- New tokenomics proposal includes a design for a “tributes” protocol that lets anyone incentivize emissions for any Astroport liquidity pool by “paying tribute” (i.e. gifting tokens) to voters who vote for a specific pool
- ASTRO stakers would be incentivized to lock their xASTRO tokens for a minimum of 2 weeks to receive vxASTRO and become eligible for both voting on ASTRO emissions and collecting “tributes”
- Proposal aims to reduce centralization around emissions decisions and eliminate the need for excessive, multi-year ASTRO lockups while potentially reigniting the AstroWars
Before the UST depeg on what’s now Terra Classic, Astroport contributors were on the verge of deploying Astroport’s most anticipated update: vxASTRO.
Short for “Voting Escrowed xASTRO,” vxASTRO was inspired by Curve’s veCRV — the same veCRV, which launched the Curve Wars and has led to several metaprotocols on top of Curve (including the $330 million protocol Convex Finance).
As on Curve, the original vxASTRO model would have given ASTRO holders the ability to lock up their staked tokens (xASTRO) for up to two years in exchange for boosted LP rewards and governance power over emissions decisions. It was an idea that catalyzed the community, and several leading protocols on Terra publicly announced they were accumulating warchests of ASTRO in anticipation of the “AstroWars.”
Then, the depeg struck, and Astroport contributors temporarily shelved vxASTRO to build a new multichain AMM under its Hub and Outpost model. Live today on four blockchains (Terra, Neutron, Injective and Sei), the time has come for Astroport to resurrect vxASTRO with a new design.
Earlier today, Astroport and Delphi Labs contributors published a proposal for vxASTRO 2.0. Gone are the long, multi-year lock-ups. Instead, vxASTRO features a minimum lock of just 2 weeks and the rollout of a new “tributes” protocol known as “The Tributes Temple” that would be exclusively available to xASTRO lockers. Let’s dive into this newer, fresher model.
The current process of ASTRO emission allocations is inefficient, requiring a manual process to adjust and propose future token emissions every eight weeks. xASTRO holders may then vote on a general emissions proposal, but there is no granularity in the process.
Voting escrow has emerged as a popular and successful model for emissions voting on other protocols. These mechanisms were initially pioneered by Curve and subsequently adopted by projects like Solidly and its forks. The purpose of voting escrow is to allow token holders to lock their tokens to gain voting power over the DEX liquidity gauges.
This aligns the incentives of governance participants and LPs to maximize the revenue of each party, while enabling participants to influence the allocation and distribution of token rewards within the ecosystem based on their long-term commitment and involvement.
Other examples of existing voting escrow tokens include Velodrome’s veVELO and Balancer’s veBAL. These protocols allow users to lock their native asset for the respective vote escrow tokens, with the amount of vote escrow token dependant on the amount of time locked. On Curve, for example, a user who locks 10 CRV for 2 years will receive 5 veCRV while a user who locks 10 CRV for 4 years will receive 10 veCRV.
vxASTRO 2.0 implements the core features of ve- token models, but without the characteristic multi-year lockups of traditional ve- tokens, thus being far more flexible. These shorter locks are better for experimentation and iteration as Astroport continues to roll out features and implementations across multiple chains. As Cosmos unfolds and leading appchains begin to distinguish themselves, it also ensures the protocol can move quickly without the burden of extensive lockups.
In the more than 2 years that have passed since outlining the vxASTRO design in the Astroport litepaper, the community has surfaced two core concerns over ve-derived approach:
- The prolonged lockup of tokens
- The centralization of voting power granted to a few large holders
To address these concerns, vxASTRO 2.0 would instead allow vxASTRO holders to vote on ASTRO emissions to their preferred pools with a lockup of as little as 2 weeks. Additionally, protocol fees would continue to be distributed to xASTRO and vxASTRO pro-rata.
This creates a more streamlined, decentralized, and efficient system of allocating ASTRO emissions, and because vxASTRO holders alone would have power over Astroport’s emissions decisions, it creates a strong incentive for users to lock up their xASTRO.
Per the proposal, there would be a new benefit for vxASTRO holders, too, which would come in the form of an in-protocol “tributes” or voting incentives marketplace. Through this marketplace, vxASTRO holders (i.e. those who lock up their staked xASTRO) could receive incentives from external parties to vote for certain pools. vxASTRO holders could then claim a pro rata share of those incentives after every two-week voting epoch. (Look for a second article that explores the tributes marketplace in greater depth later this week!)
