Terra-fying Rise of Anchor
Anchor is pondering on Ve-economics for Terra
As a reminder “Ve-” stands vote “ vote escrowed”, which means the longer you lock your tokens for governance, the higher reward you get. Here, Anchor is trying to adapt the hugely successful Convex model to ANC.
After the recent replenishment of its Reserve, Anchor protocol doubled its amount of deposits from ~5BN on 1Feb22 to $10BN on 11Mar22. Nothing short of amazing, all the more than other DeFi protocols have been going through a bear phase in the meantime.
Users seem resolute to hit Anchor’s honey pot while it lasts, and why not? On the flipside, the borrow side has been completely depressed. As long as the supply and demand will remain imbalanced, it would put downside pressure on the reserve of the protocol, and the fresh $450M injection will erode quickly. As part of an initiative to improve its long-term viability, Anchor is trying to improve ANC tokenomics.
As a more long-term parade, ve-nomics would give a renewed incentive to hold ANC tokens in order to direct rewards to specific asset pools. In turn, it could boost competitive demand for ANC and hopefully revert part of its slopping trend. In practice, it is hard to see what real benefit the liquidity wars have had on Curve and Convex token prices, and how much it would have for ANC.
In fact, until Anchor is actually offered on a single chain, its power of attraction will remain limited to its ~20% yield, with very little regards to the economics attached to ANC. The picture starts making sense when you combine this recent initiative, with the announcement a few weeks back that Anchor was studying a future of liquid staking with Avalanche, which would in turn unlock the capability to go cross chain.
Multi-chain + Ve-nomics is the future that any decent DeFi protocol should be aspiring to these days.
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