ANC borrow highly uncompetitive

Terms for borrow on Anchor are uncompetitive, for example versus perpetual futures on FTX. With such futures one can synthetically create the same levered exposure to all of Anchors collaterals, and at better terms. Maintenance margin of around 13.4% for Luna/ETH vs 20%/40% in Anchor for bLuna/bETH. Cost of borrow 0%, vs currently -3% on Anchor. Liquidation premiums will typically be less on FTX vs. Kujira. Moreover, assets like bETH can fluctuate significantly from ETH due to the low liquidity - as we have seen - increasing liquidation risk. Current subsidies are highly geared towards depositors, but in the more competitive environment we are in, I urge the community to pay attention to Anchor borrow. The rational investor would not want to use Anchor to borrow at this time.

What’s your solution? A lot of these things have been addressed and are being worked on. Would love to hear solutions and improvement ideas.

My opinion: Earn rate is too high and largely paid for by borrowers who are charged to high rates, and may hence consider moving - reducing the protocol revenue. Earn will likely be competitive with lower rates (addressed at dynamic-earn proposal). It is now time to think about adjusting the parameters for borrow, and lower he interest, so that Anchor becomes attractive again. In the current market the borrow rate needs to be positive for this to be the case. ANC tokens as borrow rewards might not be the best idea - as it incentivises borrowers (who may not really care about governance) to leave the protocol when the ANC price is low.

Have we considered fixed rate borrowing (or semi fixed)? Perhaps using the Earn sided withdrawal fee to normalize the rate, something similar to the yield reserve?

Perhaps borrowers don’t need to receive ANC tokens at all, but the protocol completely handles the ANC subsidy side of things?

I am not an expert on the borrow side of things, but seems the goal is to make it equally as simple and attractive as it is to deposit. Maybe we also need to revolutionize the UX.

Correct, We need 1 click-borrow - That is in the works. We also need to UI revamp massive simplications. Also on the road map for obvious reason.

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I believe a governance set Earn rate would be a better idea - then one could consider the major competition.
On a personal note i have been using ANC borrow since reward rates were >>100%, and it has been a gold mine for me - earning me millions. As much I am thankful to the devs and community for making these gains possible, I also aspire to be a rational investor, and have felt compelled to move to FTX now that incentives are are no longer attractive - sadly. With this i am hoping to start a discussion focused on borrow incentives, and am ready to move back once it is attractive. It is also god to keep in mind that not only UST demand drives the Luna price, borrowers who borrow to buy more Luna, do as well.

I think a lot of what your requesting is in the works already. Check out Anchor v2 post for an idea of xanchor it should address most concerns.

Comparison with Binance/ftx futures isn’t a fair comparison, people don’t just leverage exposure to their assets they also borrow as a line of credit which is a completely different ballgame to futures trading. It’s not even in the same risk framework.

With that being said anchor offering leverage to other protocols with its large UST pool could be incredibly lucrative. It can be offered to a lot of different daos or proven yield protocols to boost capital utilization and efficiency and would be an appealing product separating anchor from the pack.