Why would you want to further incentivize Earn if Borrow isn’t generating enough demand?
The issue here is how to fix Borrow. Earn is fine. If the demand for Borrow isn’t figured out, ANC is going to $.25 (or lower) imo. Investors will start dumping this when their 200 million ANC start vesting in a few months.
From March-May utilization was 70%+. Liquidations rocked the system, but the bands will converge closer over time.
If you don’t want early investors to dump their ANC, give them a reason to hodl it by 1) driving demand for ANC which will increase price 2) further incentivize their Earn savings only if they hodl their ANC
You do realize that ANC Borrow would likely fall to well under $50 million if you pulled 50% of the incentives and the ANC Earn rate would then likely fall to 5% or so. How would that impact the price of ANC?
Currently borrowing is only available to LUNA hodlers. Borrow demand will not be an issue once other assets are bondable. Borrowers are paying 3-7% to borrow right now. You don’t think they’ll be interested in earning 100% to borrow?
I’d consider making the reward relational to the borrow rate (currently ~15%). At equilibrium, this would mean free borrowing which is attractive already, anything above that is
The ANC borrower issuance is to aggressive. Consider offering the initial issuance to all accounts who have borrowed up to this point to keep your word and reward early borrowers, and new issuance schedule from then forward.
How do other financial institutions generate income? Gotta get out of the mentality of just relying on Borrowing because it obviously ain’t working.
They pay deposit fees that are sustainable to their business. The problem is, right now 19.5% is far from sustainable
I do agree on the fact that ANC need additional utility / value accrual schemes.
Not that sure on whether introducing tiers in deposit yields would be a good option though. Anchor’s value proposition is to provide yield - this key feature should be kept as simple as possible imo
Also might be worth considering for methods to remove the circulating ANC supply. I think Luna tokenomics are quite well structured here, where supply decreases as network adoption increases. Would there be a way to have ANC tokens burnt as the amount of deposits increase?
Wasn’t the plan when the yield reserve was build up to a sufficient level to increase the % of the excess yield that goes to buying back ANC? If this is still the case, the value accrual problem would be solved by working on the system deficit and creating a plan for the yield reserve. The bigger problem with ANC value is that there’s too little guidance for ANC investors to understand what to expect in terms of future return.
For example, what is the optimal amount in the yield reserve before ANC rewards are boosted? What can we expect the rewards to be boosted to? What is the plan and expectation on when we can expect the boost to happen? Of course, these are basic concepts in Investor Relations for any business with a large investor base.
Burn mechanisms reward ANC holders not participating in governance. Is that the intention?
I think you just highlighted another issue, ANC only has value during the good times (yield reserve sufficient), maybe ANC token should have value during “good” and “bad” times.
I think this is the main issue with Anchor in general. It works well, when we are in “good” times and building mechanisms only based on optimistic scenarios. There needs to be a shift in mentality to “Designing for worse case scenarios” instead of designing for optimistic scenarios.
I know nobody likes to think of worse case scenarios, but look where it got us…Scrambling for a solution when it actually did happen.
+1 here. Research on protocol consolidation should take place.
As mentioned ANC only accrues sufficient value during the “good times” where excess yield is plenty. Ideally its value should proportionally increase with the total deposit size
Agreed. Relatedly, what do you propose we do to address the current system deficit?
I completely agree with keeping it simple, maybe tiers are complicated. But tying additional utility/value of ANC to Anchor’s key feature would likely produce maximum benefit.
I also don’t think the burning model LUNA uses is all that great. You think price is going up because of burning? or because people are buying LUNA to stake and earn more yield and airdrops?
See MKR for example. They’ve been using the burn model for many years and still can’t get ahead. While the burning model technically lowers the supply, it’s difficult for investors to realize. It isn’t a directly impactful benefit in the way increased yield is.
Perhaps I’m misunderstanding what you’re saying here, but if you’re implying that there needs to be value accrual when the yield reserve is being drawn I would really like for you to elaborate here (beyond the 1% liquidation fees).
I think it could be a good idea to add more function to ANC, but I don’t see why there is a desperate need for it. There is, however, a need for enhanced communication to ANC holders on the value of the token.
Other similar investments to ANC (e.g. equities) are able to be priced ‘through the cycle’. It’s difficult to find a company on the S&P500 that hasn’t ever had a loss-making quarter or a string of quarters and yet their market values did not plummet to zero. Investors are able to understand the concept of future expected cashflow returns.
Pricing through the cycle requires effort in investor relations. Not to pump up the value, but to set the proper expectations so investors can understand the roadmap to yield surplus and a model on how to assess long-term value of the token.
Even the most engaged of us really have no idea what’s going on in the internal discussions of Anchor. We know that certain features are coming at some point, but no idea how they are going to work in practice (for example bETH implementation unknowns… deployment timeline, ANC distribution, borrowing rate, LTV requirements, etc.). If the folks on the forum don’t understand how all of this will work, then how is the average ANC holder supposed to understand the value of the token?
If I understand what you’re saying correctly then you are implying that we should expect extended draws on the yield reserve regularly in the future (30 days+ periods). Is this the design intention? Or is this growing pain associated with an experimental system? Of course, this affects the decision on how large of a yield reserve is needed which in turn affects the value of the ‘excess yield’ value accrual mechanism. I think ANC holders can value future potential of this mechanism, but quite frankly, there’s way too many unanswered questions for them to do this without a significant risk-adjustment associated with protocol design uncertainty.
It is possible that holders will dump the anc price to near zero if no value is soon discovered. That could obviously have a dramatic effect on borrowing incentives. At all time lows, I personally find it difficult to hold. Perhaps requiring new protocols to hold anc when accessing anchors Earn side function would be helpful. I agree that it’s a tough sell as a collateral asset or staking token due to its depreciating value. It needs a demand that is tied to the protocol imo. Thanks
Couldn’t agree more. I asked this question on Twitter as i didn’t see the need for it, although it now has more value since you can use it for staking mirror synth assets.
Yes, I agree that a tiered system, with ANC stakers/holders (in Governance or LP staking) should have better rates on EARN.
Also, there should be more opportunities (pools) to pool ANC. Right now, the only reason I dont dump by ANC rewards is because I put them in the ANC/UST pool. Give us more opportunities to do that (right on the Anchor platform). ANC/LUNA, ANC/MIR, etc.
Either a better rate on earn, a better borrow ‘apr’ meaning get paid more to borrow, or a lower borrow apr (in paying).
ANC needs more utility. Current utility doesn’t hold up well.
@Terrabear want to crosspollinate and get more discussion going on this from others in this thread so I’m pulling over a new thread that merits discussion of a possible way to go add value.
Everyone, please head over to this thread and add your pros and cons to this idea Make ANC more valuable by giving premium yield only to ANC holders
I think ANC gets plenty of value from buybacks. The issue is that deposit yield is too high. 20% I don’t think is sustainable long term. Even a small change to make it 17 or 18 would make ANC far more valuable.