[Proposal] veANC: Evolving Anchor Tokenomics

Authors: Retrograde core team (@tetris, @Pong)
Reviewers: Anjan - ParaFi Capital


Expand the role ANC plays in helping Anchor Protocol achieve its vision of becoming the foundational money market in Terra and DeFi broadly.


If adopted, this proposal seeks to:

  1. Progress the role ANC plays in Anchor Governance through the following components
  • Vote-Escrowed ANC: introduce vote-escrowed locking of ANC as a replacement of ANC staking, where a longer locked duration grants a greater share of voting power and boosted ANC emissions in the form of subsidies to the borrow rate. ANC would be locked up for up to 4 years in a contract to mint veANC
  • Voting: suggest veANC to replace ANC in governance voting. Introduce gauges which dictate ANC emissions directed towards each Anchor-approved collateral type as an ongoing governance topic
  1. Improve Anchor Protocol incentive alignment by driving value accrual to the ANC token
  • Direct a portion of protocol earnings as rewards to veANC token holders
  • Direct a higher portion of future ANC emissions to veANC token holders in the form of subsidies to the borrow rate



  • Incentivize Long Term Supporters: veANC holders will support the protocol over a longer term horizon rather than speculate on price fluctuations in the short term. Those with strong conviction are rewarded the most over time.
  • Ecosystem Growth: veANC creates a flywheel effect where emissions drive higher TVL, in turn generates more fees, and leads to greater value accrual to the ANC token. This better aligns incentives between ANC holders and the core stakeholders for the Anchor protocol.
  • Increase incentives for 3rd parties to accumulate ANC: Protocols will be incentivized to lock up ANC to vote and support the base borrow rate for their preferred collateral asset. Given the massive sway of Anchor in the Terra ecosystem, directing ANC emissions can often be a more efficient use of funds for 3rd parties than native incentive programs.
  • Locking Anchor Supply: Longer lockups of ANC contribute to a lower ANC supply (less is available on the open market to sell). ANC will maintain a more stable price as a result of the new design.
  • Improved Security: In its current state, Anchor is susceptible to attacks via borrowing ANC, and voting with ANC to make adverse changes to the protocol.


  • Lacking Incentives: Anchor may not generate enough fees or governance value may not be enough to motivate ANC holders to lock into veANC.


1. Vote-Escrowed ANC

  • ANC can be locked up to 4 years into vote-escrow ANC. This locking mechanism will replace ANC staking
  • veANC is non-transferrable, but could be converted to a transferrable NFT in future improvements
  • Lock period will be in a range of min 1 year to a max of 4 years
  • Locking duration corresponds to linear weights, so if max duration is 4 years, voting weight for year 4 = 100% and year 1 = 25%
  • Voting weight decay as the remaining ANC lock duration decreases and can be extended back up to the maximum lock duration

2. Rewards

  • Borrowers stake assets like bLUNA and bETH as collateral and receive boosted ANC emissions on their UST borrowings according to their veANC holdings
    • Based on their amount of veANC, users can boost their ANC subsidies on UST borrow rate up to 1.5x proportional to the amount of tokens locked.
  • ANC staking rewards will be redirected as rewards to veANC holders
  • A portion of protocol earnings are directed to veANC holders

3. General Voting

  • Once veANC is introduced, only veANC is accepted voting power in Anchor Governance

4. Gauge Voting

  • Gauges represent each Anchor approved collateral type
  • ANC emissions are distributed to gauges based on biweekly governance votes. Each gauge can receive a different amount of ANC to emit to its respective collateral type
  • As Anchor expands its universe of collateral assets, controlling ANC emissions will become paramount in the ecosystem


veANC incentive alignment can be subdivided into economic and governance incentives:

Economic Incentives

  • veANC rewards holders by subsidizing borrowing APRs with greater ANC emissions (higher distribution APR)
  • veANC holders receive a portion of Anchor Protocol earnings
  • ANC staking rewards are redirected to veANC holders given staking will be replaced with vote-escrow locking

Governance Incentives

  • veANC holders are eligible to vote on how future ANC emissions are distributed across Anchor collateral types on a biweekly basis (every two weeks)
  • veANC holders can vote to change borrowing parameters (asset listings, collateral parameters, liquidation parameters)
  • veANC holders can vote to change lending parameters (market parameters)

Next Steps

We welcome any feedback and would like the community to discuss our proposal. We will incorporate ideas as needed before an on-chain poll is introduced.


This is great. It seems that finally all the great ideas and debate from the community about Anchor tokenomics are solidifying into an actionable plan. Creating better utility for the token in the form of voting escrow tokens is a great way to evolve the terra ecosystem governance structure and add a better dynamic to the borrow side emissions.

More importantly, vote locked gauges can help direct emissions rewards towards collateral types that drive the most revenue for the protocol and that is what Anchor needs right now.

It also helps those governance stakers that have been holding Anchor actually lock in to be rewarded for being a governance steward.


This will be great for Anchor.
But I need to know this first from the team; Is this feasible when passed? How long would it take to be effected when passed?

Ok great. The idea is fine.

But who are these ‘experts’ that are now coming out of the woodwork with proposals that are getting rushed through the door?

Seems the last few months we couldn’t get consensus on anything. All 3 of these guys joined 6 hours ago.


Love the ideas. I’d be in favor of a one year lockup. (Already used to the timeline from Astroport’s staking lock). 4 years seems quite high since the protocol is so new…thanks

I like the idea of trying to fix the ANC price; however, I’m not sure we want to turn borrow emissions into the curve wars… This is not good for the long-term health of Anchor whereby the platform has a diversified set of yielding collaterals backing its loans. It also will make Anchor even less competitive relative to other borrow platforms that are emerging on other chains.

