Our community held its second AMA a few weeks back, and was recorded by TerraSpaces, which allowed me to transcribe and summarize it. Please find the breakdown below. It was written last week, but is only posted here now, apologies for the delay. The third installment of the AMA is being scheduled.
Disclaimer: I’ve tried my best to do justice to the ideas and discussions from the team but some jokes and information may have been omitted. I’ve included timecodes taken from TerraSpace’s recording for your convenience, should you wish to get a fuller picture.
2:10 What does a day at Anchor look like?
Every day is a wild ride of activities, with focuses ranging from product development, road mapping, engaging with the community, hopping on calls with other folks in the industry. Every day is a marathon which starts around 5- 6AM and extends into the night, with a few breaks in between, because the team is distributed over wacko time zones. We’re really focusing on diversity of thought and opinion and opening Anchor up to the community.
5:40 Are the Anchor devs and the Stader devs working on some kind of integration?
Currently, Lido is the staking optimizer that provides bLUNA but if the community wants to see us work with Stader, it seems like a natural fit. It’s a good thing to have redundancy in these things, we wouldn’t want to rely on a single protocol.
15:10 In the case of a liquidation, would it be possible to choose which collateral type gets liquidated first?
There has been some discussion about such a mechanism in the community but it’s not currently possible with how the protocol works, as it doesn’t allow for cross-margin functionality. Beyond Anchor, Nate has not seen anything close to TradFi’s cross-margin systems, but he is aware of projects working on the topic on Solana. This is the kind of thing to take to the forum to be thought out and hopefully build consensus around.
15:50 New Luna derivatives (p/yLuna, LunaX, etc.) could absorb bLUNA demand, how do you see this affecting the health of the borrow side, and are there any remediation?
It’s a legitimate question but it’s hard to predict the effects of new opportunities on the borrow demand. Diversifying bAssets can greatly help increase the yield reserve, as it has recently.
16:50 ‘’wen bSOL?’’
bSOL, bATOM, and all the other bASSETS are being built by external teams, with the help of Anchor’s. bSOL is currently in audit, with no critical finding so far. So ‘’soon’’ but no precise date, especially since the auditing space is heavily backlogged. Also, adding new bAssets is in the hands of the community: anyone can start a proposal to kickstart the creation of new bAssets.
19:15 What’s the best way to share ideas with the team?
The forum is a great place to share ideas, there is a strong core of people there to discuss and refine ideas. Depending on what kind of questions you have, you can also turn to the Discord and the Telegram, there are a lot of very active people helping out there.
21:30 Anchor uses liquid staking derivatives to subsidize its own rate. Is there any plan after bAssets to add yield bearing assets such as yield tokens from Prism?
This has not been brought up in community discussions yet, but Nate reportedly thought about it. We need to see these things evolve, how stable and liquid they are before we start discussing their integrations.
23:00 Which metrics are most useful to assess the health of the protocol?
The main two metrics are the borrow yield (inflow) versus the earn yield (outflow), with the yield reserve serving as a nice buffer between the two. Everything else kind of makes up these two main metrics: so long as there is more inflow than outflow and we have a plan to keep things this way, then we have a good business model.
25:50 Beyond the bug bounty program, are there any security measures protecting users from hacks? And what is the team’s vision for Anchor in the future?
The community put together a request on the forum to get a security audit, possibly two. There is this great company called Code Arena with community sourced code auditors, with experience on CosmWasm. Problem is auditors are heavily backlogged. Nate’d love to see the community rally around a proposal to scale the bug bounty with TVL as 50,000$ is quite small.
28:20 Beyond wallet safety, what are the best safety practices for Earn deposits?
The good thing about getting such a high yield is that one can pay for insurance add-ons and still have quite a bit left. Currently, getting insurance is somewhat of a “Frankenstein” approach, with insurance products from Insurace, Nexus Mutual and Unslashed being available. Ozone should improve the situation as it covers technical failures in the entire ecosystem.
With regard to de-peg insurance, Risk Harbor is working on something called Bracket that has caught the attention of the Anchor team. UST has also held up well, and there are advancements and products that should strengthen the peg.
Anchor is in talks with the first regulated insurance player in the crypto space, which is currently doing due diligence and trying to come up with a product. This will probably be a narrow coverage at first, but it will create a trail that will enable Anchor to be at the forefront when bigger players from the Trad insurance sector move into crypto.
