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Crypto custodian Anchorage Digital is allowing its customers to participate in crypto governance.
The move gives access to off-chain voting platform Snapshot via Anchorage Digital’s custody solution, which will now support more than 60 ERC-20 tokens, the company told Blockworks exclusively.
In an interview, Anchorage Digital President Diogo Mónica told Blockworks that the idea behind the firm’s new product is to key in on the “proliferation of all of these different protocols” that are emerging alongside “all of these different tokens.”
Many prominent protocols make use of Snapshot’s off-chain governance platform, including Aave, Lido and BitDAO. The custodian in a statement highlighted three accompanying use cases for its crypto governance platform.
Laying token governance groundwork
Initiatives to harness token holders across crypto companies have been met with mixed results.
Harnessing decentralized digital asset owners, including DAO participants, is a tall talk that has historically relied on online word of mouth efforts, including momentum pushes on Discord and Twitter, in addition to debates on the governance forums of protocols themselves.
Anchorage Digital’s aim in cutting through the online noise, Mónica said, is to develop an in-house crypto ecosystem of governance tokens that can avoid the pitfalls of setting up one-off solutions that must interact with individual protocols.
“Unfortunately, in the early beginnings of the DeFi summer, back three years ago or so, all of these [protocols] essentially reinvented the wheel, at least in theory,” Mónica said. “They all built their different protocol standards for governance, making them non-interoperable. This was previously a nightmare for folks like ourselves.”
Anchorage Digital, one of the largest crypto custodians that maintains a regulated US presence, previously handled client governance needs on something of a one-off basis that varied by the protocol in question, according to Mónica.
The company in its statement said it plans to “enable support for all applicable future ERC-20 tokens by default.” Anchorage Digital is the parent company of Anchorage Digital Bank, which bills itself as the digital asset native US federally chartered bank.
Like a number of crypto companies over the last 12 months, Anchorage Digital laid off staffers earlier this year, as previously reported by Blockworks. The banking unit was not affected, a spokesperson told Blockworks at the time.
In enabling access to the governance platform, Anchorage Digital cited external research finding that in April 2023, there were more than 5,500 “unique proposals written” throughout the Ethereum ecosystem, including EVM-compatible chains — including upwards of 600 governance proposals with “more than 100 distinct votes.”
The company said that the latter signaled “a very active community” across the ecosystem.
How Snapshot via Anchorage works
Governance votes on Snapshot facilitated by Anchorage on behalf of the company’s institutional and retail client base don’t impose gas fees, because they’re conducted off-chain.
It’s somewhat of a similar setup to proxy voting outfits pushing for votes on Wall Street equities — albeit with substantial crypto-native shifts, according to Mónica. Client assets are not shifted from Anchorage’s custodial oversight as a result of participation in protocol governance.
“At a high level, this can be compared to traditional equity governance…however, it’s significantly different in reality, because the types of things that you’re voting on, that you’re deciding, are a lot more tactical when you’re an equity holder in [a] company,” Mónica said. “In the traditional crypto world, you have many votes per week. That is fundamentally different.”
Snapshot votes are not automatically executable — they are more akin to a straw poll. These signaling votes can be executed by developers of a protocol who maintain control of upgradeable components, typically through a multi-signature wallet with varying degrees of decentralization.
Truly decentralized protocols employ on-chain voting to explicitly authorize changes to blockchain code, which, when approved, are automatically executed, usually after a time lock delay period. Governor, developed by Compound Finance, is an oft-used example.
But snapshot has gained popularity thanks to its gasless voting feature which makes it a viable option for a much wider range of token holders.
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