We need to find additional benefits for locking ANC… I know this has been rejected in the past, but we should think harder about benefits on the depositor side of the equation. So far, the depositor user counts has greatly outstrip borrower user counts. The depositor side is also a major contributor to the yield reserves running out so quickly.


Looks good to me. In addition, why don’t we redirect the airdrops for luna stakers to borrowing rewards, this will make veANC even more valuable.


I’m hesitant about the rewards section.

I’m not always borrowing and do it in short bursts of time.
I don’t want to commit to a long duration lockup as suggested above.

How will this change the borrow rate for those who want to use borrow for short time ?


I actually really like this. Would make me actually finally pick up some ANC lol.

This seems like something you’d see chains try to control since Anchor collateral is all PoS tokens. That being said, I’m not sure having collateral communities fight over rate control is a good idea, especially in terms of Anchor’s narrative. Anchor would get increased borrowers hypothetically from the highest voted gauge, but that leaves a potentially large group of assets with sub-par variable rates.

Its safe to say this will get Convex’d granted who made the proposal. I’m not sure if that’s a positive end state either. 1 entity getting majority control over the borrow rate of Anchor assets seems pretty risky.

I’m against the vote gauges, the lock to increase ANC emissions is fine.


does it break if we collateralize it

Also, would this assumably decrease base distribution rate? If so the boost for locking should be in line with the distribution APR.

Telling any user w/ an open position they’d have to buy & lock extra ANC to keep their interest rate stable this suddenly isn’t a great idea for sentiment.

I think if the mechanism works well, your borrow rate becomes attractive enough for you to work leverage into your strategy long-term. Over time of course.

Just my two cents, but I don’t think this is the best direction for ANC tokenomics. There is a very good thread here that succinctly highlights the cons of veTokenomics.

Curve veTokenomics has played out very well due to three main reasons:

Factor #1: Lots of motivated players: Lots of different stablecoin projects fighting to incentivise their stablecoin pools on Curve (Frax, Mim, UST to name a few)

Factor #2: Deep liquidity for stablecoin pairs is very fundamental to the utility of stablecoins

Factor #3: Curve emissions are constantly decreasing, and will be emitted for the next 300 years.

Reasons why veTokenomics might not work well for Anchor Protocol

Factor #1 is not directly applicable to Anchor. Currently only Layer 1 tokens are used to borrow UST. Will Layer foundations such as Solana or Atom participate in Anchor wars? Unlikely. Will Application layer projects fight to incentivise Layer 1 tokens? I think quite unlikely.

Factor #2: While creating a leverage/lending utility for the L1 token is valuable, it does not have the fundamental importance of a stable coin having deep liquidity on a Dex. Right now, users are able to deposit their eth into Aave and borrow USDC at 3% variable borrow rate/ 11% fixed rate (and a host of other coins) vs the 12% variable borrow on Anchor (before netting off 11% anc distribution). So at the moment (market is in a risk-off mode), the cost of funds to a borrow (even factoring net anc incentives) is quite similar on both protocols. With other money markets as alternatives, will Layer 1s think it worth getting involved in a war? I think unlikely.

Factor #3: Currently Anchor’s emissions for borrow incentives is slated to end in Year 4 (iirc, we have <3 years of borrow incentives left), making a fight over this 3 years of emissions even less palatable for protocols/layer 1s. It’s possible this can be adjusted by governance votes etc so extend the emissions - so don’t think its an insurmountable hurdle here. Although by doing so, the Anc % distributions will drop even more.

I believe these are some reasons why Mars Protocol is going with an xToken model rather than a veToken model.

Really happy to see the community coming out with proposals to improve the Anchor tokenomics! I hope some of my thoughts above will help to drive the discourse forward.

You can reach out to me on:
Twitter: https://twitter.com/davidkohcw
Telegram: @davidkohcw
Running a Terra validator at SeltonStake


Ok, first question. What problem are you trying to solve?

Second question. What is the desired outcome you are looking for when addressing this problem?

It seems you’ve come straight in with a detailed proposal on ve locking mechanics, but how about starting from point A before we get to X, Y or Z?


I agree with the overall concept of favoring long-term supporters for governance decisions, but a 4-year lockup is a long time.

Why don’t we consider a model similar to Platypus Finance, where governance-staked ANC earns non-tradable veANC over time up to a specific cap, and withdrawal of any of the gov staked ANC zeroes out the veANC total? This keeps people interested in governance prioritized, but someone barging in at the last minute has limited voting power? This way also if people want to leave governance or need liquidity they can exit as desired and the remaining voting power and quorum are not diluted by people who have just written off their ANC holdings because they won’t see them for 4 years?


What if the veANC applies the same concept Prism will use with AMPS or Platypus is using with vePTP, veANC could be farmed on incremantal volumes by time while staking ANC, BUT it’s lost if you unstake any quantity?
Also yield could be boosted depending on the ratio of veANC versus aUST. Fixed yield could be lower than current values is no veANC is held by the wallet, but could go higher depending on the veANC/aUST ratio. This would generate a virtous circle and would generate better incentives for protocol retail supporters versus external protocols that can empty the reserves using loops (Like Wonderland loops, Edge and others to arrive)


I think you meant borrowers? Adding more utility to the depositor side will only make things more lopsided than they already are, so benefits should be directed primarily to borrowers…

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I meant depositors… One thing that Platypus Finance is doing is that they scale back the base deposit rate (to something like 5%) and then require locked and staked PTP which boosts yield earned on deposits. We don’t necessarily need to do that, but I do think we should be looking on both sides of the equation for opportunities.