34:50 Roughly how long do you think until big risk mitigation players move into the space?
Insurance is the slowest moving of all complementary product, as it’s extremely risk averse and actuarial. It’s based on data and history, which Anchor does not have a lot of yet. What we can do right now is making sure everything is super buttoned-up, keeping the peg, being out there, working, and talking to the right players so that when they start moving into the space, we are the first to hear about it.
37:50 Could bDOT, bSOL and other bAsset have different collateral ratios depending on the yield level of the asset?
When a new bAsset comes in, we as a community decide what collateral ratio to give it. So, yes, we should be doing this kind of things, especially when we list non-PoS assets.
44:00 Do you think that putting a regular audit schedule in place is feasible and desirable?
We do have a regular audit schedule, that’s why we’re looking to get one done as soon as possible.
45:50 Has there ever been CosmWasm exploits?
There have been some core blockchain issues that have brought chains to a halt, but no protocol exploit to the speaker’s knowledge. Most issues don’t stem from errors in the programming language but from incorrect math or faulty assumptions.
47:00 In traditional banking, there is a board which is legally responsible. How do you see that working with a decentralized system where decisions are taken by a DAO?
In a bank, it’s not about criminal responsibility but about checks and balances. No piece of code goes through without multiple sets of eyes checking it. Also, no single person knows the whole system and that’s where management reporting and analytics comes into. Regarding checks and balances, DAOs can certainly improve, and that’s why governance plays a super important part. Also, Anchor is the opposite of a bank, we don’t want to recreate banks.
52:40 What do you think is the right balance between centralized and community led decision making?
Typically, there is a core of people who are always going to be involved, and as long as they are consistently making good decisions, then the rest of the community will continue to back them, regardless of its 5% or 10% of the whole group.
53:50 Is there a way to offer bonds to strengthen ANC?
A poll was put up last week to ask whether we should offer bonds to top-up reserves by selling discounted ANC, but the result was that people were against it. The fundamental thing is that bonds must make sense to Anchor’s specific economy, a business case for Protocol owned Liquidity, otherwise we’re wasting money.
56:15 How about a partnership with Leserve to offer bonds on bLuna, or other?
Leserve and other protocols are free to offer such bonds, but should Anchor do so? We’re only at the second iteration of DeFi and so the current system for liquidity might change significantly in the next few years, perhaps towards a more traditional delta neutral market making system.
1:00:15: Are there plans to use other terra stables with Anchor to get the Earn yield?
There have been fringe talks about this in the community. Nate thinks that there is tremendous utility to be built around fx swaps, things that could drive value to the protocol, which warrants more research.
The Euro would probably be a good starting place, as that’s probably where there would be the most demand and liquidity. There are protocols such as Capapult building in Sweden something about payments. Once we have a large enough balance of Euros on Terra, we can start thinking about it more seriously.
1:05:30 It takes 1000 ANC to make a proposal right now, which is the highest on Terra. This creates a barrier to submitting proposals on chain. What do you think?
In the spirit of decentralization, we should lower this, and maybe even add functionality to publish a proposal and allow other people to post collateral for it. Nonetheless, this limit exists to avoid having garbage posts, so we’ll need to figure out the best level for the requirement.
1:09:00 Currently the yield is tracking 19.5, the threshold deposit rate rather than the target rate. Should we just track 20% instead as advertised?
The yield fluctuates between 19,5% and 20,5% depending on how well the protocol is doing using reference values. This system has been out there for half a year now, and it could be target for improvement, instead of picking target parameters. Currently, the 20% APY is highly dependent on ANC emissions which are scheduled to go down over time, so maybe the conversation should rather be about how to build sustainability for the Earn yield when that happens.
1:15:00 Would you double up on insurance with one for protocol failure and one for UST de-peg?
Danku: I get these questions a lot in Germany, where people are very risk averse. Personally, I don’t use any type of insurance, but if I were to choose, I’d go for the de-peg insurance as it covers you in other protocols and, often, for derivatives such as aUST as well.
Matt’s closing thoughts?
It may sound hyperbolic but Anchor, right now, as a chance of becoming the reference rate for all of crypto. If you imagine that crypto will absorb part of TradFi, it might become the reference rate for all of finance. This is probably the most exciting mission in finance, so we really need the community to make it happen. There is a very real window right now to go after this, that’s why I don’t sleep at night: it’s not fear, it’s we don’t want to leave anything on the table.