[Proposal] Redirect ANC-UST rewards to Astroport

Community Initiatives
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Dear Anchor community, the Astroport contributors are pleased to present this proposal to redirect ANC-UST ANC rewards to Astroport.

Background and key concepts

Astroport is a next-generation AMM built on Terra expected to launch in December 2021.

Scheduled emissions of the ASTRO governance token will be directed to a limited number of Astroport liquidity pools as determined by Astroport governance. ANC-UST is set to be in the initial batch of pools to receive recurring ASTRO rewards.

As part of the Astroport launch there will be a “lockdrop” where users can move LP tokens from Terraswap to Astroport and “lock” it for a predetermined period of time in exchange for a “drop” or distribution of ASTRO tokens. However, not all Terraswap pairs will qualify for the lockdrop–the purpose of this proposal is to ensure that the ANC-UST Terraswap liquidity pool will be supported.

ASTRO Generators let LPs claim governance tokens from two protocols at the same time (specifically ASTRO + a third-party token such as ANC).

You can read an overview of Astroport here in the litepaper. The lockdrop is described in this Medium post.

Advantages of moving to Astroport

Astroport rewarding ANC-UST Astroport liquidity with ASTRO on an ongoing basis means Anchor users will have to choose between staking in Terraswap and earning ANC rewards, or staking in Astroport and earning ASTRO. However if Anchor chooses to shift ANC rewards to Astroport instead of Terraswap then ANC-UST stakers can collect both the ASTRO and ANC rewards thanks to the dual-token distribution mechanism of the Astroport generator.

Continuing ANC rewards for Terraswap liquidity while the same LPs could be earning ASTRO on Astroport will also have the effect of splitting liquidity between the two AMMs. Fragmenting liquidity like this is undesirable as it makes large trades less capital efficient and allows value to be lost to arbitrageurs. Concentrating liquidity in a single pool would avoid these issues.

We expect that Astroport will become the home of deep liquidity for all the main Terra assets due to ASTRO rewards and the flexible pool types such as stableswap invariant pools and concentrated liquidity pools which aren’t available elsewhere. Deep liquidity also for ANC will also allow capital efficient trades to and from ANC from a wide variety of Terra assets, which is beneficial to ANC traders.

For all these reasons, shifting ANC rewards to the ANC-UST pools on Astroport is the best decision for the Anchor community.

Why move now rather than later

The Anchor community may prefer to wait until after Astroport has launched and matured and then make a decision on moving rewards over.

Astroport would like to include ANC-UST in the initial lockdrop, allowing stakers to earn a significant one-time ASTRO reward for locking their existing Terraswap LP tokens in Astroport for a given amount of time. However, for the reasons above this only makes sense for Astroport if there’s a commitment from the Anchor community to migrate rewards. That way, upon Astroport’s launch, ANC-UST stakers will immediately benefit from dual ASTRO/UST rewards (in addition to the lockdrop rewards) rather than needing to sacrifice one to get the other.

Approximate awards

The Astroport lockdrop will distribute 7.5% of the ASTRO supply (75,000,000 ASTRO). If this proposal is positively received, ANC-UST will be allocated 19% of the lockdrop (14,250,000 ASTRO).

In addition to the lockdrop there will also be emissions of the ASTRO governance token directed towards the ANC-UST pair, though these have yet to be finalised.

Summary and next steps

We have made this proposal to gauge the interest of the Anchor community as to whether a migration to Astroport would make sense now or later.

If the Anchor community chooses to move rewards right away and participate in the Astroport lockdrop, ANC-UST stakers will be able to earn significant ASTRO rewards in addition to dual ANC/ASTRO rewards post launch. If the Anchor community choses to delay and reconsider later based on Astroport’s launch and success in attracting liquidity, then there will be no ASTRO lockdrop rewards available to ANC-UST LPs and no dual rewards available post-launch.

Following the Astroport launch there will be the first governance poll:

  1. Move over future ANC-UST LP rewards from Terraswap to Astroport

After some days or weeks once liquidity is sufficient a second poll will be conducted:

  1. Route buybacks to the Astroport pools; alter the web app to use Astroport pools

We invite open discussion in the comments below.

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Interesting idea; I’d instead be more in favor of stopping ANC LP rewards altogether. Now that ANC is also on a few CEXes, liquidity mining is not really needed and the ongoing ANC rewards only dilute ANCs value.

As it looks like you guys will be offering ASTRO rewards, this should be a sufficient incentive for people to migrate their liquidity to Astroport if there are no more ANC LP rewards here.

13 Likes
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Agree with the sentiment here, although i dont think the ANC incentives should be stopped altogether. There are other milestones to be met (e.g. listed on a major CEX).

We have a large amount of liquidity for a relatively low volume on terraswap. I believe we should consider reducing LP incentives slightly by developing a framework with milestones for when we want to reduce rewards (e.g. like olympus’ OIP-18). The purpose is to reduce unnecessary inflation and possibly reroute this to incentivise other things (e.g. partnerships, grants, borrow)

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I agree that rewards should be moved over.

