Hello all. I recently deposited some UST to earn the 20%. I am also interested in depositing some ANC. Can someone expain the ANC-UST LP option for me in a simple way. If I deposit ANC, I will earn ~79.3% rewards, paid out in ANC or UST?
What are the fees like? Do I have to claim and re-stake, etc?
Under Earn, you can deposit UST to earn a stable 20% APY return. These rewards are included when you redeem your deposit. This is Anchor’s stable ‘Savings’ account.
Under Govern, you can deposit an equal amount of both UST + ANC to TerraSwap’s ANC-UST Pair, and you are given LP tokens to represent your share of the AMM pair. You can at any point return those same LP tokens to get back your share of the aMM pair at some ratio of UST + ANC (which could gain or lose value, depending on fees and impermanent losses). This is liquidity mining.
In addition, also under Govern, you can opt to stake those LP tokens for more rewards (the ~79%). This is Anchor’s way of incentivizing users to offer ANC-UST liquidity, which is important in the early life of a project. These rewards are distributed by Anchor in the form of ANC, claimable under Govern > Rewards. The rate rewards are granted is constant. The total rewards given to LP stakers is split between all stakers pro-rata. So, Anchor’s LP staking rewards is not stable and will not last forever.
Since the ANC emission rate to this is constant, I would then be speculating on how much LP total will be staked. On the one hand, I think Anchor will become increasingly popular, so more people will discover the option to stake LP, making the total stake increase and APY rate decrease from where it is. But on the other hand, looking at other examples, like Mirror’s MIR-ANC LP stake rewards are at ~80%, suggesting that 80% might be a reasonable long term number. My guess is it will stabilize at 69%.
I think I missed something, I’m slightly confused - why total value of ANC-UST LP has decrease ~20% last few days? I think that if ANC price go down, more UST should rebalanced total LP pool?
So I started providing liquidity to the ANC-UST pool but the ‘reward’ I am being given is from my own ANC. I started out with 58 ANC and $157 ust. The reward I have currently is 1.4 ANC, my total ANC being provided is now down to 56.6 ANC. Can someone please explain?
So how does this work - what if i provide liquidity without staking the LPs. What is the return? It sounds like the rate stated on the Govern page for Liquidity Pool is talking about staking rewards. Can someone clarify what the liquidity reward itself is?
Not quite. the idea of liquidity pools is that the total value of each token set must always be equal ($100 worth of ANC must be paired with $100 worth of UST). If the price of ANC drops, it takes less UST to balance that out; not more. Looking at this from the viewpoint of a totally self-contained ecosystem, with the liquidity pool being the only mechanism of exchange between the 2 assets, the drop in ANC can be viewed as a lack of demand relative to the demand for UST. so if people start trading more ANC for UST, the pool becomes flooded with ANC, and UST starts to flow out of it (implying to the algorithm that UST is becoming more valuable relative to ANC). Thus, the price of ANC drops, while UST could theoretically increase. Let’s assume we start with 100 ANC valued at $1, and 100 UST valued at $1. after trading pressure from the market, the pool ends up with 150 ANC and only 50 UST. Since UST is ‘stablized’ through other external forces, we know that that the 50 UST is worth $50. therefore, the algorithm assumes that the value of ANC in the pool must be equal to $50 as well (or $.33/ANC). Therefore, the entire value of the pool has dropped. What should keep this from spiraling down to $0 though is the arbitrage aspect. because if the true value of ANC is greater that $.33, then arbitagers would pour into the pool to buy up the cheap ANC, thus driving prices back up.
This is a simplified explanation, and it’s a little more complex than all this in reality. but hopefully that helps you understand the reason why pools decrease.