[Proposal] veANC, Anchor Voting Escrow Tokenomics

This proposal aims to increase the utility of the Anchor token through the introduction of voting escrow tokens, also known as a vote locking model. This model took shape on the Ethereum protocol Curve. The veCRV tokens then inspired another layer of protocols to develop, locking up over 86% of the curve token supply. Providing incentives in the form of increased voting power for locking tokens should encourage a longer-term focused community and strengthen the purpose of the Anchor token. It also lays the groundwork for the introduction of gauges, which should add even more functionality and utility for holders of ANC and the community.

Vote escrowed Anchor veANC:
veANC is a non-transferable, non-monetary, vote-locked token. Anchor voters can lock their tokens based on time periods to gain voting power. The longer the votes are locked, the higher the voting power boost. A user’s voting power linearly decreases over time based on a vesting schedule. The initial vote locking parameters will be:

  • Minimum lock time: 1 week
  • Maximum lock time: 4 years
  • Decay/Unlock interval: 1 week
  • Max voting boost: 2.5x coefficient
  • All parameters will be changeable by a governance vote

Initial Roll-out:
This initial rollout of veANC will be applied to governance voting, staking, and collateral gauges.

Governance, Staking & Voting Rewards:
For governance voting, the boost coefficient will be used to determine voting power on polls. So for example, if a user locks 100 ANC tokens for 4 years, their voting power would be (2.5 * 100) or 250. This amount then linearly decays every week. Unlocked tokens have no voting power. Furthermore, there be voting rewards based on when someone votes on a poll. During a poll, 50% of staking rewards will be redirected to those who are voting on that poll similar to the current Mirror mechanism.

Updated: Once live all new ANC stakes will only be able to stake through veANC locking. All previous ANC stakers will keep getting rearwards but have no voting power until they unstake whereby they will only get rewards and voting power if they veANC lock. Going forward this will be the only way to lock your tokens going forward and get rewards.

Collateral Gauges:
Another key part of this model is creating gauges for different collateral types on the protocol. Each liquid staking derivative token will have a gauge weight. Users then vote on these gauges to boost the power of the collateral type, which is determined by the boost coefficient of the total votes for each gauge.

The gauge parameters will be as follows:

  • Period Duration: the time period in which gauge weights update
  • User Vote Delay: controls how often a user can change their vote
  • All parameters will be changeable by a governance vote

Future Plans:
Looking forward, the TFL team is developing an Anchor borrow 2.1 model (more to come on this in the coming weeks for community debate). In this new borrow model, gauges will play a crucial role in determining a major part of this new mechanism.

From a high level, the 2.1 model will allow users to borrow against non-liquid staking derivatives, such as LUNA, ETH, AVAX, etc. On the back-end, the protocol will swap these into token baskets composed of different liquid staking derivatives (LSD) to improve sustainability. For example, for LUNA there could be a basket of bLUNA, stLUNA, and LUNAx that the protocol swaps into from LUNA. The gauges will determine what ratio of LUNA is swapped for these different liquid staking derivatives.

In this example of a gauge, the LSD composition would be influenced by how many votes it attracted and the LSD protocol could choose to have a higher proportion in the basket through voting. Protocols with more voting power could attract higher weights for their LSDs.

Creating strong utility for veANC tokens such as those mentioned above will help drive Anchor emissions down and create more demand for the token, all of which direct Anchor to a more sustainable path.

2 Likes

@bitn8

  1. Are there any other rewards when I vote?

  2. Is there any information about the mechanism that works with ve-aust ?

  3. no general staking? If you look at the web app under development, there are general voting and vote locking voting.

  4. Can I use ANC as collateral after the V2.1 model is completed?

  5. When do votes go up?

It seems almost same to the previous proposal.

veCurve works well because there are constantly new projects trying to get access to liquidity on Curve. It also makes sense for DEXs like Astroport, for which accumulation of veTokens serves much the same purpose.

But for Anchor, are we really expecting that protocols that make liquid staking derivatives are going to fight over Anchor to get their gauge voted in? There are a limited amount of these protocols and once established, the network effects are so strong that it really doesn’t make much sense for new entrants to come into the space. For instance, Lido already controls almost all liquid staked ETH. Luna is a bit more competitive with LunaX from Stader but it’s still an oligopoly. I assume other chains will be the same.

I just see this to be a rather ineffective solution. It might do something but is it going to do anything substantial? I hope to be proven wrong but I don’t think so.

Anchor’s fundamental issue is that borrowing is just too expensive. Between the interest rate and the yield you are giving up, Anchor Borrow is simply uncompetitive in the current marketplace. You have to incentivize borrowing first and foremost. The veANC model could be applied to this, in that users who lock up the most amount of ANC will have the most amount of ANC emissions directed to them, making borrowing cheaper (perhaps even be paid to borrow). This will give incentives to protocols building on top of Anchor to accumulate as much ANC as possible to give borrowers that use their interface the best possible borrow rate (think like Vector Finance & Platypus except w/ borrowing rather than single sided staking).