To summarize the new design, vxASTRO 2.0 would have the following features:
- ASTRO holders could stake ASTRO for xASTRO, then lock that xASTRO for vxASTRO
- vxASTRO lock-ups would be indefinite while allowing users to unlock their tokens at any time with a 2-week waiting/unlocking period
- xASTRO and vxASTRO holders would both have 1:1 voting power on general governance proposals, however vxASTRO holders alone would have the power to vote on ASTRO emissions
- LPs who hold vxASTRO would not receive boosted ASTRO emissions like they would have under the original proposed design
- A Curve-style voting incentives or “tributes” protocol (as mentioned in the Neutron Hub move proposal) would be launched with tributes going exclusively to vxASTRO holders
Astroport contributors are actively working to migrate Astroport governance and staking to Neutron, and all vxASTRO voting would take place on that chain.
With this approach, vxASTRO 2.0 eliminates issues with traditional ve-token approaches. Specifically, it ends long lockups and prevents centralization of emissions decisions (via boosted voting power).
vxASTRO also meets all its original objectives. It encourages token lockups and governance participation, puts new ASTRO emissions in the hands of those who have an interest in Astroport liquidity (most likely large LPs), and rewards voters not just with additional ASTRO but also other tokens collected as tributes.
The return of the AstroWars
The power to influence liquidity flows is profoundly important, and we’ve seen it play out across DeFi.
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 (much like protocols do on Astroport today).
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.
On Terra 1.0, protocols likewise knew the original model for vxASTRO could allow them to influence liquidity flows on Astroport. That meant that even before the launch of vxASTRO, at least five protocols (ApolloDAO, Orion, Reactor, Retrograde and Spectrum) publicly announced they were accumulating ASTRO in what was dubbed the AstroWars.
The AstroWars take on a new meaning in Astroport’s new cross-chain design. Whereas previously it was Terra protocols fighting to incentivise their token, now it’s also L1 blockchains themselves that will want to make sure their outpost has the most liquidity.
That means every chain where Astroport has an outpost could become a candidate to accumulate ASTRO by buying or farming the token. Then, those L1s could lock that ASTRO for vxASTRO and vote to incentive their native token pools or the pools of leading protocols on their chains — all while potentially collecting additional rewards in the form of tributes.
Those tributes could be substantial.
For example, Votium, the vote buying marketplace for the Curve ecosystem, has facilitated at least $287m worth of vote incentives on the protocol, providing a substantial benefit for veCRV and vlCVX holders. And Velodrome’s own vote buying marketplace generates ~5.4x more yield for voters than trading fees (with $25m in incentives already going to voters vs $4.6m in trading fees).
In this new era for the AstroWars, L1s will compete alongside protocols and LPs as they seek to direct liquidity throughout the Cosmos.
And AstroWars will benefit Astroport both in the short-term and the long-term. Remember, one of the oldest rules of yield farming is also the simplest: high APYs attract new users. In the case of Astroport, vxASTRO holders will have the ability to direct emissions to specific pools to boost their APYs and dramatically deepen their liquidity.
That’s important for two primary reasons:
- Deeper pools mean better prices for traders.
- Better prices attract more traders.
Thanks to the Cosmos’ uniquely interconnected architecture and the rise of cross-chain DEX aggregators, liquidity can live on any chain and get accessed by traders on any other chain.
That makes vxASTRO the flywheel to help Astroport keep and attract traders, which in turn benefits all the participants who elect to participate in the new AstroWars.
vxASTRO 2.0 has the potential to:
- Reduce centralization around emissions decisions by eliminating the boosted emissions and governance power for vxASTRO that were planned in the original Astroport litepaper
- Eliminate excessive xASTRO lock-up periods
- Create a framework for an accompanying tributes protocol
- Ensure anyone can influence ASTRO emissions and liquidity provisioning decisions throughout the Cosmos with whatever token they’d like to use
- Lead to the rise of a new era for the AstroWars
The current forum proposal for vxASTRO is a signaling proposal. After a minimum 7-day comment period, the proposal could be updated based on community feedback before going to a vote. If approved, the vote would kickoff development work on vxASTRO 2.0.
We encourage all LPs and ASTRO holders to join the conversation in the forums now, so that we ensure vxASTRO helps Astroport become critical fabric liquidity in the Cosmos.
The future awaits.
Remember, Astroport, Injective, Neutron, Sei, and Terra are experimental technologies. This article does not constitute investment advice and is subject to and limited by the Astroport disclaimers, which you should review before interacting with the protocol.