The rise of the ASTRO Wars
Tl;dr: Like glowing orbs of limitless energy, staked ASTRO tokens grant holders complete authority over Terra’s mightiest DEX, Astroport. Protocols and traders throughout the galaxy are hoarding ASTRO today so they can use their power to direct the emission of new ASTRO tokens (and their accompanying governance power) tomorrow.
I. The stakes
Astroport hovers among the stars like an interplanetary docking station. Traders beam up to this neutral marketplace to trustlessly swap assets — minus a small fee.
To understand the ASTRO Wars, you must understand the fee flow on the Astroport smart contract system (‘Astroport’).
The bulk of fees flow directly to Astroport’s most important users: its liquidity providers. These LPs are the power users who provide the fuel (or liquidity) Astroport needs to attract traders.
A portion of the fees also flow to another crucial constituency, though: ASTRO stakers.
In exchange for staking ASTRO, stakers receive fully-transferrable xASTRO tokens. Merely holding xASTRO grants its owner immediate governance power to propose and vote on changes to Astroport.
The system itself rewards stakers with even more governance power by regularly taking an additional sliver of Astroport’s trading fees, purchasing ASTRO with it, and depositing it back into the xASTRO pool.
That means that when someone redeems their xASTRO tokens for ASTRO, they should receive more ASTRO tokens than they deposited.
An xASTRO holder can redeem their tokens for underlying ASTRO at anytime. But what if they’re committed to Astroport for the long haul?
These Astrochads will soon be able to lock their xASTRO in exchange for Vote-Locked ASTRO (vxASTRO) for a predetermined time (1–24 months).
⚠️ Think of vxASTRO as points. They cannot be transferred or traded. Once time-locked, there is no going back without paying a steep fee. That means vxASTRO holders cannot claim their underlying ASTRO until their locks expire.
vxASTRO holders get additional governance power, and greater LP rewards and fees (up to 2.5x more if they max-lock their tokens for 24 months) than xASTRO holders.
To the timelockers go the glory.
Now, let us recap before things get really interesting:
- ASTRO tokens can be staked for xASTRO tokens, which grant holders governance power over Astroport.
- xASTRO accumulates system fees over time in the form of additional ASTRO. This means stakers should be able to withdraw more ASTRO than they staked over time.
- xASTRO can be time-locked up to 24 months for vxASTRO points, which grant holders additional governance power and a larger percentage of system rewards and fees (up to 2.5x more).
II. The Generators
A black star ✦ radiates energy from the core of Astroport in the form of new ASTRO tokens. This stream of tokens, which is expected to flow for 69 years, will go to Astroport LPs through the ASTRO Generators.
But which pools will receive those ASTRO tokens?
Expect the emissions to change more drastically with the upcoming launch of vxASTRO and emissions voting (sometimes referred to as “emissions recalibration”). As detailed in the Astroport litepaper, emissions voting will happen every two weeks.
vxASTRO holders will have an opportunity to vote on which pools they believe should receive ASTRO emissions during the next two-week period.
The rules are straightforward:
- vxASTRO holders can participate.
- vxASTRO holders have boosted voting power.
- Participants can vote for multiple pools and assign different weights to each pool.
- Votes will remain “active” until a voter changes or removes their votes (or if the time-lock expires on their vxASTRO). This means a user who wishes to keep voting the same way doesn’t need to repeat the process every 2 weeks.
It may sound benign, but the impact of these votes will reverberate throughout the Terra ecosystem.
First and most obviously, LPs can award themselves more $ASTRO emissions for the pools they use and love.
More importantly, though, the votes should have a massive impact on how much liquidity a given pool can attract.
One of the oldest rules of yield farming is also the simplest: high APYs attract new users. In the case of Astroport, those high APYs will attract liquidity providers who will dramatically deepen the liquidity in the winning pools.
That’s important for two primary reasons:
- Deeper pools mean better prices for traders.
- Better prices attract more traders.
This is the flywheel to help Astroport maintain its position as Terra’s leading DEX.
After all, as anyone who’s been stuck in a trade can tell you, tokens require liquidity. Without it, prospective token holders can’t acquire a project’s tokens, and token holders can’t sell the tokens they may hold. That limits the ability for a protocol-based community to grow.
Liquidity is king, and that realization is where the ASTRO Wars truly begin.
III. The ASTRO Wars
In a word, the ASTRO Wars are a war for liquidity.
By directing ASTRO emissions to specific pools, xASTRO and vxASTRO holders are helping attract liquidity to those pools by boosting their APYs.
