# \[Proposal\] veANC: Evolving Anchor Tokenomics

**URL:** <https://forum.anchorprotocol.com/t/proposal-veanc-evolving-anchor-tokenomics/2773>\
**Category:** Mechanism\
**Created:** [February 17, 2022, 8:22pm UTC](https://forum.anchorprotocol.com/t/proposal-veanc-evolving-anchor-tokenomics/2773 "2022-02-17T20:22:12Z")\
**Posts on this page:** 1\
**Showing post:** 15

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**Author:** ![davidkohcw](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.anchorprotocol.com/davidkohcw/32/74_2.png) [@davidkohcw](https://forum.anchorprotocol.com/u/davidkohcw)\
**Post date:** [February 18, 2022, 7:11am UTC](https://forum.anchorprotocol.com/t/proposal-veanc-evolving-anchor-tokenomics/2773/15 "2022-02-18T07:11:18Z")

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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](https://forum.makerdao.com/t/signal-request-gbmkr-a-proposal-to-benefit-long-term-mkr-holders/12756/16).

### **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](https://twitter.com/davidkohcw)  
Telegram: @davidkohcw  
Running a Terra validator at [SeltonStake](https://station.terra.money/validator/terravaloper12x0uekrjre057h0vyrf9w8mkz6paf32qvn0q84)

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