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    Terra Luna funding cut: Is community slashing mining revenue allocation by 60m tokens fair?

    By Raphael Sanis

    09:54, 18 October 2022

    Terra LUNA
    The new fund will benefit the whole terra ecosystem, including the new LUNA 2.0, terra classic and terrausd classic – Photo: Shutterstock

    An updated proposal for a Terra ecosystem fund is drastically reducing the amount dedicated towards developer mining rewards.

    Instead, it has split the 95m LUNA more evenly to include liquidity rewards, developer grants, and user incentives.

    LUNA to USD

    Proposal updates

    The Terra ecosystem, including terra (LUNA), terra classic (LUNC) and terrausd classic (USTC), have announced an updated proposal for a $240m development fund.

    The fund will be using 9.5% of LUNA’s total supply to incentivise developers on the ecosystem to build new protocols.

    LUNA’s original plan saw the majority of these funds being directed towards developer mining rewards, which was divided based on total value locked (TVL).

    Instead, the new proposal recommended allocating just 20 million LUNA to developer rewards. Another 50 million LUNA would be directed to liquidity rewards to encourage decentralised exchanges (DEXs) and a  further 20 million LUNA would be designated for grants. The remaining five million LUNA is dedicated for its users.

    DOGE/USD

    0.15 Price
    +0.550% 1D Chg, %
    Long position overnight fee -0.0753%
    Short position overnight fee 0.0069%
    Overnight fee time 21:00 (UTC)
    Spread 0.0012872

    BCH/USD

    485.45 Price
    -0.400% 1D Chg, %
    Long position overnight fee -0.0753%
    Short position overnight fee 0.0069%
    Overnight fee time 21:00 (UTC)
    Spread 2.50

    ETH/USD

    3,102.19 Price
    +0.820% 1D Chg, %
    Long position overnight fee -0.0616%
    Short position overnight fee 0.0137%
    Overnight fee time 21:00 (UTC)
    Spread 6.00

    XRP/USD

    0.50 Price
    -1.080% 1D Chg, %
    Long position overnight fee -0.0753%
    Short position overnight fee 0.0069%
    Overnight fee time 21:00 (UTC)
    Spread 0.01168

    Is the new proposal fair?

    Terra’s main reason for the updated proposal was the recognition that it was not fair to divide the funds by only TVL. It argued that this metric does “not accurately reflect the value” these decentralised applications (dApps) bring to the ecosystem.

    The proposal said: “As reported in DefiLlama, Astroport and Risk Harbor currently hold a majority of the total TVL on-chain. Proceeding with these incentives in the earlier proposed format would result in these protocols receiving more in value from the rewards than the actual TVL within these protocols. This is an extremely inefficient distribution of incentives.”

    By dividing the fund into different parts, Terra is hoping to see growth in different areas on the network. As well as TVL, these metrics include number of projects and monthly active wallets.

    Community involvement 

    Terra proposed having a seven-person committee to run this fund. It said this was necessary because of the “requirements of indexing, processing, and assessing individual protocol impact and user activity for the four incentive programs.”

    MC UST and Somethingelse, the pseudonyms of the two developers who made the proposal, were included in this committee.  

    Terra clarified that transparency and accountability were important features in the committee. It said there would be monthly updates on the funds and disbursement decisions.

    As this proposal is still new, there was only one comment on the proposal at the time of writing, which praised the update.

    The comment said: “It feels like a step in the right direction moving away from TVL-based grants. Good to entice more developers to come build on Terra.”

    Markets in this article

    LUNA2/USD
    LUNA2.0 to USD
    0.6260 USD
    0.0062 +1.020%

    Related topics

    #Cryptocurrency

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