It’s not necessarily an even playing field, though. Whale-sized wallets can farm ASTRO tokens, then stake those tokens and vote for their chosen pools to receive even more ASTRO rewards in the future.
But even whales are mere specks in the eyes of larger players: specifically, other protocol-based communities.
These communities need liquidity for their smart contract systems more than any one individual trader. And they will fight for it.
We’ve seen this play out before with the Curve Wars. Curve’s Ethereum-based DEX is optimized for swapping tokens of equal value (e.g. swapping one stablecoin such as USDC for UST).
Curve pioneered the voting and token-locking model for its own governance token CRV, and the time-locked version of that token, veCRV.
Before the launch of CRV, third-party protocols built up liquidity for their tokens on Curve the old-fashioned way: by directly giving governance tokens to LPs on Curve.
Protocol designers quickly realized there was a better way, though. They could simply acquire large amounts of Curve’s native token, CRV, stake it for veCRV and vote for their own pool to receive CRV rewards. Doing so could help them attract liquidity for their tokens without emitting as many of their own governance tokens.
The Curve Wars entered a new era when protocols specifically designed mechanisms to capture large amounts of CRV. Yearn Finance, Alchemix, Convex and others began vacuuming up CRV tokens and locking them for veCRV on their users’ behalf.
Those protocol communities could then pass the benefits of veCRV down to their users (who might not have owned any CRV or veCRV at all).
Already today, a number of protocol communities are positioning themselves to take on a similar role in the Astroport ecosystem.
IV. The Players
Several third-party protocol communities have publicly announced plans to build $ASTRO staking solutions for the Astroport ecosystem.
Let’s take a look at what’s been announced.
Apollo DAO is a decentralized hedge fund building a suite of DeFi apps that are all designed to create an inflow of assets to its “Warchest.”
Apollo is actively farming ASTRO tokens and has already accumulated more than 1.3 million ASTRO tokens.
Apollo plans to use those tokens to kickstart the launch of a Convex-style model to allow its users to access the benefits of vxASTRO through $apASTRO. From a recent Medium post:
To do this, users will be able to deposit their ASTRO tokens with Apollo in return for apASTRO vault tokens. apASTRO will be an LP of xASTRO and zvxASTRO (our “liquid staking derivative” — to be renamed ahead of launch), similar to cvxCRV LP vault.
The way this will work is Apollo will convert 50% of the deposited ASTRO to xASTRO and then max-lock the remaining 50% of ASTRO tokens as vxASTRO, providing users with apASTRO vault tokens.
All the yield from our max locked vxASTRO yield will go to the apASTRO LP vault, as well as additional APOLLO incentives. While this will mean a slightly lower yield than if we max-locked 100% (as 50% of the LP will be in xASTRO and not max-locked), we believe this trade off is more than worth it due to the increased stability and liquidity, allowing users to enter and exit apASTRO more efficiently and giving users more confidence that the peg will be maintained.
Learn more at Apollo.farm.
Orion’s ASTROBooster will help anyone on Terra earn the highest rates on their ASTRO holdings by staking Astroport LP tokens, $ORION tokens or even Terra NFTs. From their Medium post:
On ASTROBooster, you’ll be able to convert your $ASTRO or xASTRO tokens into a derivative orionASTRO token at a rate 1 orionASTRO per 1 xASTRO.
This will entitle you to receive all of the below incredible benefits:
✦ 100% of the rewards on x/vxASTRO in the same way as you would receive when you lock your xASTRO on Astroport for the duration of two full years!
✦ Extra! 15% of all the LP rewards from Astroport (40+ LPs will be available soon)
✦ Extra! More rewards in $ORION tokens (will be auto-compounded soon too)
✦ Extra! Automatically enter to win over 1000 Terra NFTs (we’ll be running 50+ NFT giveaways per day)
Learn more at Orion.money.
Reactor aims to not only give Astroport liquidity providers the ability to earn trading fees and claim boosted ASTRO without locking ASTRO themselves with rexASTRO, they are expected to enable “bribing” as well.
From their docs:
(When users) deposit ASTRO in the platform… this ASTRO is locked forever, receiving 1:1 the reASTRO token. (When staking) reASTRO on the platform:
✦ All normal vxASTRO rewards are distributed to the stakers
✦ Receive a share (10%) of platform fees in ASTRO
✦ Receive the Reactor platform’s native token (RCT) pro rata for each ASTRO you receive
In order to bootstrap liquidity for both ASTRO and reASTRO tokens, liquidity providers for ASTRO/reASTRO pool in Astroport Generators will receive dual farming rewards, receiving both ASTRO and RCT tokens as rewards.
