Proposal: Increase protocol revenue by moving year 2 Luna ANC staking rewards to the borrower incentive pool

According to the ANC distribution schedule, between March 2022 and March 2023 another 50m ANC will be distributed to Luna stakers via continued tiny weekly airdrops.

I’m asking whether there is any benefit in continuing these airdrops, or whether it would be better to redirect that 50m ANC to the borrower incentive pool, where that ANC will directly contribute to protocol revenue.

Here are the problems with 50m ANC distributed via tiny airdrops:

  1. The original intention of the airdrops was to promote awareness of Anchor. Yet right now there are lots of apps, news outlets, social media accounts using Anchor or talking about Anchor - Luna stakers know very well about it. Spending 50m ANC on what looks to be a very inconsequential awareness campaign seems like a terrible cost/benefit choice.
  2. The UX of weekly claims is annoying and the cost is significant to most people, making these airdrops even less useful. I have a few friends who’d be paying more in fees for each claim vs what that ANC is worth. I know there are tools that automate it to an extent but still it’s more like slapping a band-aid rather than fixing the underlying problem.
  3. Most of that 50m is ultimately dumped on the market, diluting the price and generating no value in return for Anchor and the community.

As the solution, I suggest moving year 2 Luna staker rewards to the borrower incentive pool.

Improving the borrower experience is necessary for Anchor to succeed. An extra 50m ANC distributed via that pool will help bring in tens or perhaps hundreds of millions UST in protocol revenue by making borrowing more attractive for longer.

I understand that in this scenario Luna stakers might feel bad that these drops get taken. But would this really be a serious enough problem, given that Luna staking APRs went up so much over the last few months and there are so many other airdrops now happening?

9 Likes

I am for this one, or instead it can be moved to extend the ANC-UST pool rewards. Whichever works.

2 Likes

I don’t think this proposal will do any good. What makes you think the borrowers aren’t going to dump ANC anymore than the Luna stakers? Secondly, if this does go through we’d see a big 50% drop in borrow rewards the following year. Currently, ANC borrow rewards are consistent each year. The LP rewards are stopping in one month, which will reduce ANC emissions. We don’t need to mess with the Luna stakers airdrop in my opinion.

Many of them will, but meanwhile at least the ANC was used productively (stimulate borrowing) instead of having no good use at all.

Secondly, if this does go through we’d see a big 50% drop in borrow rewards the following year.

I’m not suggesting distributing these ANC immediately over the next year - better if they are used to extend the runway into year 5 and beyond.

13 Likes

I think that’s a very good opinion. In fact, many ANC-UST LP holders tend to re-stake their ANC rewards.

As mentioned, it would be better if it was linearly divided up to the left 3 years and redirected to ANC-UST LP rewards rather than distributing it next year.

Of course, move to borrow incentive also good idea.

I definitely think we need to address the airdrops. Flipside data shows the intended effects don’t happen and they are unnecessary emissions.

Moving them to borrow emissions isn’t a bad idea.

There also is the competing plan Do put out that is to redirect that airdrops to validators not in the top 10.

There are some new tokenmomics models floating around and Anchor is due for a change in tokenmocis. Probably can see how this might work into that.

More to come in the coming weeks on that.

I agree. Both Luna stakers and borrowers on ANC might dump the token, but at least incentivizing borrowing is beneficial to the protocol. Maybe even spread the borrowing incentive over a longer period to avoid such a sharp drop in borrowing rewards.

The proposal is legit. Airdrops at this stage don’t provide much value. I would support it.

3 Likes