• The proposals seek to burn 88.7 million LUNA in 2 weeks
  • The burning is done to mint Terra USD stablecoins
  • Terra DeFi protocol approved the proposals 133 and 134

Terra, the fourth biggest smart contracts platform, has passed a proposal to 'burn' around 88.7 million Terra (LUNA) tokens, one of the biggest burns in the history of cryptocurrencies. The burn value is roughly $4.3 billion (calculated using the current price of LUNA tokens).

As investors filled their wallets with these tokens, Terra's native token reached a new all-time high following the news. The data at Coinmarketcap  at 12:50 a.m. ET shows that Luna was worth nearly $49, with an 87.59% surge in trading volume and a market capitalization of $23.5 billion. Although, the token is currently down by 10.38% from its all-time high.

'Burning' is a process in the lifecycle of a cryptocurrency where tokens are erased from existence. LUNA's burning process will last for about two weeks and will start Tuesday when the token reaches a new all-time high of $53.74. The number of Terra tokens burned initially were 520,000 LUNA tokens. 

The burned tokens were used to create the native stablecoin project of Terra blockchain project, the Terra USD or USDT. Reports state that these tokens were used to mint around 4 million to 5 million TerraUSD (UST) stablecoins.

As per Terra's co-founder, Do Kwon, proposals 133 and 134 were passed to support other blockchain projects on the network, including Ozone and UST. Ozone is the mutual insurance protocol that "facilitates levered coverage of technical failure risks" in any decentralized finance (DeFi) protocol built on Terra network, said Kwon in a community post.

The Ozone protocol is an important part of the network as it will provide security to the DeFi applications running on the Terra network. In the past 2 years, more than 50 attacks have been suffered by DeFi protocols, data from Rekt shows. It is therefore important now for DeFi protocols to strengthen their security.

The tweet by the official handle said that staking tokens of the project will also become lucrative for investors.

"Higher staking yields for $bLUNA not only make it more attractive to hold but also benefit Anchor's sustainability since the yield captured from bLUNA and diverted to depositors on the demand side will be larger on a per-unit (of collateral) basis," a tweet said.

blockchain-iot-security-identity-decentralized-wireless-crypto-getty_large Blockchain Photo: Getty