Fellow Anchorians,
Our community held its third AMA a few weeks back, and was recorded by TerraSpaces, which allowed me to transcribe and summarize it. The fourth installment of the AMA is tentatively scheduled to be held around New Year.
Disclaimer: This document summarizes topics discussed in Anchor’s community AMA on the 22nd of December. Jokes and some information have been omitted for the sake of conciseness and clarity. Timecodes from TerraSpace’s recording are included. Alpha has been boldened.
Yield reserve
6:22 What happens when the deposits from Anchor exceed the amount of yield from borrows available?
If you do the calculations based on current metrics available through the dashboard, not accounting for the subsidies, Anchor is currently able to support a 17-18% APY, which means there’s only a 2-3% difference from the target. With the addition of a couple new collateral types, this can be supplemented. There is an expectation that we can’t sustain 19,5% forever and might have to lower the Earn yield, but the longer we can hold it, the better.
10:20 So 17-18% comes from the yield from bonded collateral and the 2-3% extra comes from the yield reserve?
Yes, in the current market conditions. A couple of weeks ago, the protocol was generating excess yield and repleting the reserve. Anchor has a target utilization ratio: it incentivizes borrowings to match deposits using ANC rewards.
14:00 How much yield can Anchor sustain without the distribution APR and the reserve?
Leaving out borrowing interests, which make up a significant portion of the protocol’s income, and focusing solely on staking rewards from deposited collateral, then the Earn yield would still be around 10%.
Refer to Anchor Docs and Flipside crypto for more yield reserve data.
16:40 The MIM-UST strategy is bringing deposits but no matching collateral, correct?
Yes, but the protocol itself is not static. First, Abracadabra is using the protocol perfectly as intended: Anchor is providing a service that any individual or protocol is free to use and incorporate into their strategies. Second, for this to be problematic, the assumption is that we, as a community, are just going to sit on our hands and not develop any new streams of income or borrows for the protocol.
55:30 Do you have a target in mind for what Anchor’s borrowing interest rate will be over the long term?
Borrow rates constantly change, especially in crypto where demand is very volatile, which prevents Anchor from setting a fixed target rate. This is also true for protocols such as Aave and Compound.
Anchor does have a relative long-term target though: to consistently beat the rest of the market. Because Anchor extracts yield from deposited collateral, its interest rate should always be lower than that of the competition.
Marketing
25:20/27:40/29:40 Is any marketing planned?
Marketing is a complex thing. Onboarding someone who has no conception of what DeFi is is both difficult and costly. Furthermore, the line between what is financial advice and what is not is fine and treacherous.
For these reasons, the team believes that the best way to expand Anchor’s reach is three-pronged:
- Continue to build a great product: word of mouth has been a strong growth drive for Anchor.
- Secure partnerships with other protocols and wholesalers with existing consumer bases. By integrating with Anchor, partners are able to offer new services to their users and subsequently take on the burden of marketing Anchor’s services to their user-base. Such integrations and partnerships are currently in the works.
- Take Anchor cross-chain: providing a chain-agnostic interface to the user facilitates on-boarding and expands the protocol’s total addressable market.
New collateral types
32:40/35:40 How much of a priority adding extra collateral types is?
Adding new collateral types is the number one priority. bSol’s audit and testing is taking time but if you searched for a contract on finder, well… you might find something. We’ve been doing a lot of testing, with other integrations as well, things are moving rapidly, considering that bringing tokens along with their yield is a complex technical feat and arguably the pinnacle of cross chain development.
bLUNA’s validator set
49:30 How can validators apply to become bLuna stakers? Will there be a way in the future for users to redelegate?
Validator staking for bLuna is managed by Lido, which has its own selection policy, and has done 2 intake rounds. It has published a proposal to even out the stake among their validator set and to introduce a new yield bearing token, stLUNA. The Anchor team will be in touch with Lido, hopefully it’ll be open to widening its validator set.
An integration with Stader is also in the cards, as they offer similar services. Potentially, other validators could benefit from Anchor’s collateral staking through them.
Contingency plan
11:30 There are a lot of insurance offers out there, should you not wish to contract one and eat into your profit, is there any sort of contingency plan in case a black swan event happens?
No, currently there is not. You’re putting your faith into the smart contract, like with every other DeFi protocol out there. Ozone should come around early next year and help protect depositors and borrowers.
aUST clarification
aUST appreciates against UST: a deposit of 1,000$ will net you less than 1,000 aUST, but the amount you receive will be worth 1,000$ minus the transaction fees, and it will increase in value over time.