I also strongly agree that ANC emissions should be decreased on the LP pair. 360m of liquidity for 3m daily volume is a bit overkill.

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Why does the ANC protocol need to continue providing ANC rewards if people switch to ASTRO?

sounds like we could just stop that, and people would be happy getting ASTRO rewards on their LP.

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Totally agree. Even with ANC emissions at much lower levels for borrowers and the protocol entering into extremely sustainable and profitable conditions, I’d be willing to assume that a large majority of the daily volume is from incentive dumping.

The amount of liquidity for a very low volume token seems to be way overblown at this point, so why continue incentivizing at such high rates. Moving liquidity to Astroport and solely incentivizing with $ASTRO (since the mechanics for the token are 100x better designed and more productive) or, tapering down the ANC LP incentives to a much lower level if the dual incentive ASTRO Generator is utilized for the pair.

This is a much more useful strategy at this point in time (month 9 post-launch) and gives the protocol and governance more incentive to bolster sustainability + strive to list ANC on major tier1 exchanges to diversify and deepen liquidity across the market (without incentiving farming).

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My thoughts exactly. Loop also just launched ANC pool as well. We need to lower ANC emissions and this is a perfect opportunity for that as more DEX launch the pair. I would also want to see ANC on OSMO

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Yup fully agree with the proposal.

I think it makes sense to migrate rewards to Astroport, and at the same time cut down emissions by half (arbitrary number here - will need more in depth analysis as to what the right number should be)

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Agree with the proposal and with most others here to vastly reduce the liquidity pool emissions. Borrowing emissions will go down naturally over the next few weeks themselves and these could combine to significantly reduce selling pressure.

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Seems like there’s a bit of a consensus around 1) moving to Astroport 2) tapering incentives.

While we wait for additional replies from on this thread, I think it would be useful to put out a twitter thread explaining the alternatives (TS/Astro), suggesting a tapering and directing users to this post and one focused on the incentive emission schedule.. This could also be an interesting topic to touch upon in the next few AMAs.

While I can see why, should the community decide to wait before migrating the ANC-UST pools to Astroport, it would make them ineligible to ASTRO lock-drop rewards, I’m struggling to understand why that would also make them ineligible to post-launch rewards. I was under the impression that Astroport would be rewarding a wide range of interaction with the protocol (trading, LPing,…) with ASTRO in order to distribute the token as widely as possible, which I fully support. Why should Anchor’s pools be deprived of ASTRO rewards, should its community decide to put the safety of one of Terra’s flagship protocol first? I’m certainly getting this wrong, @lukedelphi would you mind clearing this out?

In any case, I am in favor of migrating to Astroport as proposed by Delphi.

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How does this compare to WineSeller

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I still think hydra and drift protocols on solana have some great metrics with vAMM and Oracle inputs to better augment K. Hydra goes further and weights rewards - similar to what it seems like Wineseller is doing - but more related to volatility. This is the most important aspect. In tradfi, market makers make the spread, the difference between the bid and ask. In times of high Vol. they make the most because liquidity gets thin across different price values, widening the spread they make. Therefore they are more incentivized to trade in times of high Vol. Contrast that to CPMM AMM xy=K where arb makes money in high vol markets at the expense of LPs who are incentivized to dump further widening the markets and the arb opportunities. IMO we need to augment the curve (vAMA) based on oracle data and IV (implied volatility) metrics to increase LP rewards higher in times of high volatility markets. Further, we need to start exploring derivatives as ways to help hedge LP risk as traditional market makers. Institutional market makers are already dumping tons of money into the SOL ecosystem to explore this. We need to keep up with it here on Terra.

Would love to see a white paper from Wineseller

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Hi @Spaydh

While I can see why, should the community decide to wait before migrating the ANC-UST pools to Astroport, it would make them ineligible to ASTRO lock-drop rewards, I’m struggling to understand why that would also make them ineligible to post-launch rewards. I was under the impression that Astroport would be rewarding a wide range of interaction with the protocol (trading, LPing,…) with ASTRO in order to distribute the token as widely as possible, which I fully support. Why should Anchor’s pools be deprived of ASTRO rewards, should its community decide to put the safety of one of Terra’s flagship protocol first? I’m certainly getting this wrong, @lukedelphi would you mind clearing this out?

At the time of Astroport launch it makes the most sense to reward pools which would bring the maximum value to Astroport and also the project in question.

If Anchor continues to incentivise the Terraswap pool, then what little trading volume there is would remain mostly on Terraswap and building liquidity for an Astroport ANC-UST pair would not bring much benefit to Astroport. Additionally fragmenting liquidity between Astroport and Terraswap would not be helpful to Anchor either as trades would be less capital efficient on Terraswap.

That said, soon after launch emissions will be decided by Astroport governance and any pair on Astroport may be voted in to receive a share of emissions. Any ANC based pair would certainly not be ineligible.

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100% agree with what many are saying here. The liquidity we are paying for is overkill, and if astro is incentivizing the pool, we could dramatically reduce or even end UST-ANC incentives.

