Introduction

Tax rates in the Terra ecosystem are used to incentivize miners to ensure a long term and stable growth. However, tax rates are not consistent and adjusts from time to time according to the short term and long term performance. If the short term performance of the tax rewards exceeds the long term, the tax rate will be decreased, the opposite happens if the short term rewards perform worse than the long term rewards.

Reward weights had been set to 0 since April, so its effect on the tax rates is not discussed.

Fee Collection and Tax Rate

The graphs below shows the relationship between fees and the tax rate. It's seen that the tax rate remains relatively stable in times when the total fee collected is stable, but goes down rather abruptly when the total fee rewards spiked by 100% from May 16 to May 19. The rate went up after the short term fees collected dropped by 74% on June 6. The tax rate continues to hike when the average short term fees collected are lower than long term fees collected, which is seen from June 10 to July 12.

The graph below shows the fee per Luna staked. This graph behaves similarly to the graph above. Indicating that the total Luna staked does not affect the tax rate as much as the fees collected itself, as the total Luna staked increases or decreases much more steadily compared to the tax collected.

Epoch Intervals

Contrary to what's stated in the documents, tax rate adjustments occur about every 8 days, instead of 7.