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.
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Running a Terra validator at SeltonStake