Projects/buyers pay bribes for users to vote for their pools. Reactor chooses the best incentives for every proposal and distributes all the bribes to RCT lockers (vlRCT holders) who have delegated the voting weight to Reactor.
If a bribe marketplace launches for vxASTRO, users will be able to pay LPs to vote for their desired pools in Astroport’s bi-weekly emissions votes.
Learn more at Reactor.money.
Retrograde aims to give everyone the ability to receive the benefits of locked xASTRO for vxASTRO without actually locking vxASTRO on their own.
Retrograde locks your ASTRO tokens to apply reward boosts to Retrograde LP positions. In return, you receive a share of those boosted rewards.
When you stake $ASTRO with Retrograde, you receive one retroASTRO token for each ASTRO token staked. retroASTRO tokens are liquid and will have their own retroASTRO-ASTRO pool on Astroport to facilitate trading.
Retrograde derivative tokens can be staked to earn native protocol yield. In addition, Retrograde provides RETRO yield and a share of the boosts provided to other ecosystem participants. For example, by staking rexASTRO, users earn the normal vxASTRO yield (a portion of Astroport protocol revenue), the RETRO token, and a share of the boosted ASTRO emissions earned by liquidity providers who provide through Retrograde.
The RETRO token itself can be staked to earn a portion of all Retrograde protocol revenue, in the form of Retrograde derivative tokens.
In addition, to incentivize liquidity, LP tokens for Retrograde derivative assets can also be staked to earn RETRO tokens. For example, the rexASTRO-xASTRO LP token can be staked on Retrograde to earn RETRO.
Learn more at Retrograde.money.
Spectrum’s ASTRO Lock Vault will help Astroport LPs receive the maximum boost of up to 2.5x on their positions. From their Medium article:
When Astroport launches a new LP boost, Spectrum will then open the ASTRO Lock Vault. The ASTRO in this vault will be locked forever and you will get spASTRO (staked perpetual ASTRO) as a receipt token, this token will be liquid and tradable so you can exit your position whenever you want.
Unlike other protocols, where they need time to ramp up TVL on each pool in order to get boosted. Spectrum already has a lot of TVL from many pools on Astroport. Ramping up ASTRO locking is much easier.
Unlike other protocols that pair an ASTRO token with another ASTRO derivative token, you need to pay more commission on exit, and LP providers also earn less trading fees (at 0.025%). Incentivized spASTRO-aUST pool has yield bearing tokens on both sides. Even if there is no trading, spASTRO prices will keep increasing (from both Astroport and Anchor yields). When there is trading, you earn more trading fees (at 0.200%). Moreover LP providers will also earn SPEC and ASTRO as rewards.
Spectrum will automatically vote with voting weights that will return the highest yield to both ASTO locked stakers and LP providers. When Astroport launches a bribe marketplace, Spectrum will also take it into consideration and vote for the highest return.
When there is no bribe, Spectrum will vote based on Spectrum’s market share on Astroport. For example, if Spectrum has 3 pools:
✦ ASTRO-UST: Spectrum TVL 4M, Astroport TVL 80M, market share 5%
✦ ANC-UST: Spectrum TVL 4.5M, Astroport TVL 150M, market share 3%
✦ LUNA-UST: Spectrum TVL 6M, Astroport TVL 300M, market share 2%
The weight for ASTRO-UST, ANC-UST, and LUNA-UST will be 5,3, and 2 respectively.
Other protocols’ lockdrop will open soon for you to lock your ASTRO forever and get new tokens in return. Spectrum ASTRO Lock Vault will open when Astroport launches LP boost, therefore it will take some time.
Learn more at Terra.spec.finance.
The landscape is evolving quickly, but several of the players have already announced launch dates as shown below.
V. The future of governance
The ASTRO Wars are ultimately a war for governance power. That power impacts LPs, liquidity, traders and Astroport itself.
With the launch of third-party governance protocols, we glimpse the crypto industry’s maturation process. Proxy solicitors and advisors in the corporate world make governance easier in the real world. Governance protocols will do the same for crypto.
Best of all, these protocols will democratize access to the full power of vxASTRO. That means you won’t have to be a whale to influence Astroport’s future. Instead, you can join a coalition of others who share your values and needs.
The model mirrors the role of political parties. A party’s might and will is not consolidated in one individual but in the collective strength of all its members.
Rather than manipulating or unfairly altering Astroport’s governance, Apollo, Orion, Reactor, Retrograde and Spec will help distribute governance power to all.
Any mention of third-party protocols is not an endorsement. This article does not constitute investment advice. Before interacting with Astroport, review the project disclaimers here.