is the Terra Classic 1.2% Tax Burn?
The 1.2% tax burn is an on-chain mechanism that automatically deducts a small percentage from every LUNC and USTC transaction. The deducted tokens are permanently removed from circulation, or "burned." This deflationary model aims to create upward pressure on the token's price by systematically reducing its available supply.
The tax applies to all on-chain transfers, including those between wallets and transactions to and from centralized exchanges like OKX. The Terra Classic community governance body approved this measure to help stabilize and rejuvenate the ecosystem following the events of May 2022.
How Does This Affect OKX Users?
The implementation of this tax burn directly impacts how users handle LUNC and USTC deposits and withdrawals on the OKX platform. Below is a breakdown of the changes.
For Deposits (Funding Your OKX Account)
When you transfer LUNC or USTC from an external wallet to your OKX account, the transaction occurs on the Terra Classic network. Before the funds arrive at OKX, the network will automatically deduct the 1.2% tax.
- Example: If you send 1,000 LUNC to your OKX deposit address, the network will burn 12 LUNC (1.2%) as a tax. Consequently, your OKX account will be credited with 988 LUNC.
- The tax is applied by the blockchain itself; OKX has no control over this deduction. Your account will always reflect the final amount received after the tax has been burned.
For Withdrawals (Moving Funds Out of OKX)
Withdrawing LUNC or USTC from your OKX account to an external wallet will also incur the tax. OKX will process two deductions from your withdrawal amount:
- OKX Withdrawal Fee: This is the standard network fee charged by OKX for processing the transaction.
- 1.2% Tax Burn: The Terra Classic network will deduct its 1.2% tax from the total withdrawal amount.
- Example: If you withdraw 1,000 LUNC, OKX will first deduct its withdrawal fee. The remaining amount will then be sent on-chain, where the network deducts 1.2% before the final sum arrives at your external wallet.
- The final amount you receive will always be less than your initial withdrawal request due to these combined fees. Always check the final confirmation screen to see the estimated receiving amount.
👉 Check real-time withdrawal fees and estimates
Unaffected Services
It is important to note that the tax burn is only applied to on-chain transactions. The following services within the OKX ecosystem remain completely unaffected:
- Trading: Spot, margin, and perpetual contract trading of LUNC and USTC will not incur any additional tax. The 1.2% burn only applies to deposits and withdrawals, not to buying or selling on the exchange's order book.
- Earn Products: All earn services, including staking, savings, and other yield-generating products involving LUNC or USTC, will not be impacted by the tax mechanism.
Frequently Asked Questions
Q1: What happens if I send LUNC to my OKX account without accounting for the tax?
A1: The tax is automatic and mandatory. The network will always deduct 1.2% from any transfer. You do not need to calculate it separately; just be aware that the amount arriving in your OKX account will be 1.2% less than the amount you sent.
Q2: Will OKX be burning its own share of transaction fees?
A2: The 1.2% tax is burned by the network protocol itself, not by OKX. OKX's standard withdrawal fee is a separate charge that covers the cost of processing the transaction on the network.
Q3: Can I avoid the tax burn?
A3: No. The tax is a fundamental part of the Terra Classic blockchain's code after the upgrade. Every on-chain transaction, regardless of the platform used, is subject to this 1.2% deduction and burn.
Q4: Does this tax apply to trading LUNC against other cryptocurrencies on OKX?
A4: No. The tax is exclusively for on-chain transactions (deposits and withdrawals). Trading activity that occurs on OKX's internal exchange matching engine does not interact with the Terra Classic chain and is therefore exempt from the tax.
Q5: How can I calculate the exact amount I will receive after a withdrawal?
A5: The OKX withdrawal interface will provide a final confirmation screen showing the OKX fee, the estimated network tax, and the total amount you will receive. Always review this screen carefully before confirming your withdrawal.
Q6: Is the tax burn mechanism permanent?
A6: The mechanism is implemented via community governance proposals. Any future changes to the tax rate or its existence would require a new proposal to be written, voted on, and passed by the Terra Classic community.
Conclusion
OKX's support for the Terra Classic tax burn mechanism demonstrates its commitment to adhering to blockchain network upgrades and community decisions. While this introduces a new cost for on-chain movements of LUNC and USTC, it is a protocol-level feature designed for the long-term health of the ecosystem.
Users should factor in the 1.2% tax for all deposits and withdrawals. For the best experience, consider consolidating your transfers to minimize the number of on-chain transactions you need to perform. For all other activities like trading and investing, you can continue to use OKX's full suite of products without any changes.