Something like this is a pretty good idea as well:

7 Likes

I do like Anchor 2.1 though. From a user interface, having to interact only with the main asset rather than a liquid derivative is a huge UI difference.

1 Like

To avoid unnecessary discussion, I think it would be a good idea to write this down. As in the previous veANC post, it is clear that there will be other discussion to tell.

https://forum.anchorprotocol.com/t/proposal-veanc-evolving-anchor-tokenomics/2773/68?u=coin_seeker

https://forum.anchorprotocol.com/t/proposal-staked-aust/3588/28?u=coin_seeker

Staking rewards will stay the same for ANC holders and voting rewards will be created for those who vote.

It won’t function with a locked/staking aUST mechanism.

General staking still receives rewards, however, there will also be voting rewards.

Ideally by the end of this week.

Thank you for your answer.

I just two more question about your second answer.

  1. Is there no locked-up aUST mechanism or no locked-up aUST mechanism linking with veANC?

  2. No bANC right?

Correct this will not be linked to aUST. And right now no bANC but that could change in the future

I don’t understand why is there a reason for a normal ANC holder to lock up?

can we borrow LUNA by depositing the bLUNA, stLUNA, etc…?

Also, the locked-up aUST mentioned in the previous proposal is in the plan, right?

Users come to Anchor for two reasons: Earn and Borrow

If locking ANC has no impact on either use case then why would anyone care to accumulate/lock ANC? You can’t just create “utility” for the sake of utility. It has to be utility people actually want.

Examples of how veANC could create utility people actually want:

  • Earners - The more ANC you lock as a percentage of your Earn deposit, the more ANC emissions you receive.
  • Borrowers - The more ANC you lock the higher the Distribution APR thus the lower the Net APR to borrow.

What does “power” mean? Independent distribution weights? If so then now we’re talking! But “power” is vague.

5 Likes

Even if this proposal is passed, there still seems to be no reason for people to hold an anc token.
Hope the vote, which begins at the end of this week, include the ‘reason’ to hold or lock anc token.

3 Likes

@bitn8

I think we need more details(with description) on the new borrow model team is developing.

Here are the reasons why you should hold or lock up anc.

The changing veANC structure seems to go towards a structure that needs to hold ANC between protocols.

So it seems that people are confused because there is no benefit for ordinary ANC holders.

It seems pointless to vote without a detailed explanation of the new model.

3 Likes

Yeah I don’t see any real reason to hold ANC for ordinary person.

What does boost power of collateral type do for an ordinary ANC holder.

All kind of vague and don’t see clear benefit to holding ANC still…

1 Like

I think this proposal is a good step in the right direction for a few reasons. It doesn’t address every concern immediately, but it does set the foundation for a systematic way to eventually influence a lot of these concerns if the community decides to do so. It also should hopefully encourage voting and community engagement. Anchor is used by many different types of community members who each have their own objectives - earners, borrowers, ANC holders, different protocols, etc. Over time, this model can be used in a variety of ways to provide value to each type of user.

Want a higher earn rate? Lock your ANC. Want a lower borrow rate? Lock your ANC. Want to somehow be treated differently than the average user? Lock your ANC.

I’m not suggesting any of those ideas are good - just trying to show examples of how veANC can make a lot of future Anchor improvements easier to implement and provide utility for ANC at the same time. So while this proposal may not have immediate utility to some members of the community, I do think it at least provides a better way to provide future value for all types of members.

2 Likes

I agree with this, as it stands ANC is far too liquid without much purpose other than leveraging. I can get competetive rates depositing on edge vs governance and gain access to borrowing UST. As it stands though we’ve cleaned up the faucets and it’s currently reflecting in ANC price. This serves to advance the strategy by adding a sink that will reduce circ. supply.

@intrepid_user My proposal is flexible and able to be implemented ontop of ve Tokenomics so we can leave it on the back burner for now until after v2/2.1/x is executed.

2 Likes

Reasons for ordinary token holders to lock is that users get 50% of the staking rewards when there is a poll live and they vote. This incentivizes voting, which the protocol struggles with right now.

This is about driving maximum utility behind the Anchor token. LSD creators have the biggest incentive to buy and hold tokens now because it is a direct link to unlocking millions in revenue. This is a pretty compelling reason that drives Anchor utility probably more than anything else.

3 Likes

50% of staking rewards until Poll ends?

Yea I am a bit unclear on what “power” indicates as well.
Wish there is a more clear definition or explanation.

Power might not have been the best word. Gauge boost might be a better word. The more veANC you have, the more LSD providers can push the gauge in their favor, increasing the ratio that is swapped into their LSD.

This is correct. Similar to how Mirror gov works.