It has been an absolute whirlwind 48 hours for us at Polychain and our proposal partner, Arca. The turnout for our proposal, Anchor Proposal #18, has been nothing short of staggering! At the time of writing this, 71% of all staked ANC, roughly $275mm of value, and approximately 1,800 wallets have let their voices be heard, making it the highest Anchor governance turnout in history. Absolutely incredible. We appreciate everyone’s participation and believe there is a clear voice supporting positive change going forward. We also respect the governance process which is determined by the total number of tokens voted in either direction. While on a per wallet basis the vote is relatively close, with 42% of wallets voting in-favor and 48% of them voting against, 54% of tokens have opted to vote “No”, while 16% have voted “Yes”. Given that margin, it is clear that Proposal #18 will not pass, so we will no longer be pursuing this proposal in order to focus on what is important: improving Anchor.
One may expect us to be disheartened by this outcome, but that couldn’t be further from the truth. We are elated at the amount of passion and activity displayed by Anchor stakeholders and are completely energized about the Protocol’s future. It is not a stretch to say that this was one of the largest governance turnouts in crypto history. The activity in Anchor governance, from our proposal and others, has clearly been to the benefit of the protocol, as evidenced by the immense value creation Anchor has seen with regards to TVL increases, collateral growth, outstanding borrow expansion, ANC appreciation, and general increase in protocol awareness.
Importantly, it drew vast amounts of attention to Anchor Protocol and critical questions about its sustainability and path forward. Once it was put up for a vote, we received more feedback than we could have ever imagined. Some were vitriolic, personal, and frankly inappropriate, but others were wildly productive, spanning from offering minor tweaks to completely different approaches altogether. It is that productive level of feedback that drives better proposals and stronger outcomes for both Anchor and the broader crypto ecosystem.
There has been intense speculation about the intentions of our poll, so I want to address them directly: both funds are long term supporters of the Terra ecosystem. The issues of yield reserve depletion are well-known and were cause for panic as recently as February before LFG injected close to half-a-billion UST into the protocol. We set out on this adventure to move the protocol closer to reducing dependency on outside capital infusions and on a path to self-sufficiency.
For those who have followed us from the beginning, they will observe that the proposal that went up for a vote was dramatically different from the initial Polychain-Arca proposal, which itself was radically different from Arca’s solo proposal. Such evolutions in our proposal were fueled by a core principle of stakeholder feedback. From the start, both teams were aligned in gathering as much input as possible when putting forth each proposal as neither of us have a monopoly on good ideas nor the arrogance to believe that what we put forth is perfect.
Unfortunately, we found the process of getting feedback to be more of a challenge than expected. The stakeholder community is a diverse one; it ranges from individuals to sophisticated funds to whales to devs and many more. Getting in front of such a diverse crowd requires some strategy; accordingly we planned on getting in touch with core devs, protocol leadership, other investors, and individual community members. We were more successful getting in front of certain groups of stakeholders than others.
As we approached launching the poll, we had a proposal that was being warmly received by those we were able to communicate with, but maybe more importantly, a proposal that was missing key feedback. We were acutely aware of that when we launched our poll. One may reasonably ask why we launched the poll even when missing that feedback. The way we viewed it, we could sit back, wait in the forum for responses and hope to hear from the key stakeholders we hadn’t heard from or we could take action and let the people vote with their feet. We chose action rather than succumb to the complacency that plagues crypto governance. In our opinion, if the poll passed, great, we had the community support — if it didn’t, then we galvanized the community around a much-needed conversation that we believe could lead to a better Anchor. The latter clearly was the outcome and we are thrilled about the conversations it triggered.
There are countless lessons to be learned from this exercise. One is just to simply do something. Governance should be a full-contact sport where through the collision of great ideas, elegant solutions arise. It doesn’t matter if your action is tweeting, replying on governance forums, creating your own proposal, or launching your own poll. Your voice matters and is critical in shaping the future of crypto. Another lesson is to increase access and transparency. Through this process, it became evident that direct communications with developers and protocol leadership is crucial in assessing both the efficacy and technical implications of any proposal. A formal process in which proposers discuss proposals with these key individuals could reduce significant friction, increase the surface area of collaboration, and better-tailor proposals in advance of polling. The last lesson is to not be afraid to put something out there! This process has generated a ton of critical conversations about Anchor that will drive progress. As an industry, we could stand to have more people putting forth ideas without fear of losing — from the ashes of down-voted proposals sprout the green shoots of progress.
As mentioned at the beginning of this piece, it is jaw-dropping to step back and take stock of the groundswell of action that resulted from Prop #18. Thank you, sincerely, to all who stepped up in this moment. This is what crypto governance is all about. Token holders large and small, collaborating in an effort to build a more-perfect future. Our goal from the start was to push Anchor towards self-sufficiency — we haven’t lost that North Star and we are dedicated to working with the Anchor community in order to get there. Our DMs are open.