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Thank you for your reply

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Can someone confirm this for me? Sorry I am dumb about understanding all this. There is a governance proposal, and if it passes, after that we will know when the lockdrop will happen and if we should move our ANC-UST LP tokens? Is there anything I should do now. Astroport hasnt launched yet, correct?

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How do we know if ASTRO isn’t going to be another dump token? No offense, but most tokens on Terra just dump. Instead of sell inflationary pressure on ANC we just move the sell pressure to ASTRO?

I invested a good deal in ANC-UST LP thinking good for 4 years…so a shame going to end rewards entirely. But I guess if the value of ANC goes up significantly then I can’t complain.

Can someone clarify if staking your ANC-UST LP on Anchor is the same as TS?

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I’m going to try and break this down:

Deep liquidity is important to any token, so Anchor incentivizes users to provide liquidity on Terra’s current main DEX (Terraswap) by rewarding liquidity providers (LPs) with ANC tokens on top of trading fees.

This makes it more attractive for LPs (higher APR), but also puts a lot of sell pressure on the ANC token because it increases the number of coins in circulation, and because LPs have to sell their tokens to compound/cash out of their positions.

There are two topics being discussed here:

The main topic, for which the Astroport team created the thread, is “whether Anchor stakeholders are interested in switching the destination of ANC LP incentives from a liquidity pool on TerraSwap to one on Astroport”.
Whether the switch is enacted or not, Anchor’s LP incentives will remain the same. As a LP, you might simply have to move your LP tokens from Terraswap to Astroport to get the same ANC rewards, plus any Astroport’s ASTRO rewards.
Although it boils down to your definition of a “dump token”, IMO, Astro is unlikely to be one because of its gradual vesting model and tokenomics: similar to how CRV works, ASTRO can be staked to earn a portion of trading fees, or locked, to get even more. This model has allowed the CRV token to retain value despite extreme hyperinflation. For ASTRO, at the end of the day, it all depends on how central Astroport becomes as a DEX. The more liquidity and trading volume, the more protocol fees, and the higher the income for staker/lockers, incentivizing them to hold and reducing the circulating supply.

You mention “moving the selling pressure from ANC to ASTRO”. This brings me to the second topic, which was brought on by community members, who argue that the LP incentives (bonus ANC for LPs) are keeping the price of ANC down by increasing the supply relative to the demand.
They propose to reduce or cut the incentives to curb the inflow of new supply. Assuming the demand for ANC remains stable, such a measure should reduce selling pressure and drive the price of ANC up.
If stakeholders decide that Anchor should migrate to Astroport, providing liquidity to the ANC-UST pair would still be incentivized, but with ASTRO emissions rather than/on top of ANC ones. In effect, this “moves selling pressure from ANC to ASTRO”, because LPs would have to sell ASTRO to cash out.

This topic should be discussed in a separate post but here are a few things to consider as a LP.
On the one hand, if stakeholders decide to reduce LP rewards, the APR of your LP position would go down.
On the other hand, the price of ANC should gradually rise, meaning the value of your position would increase over time, and the income it generates could catch back up or even increase (not in terms of APR, but of $ value). If the increase is too fast, you might face impermanent loss. The APR from trading fees might also increase as some LPs exit their position and the utilization/liquidity ratio increases.

Hope that helps

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I am a bit shocked.
Not many people think about their token economy and just vote.

I want to believe all of you read the litepaper.

ASTRO uses 33% of the fees from the pair ANC-UST.
It will reduce 33% APR, and it says “we will buy ASTRO from their pool and stake it”

The more ANC needs increases, the more power Astro will have.
(Power will be given to the ASTRO, not to the ANC)
I think ANCHOR will be locked-in ASTRO port in this way…

correct me if I am wrong I read many opinions from the other forums(Mirror, Pylon, VKR).
I wish they noticed it.

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I am a fairly new LP to the Anchor Protocol (and am very happy). Here is how I see it–

  1. TerraSwap is a mediocre product. Not terrible, but there are a lot of things they could be doing better.
  2. ASTRO is introducing some material upgrades in features, code, etc. that Terraswap won’t bother with. They have put a lot of thought into how to improve AMMs and seem highly credible.
  3. Most of us believe in Anchor long term (judging by ANC low volume relative to circulating supply), and don’t have any particular selling interest i.e. if ASTRO has a janky start, it doesn’t make much diff to us.
  4. ASTRO is offering to pick up part of the liquidity subsidizing tab.
  5. What is our downside in migrating liquidity to Astroport?
  6. If we decided we didn’t like something about Astroport, wouldn’t we have better leverage to get Terraswap to share more revs with us, the bigger Astroport is?
  7. What is our downside to underwriting Astroport?

@Liam can you elaborate on what part of ASTRO’s proposal is problematic? I understand that ASTRO is demanding that we lock ourselves in, but so what? As of right now, we are locked in to Terraswap regardless of duration restrictions, and they don’t give us anything in return for it. ASTRO is offering to do so.

Do you think ASTRO is not offering juicy enough terms relative to the duration of commitment?