Anchor Earn vs Borrow. growing chasm

Why would they do that? It’s a balacing act, make it to high and no one wants it, make it to low and you dont reap benefits… they’re not out to get you, or Anchor as some seem to believe. Abracadabra is properly managed, the fees are managed on a per pool basis and afaik $UST is one of the highest fees, because it’s also one of the safest assets. There are other degen plays available, $UST is not the only one, but because it’s a stable asset it’s the hottest one.

$MIM pools have limited availability, one of the parameters I’m sure they look at is the Curve pool liquidity.

Right, i figured that. Here’s a hard pill to swallow: why would anyone provide liquidity to MIM-UST pool at 1.63% base APY (plus 7-17% CRV in rewards) when clearly just going after Anchor is much better deal?

If there’s a systematic meltdown with UST and no liquidity out of terra, you’re stuck with useless UST. If you do LP, ok… 1/2 is gone. So maybe that.

Are LP providers supplying w/other goal? i.e. get more CRV (governance) to have control over curve liquidity decisions?

If you LP and one half goes to shit, the good half of the LP will get drained and the LP will fill up with the shit so you will lose basically the whole thing.

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if that’s the case, would a depeg on UST solve all of this? people that loops their UST will get liquidated and the ratio of borrow/earn will come back?

would be messy though, a lot of people gets liquidated.

your thesis is interesting though, maybe it’s a plan to kickstart UST and when they achieve good liquidity, mass liquidation will occur on both side (UST and Luna) for people that leverages.

Yes it’s very possible a swift liquidation event will take out the trash and we can eventually resume normal service.

It’s not something I would like to see, but perhaps some tough lessons will be learned.

We already know arbitragers (including White Whale) will not pick up the slack in a flash crash until spreads tighten back up and it becomes profitable.

I’d assume given TFL’s silence on the Degenbox they are fully aware and comfortable with this scenario. For the Abracadbra degens, It is lambs being sent to the slaughter house.

I do not believe this is so. It would be a risky game to convert UST to Luna for staking rewards. If the price of Luna drops while you do this, you just lost a portion of the investor’s deposits. The yield for deposit APY is generated only by staking the borrow collateral bLuna and bEth as you explained in the second half of your post.

Thank you for explaining this. I very much appreciate it.
However abracadabra does not accept aUST as collateral on their website, only UST. Is this done behind the scene or something? Can you please elaborate on this?

Complaining about MIM gets us nowhere. What did you think would happen once Anchor yields are available in the real world to normies??

A) 20% isn’t going to last forever, so please don’t be attached to it
B) It’s be more productive to brainstorm ways to get more Borrowers, than complain about Earners

Here are some ideas

  • Mirror could use Anc borrow to fund short positions
  • We could raise the Borrow liquidation threshold (to make borrowing more attractive)
    • If borrowing on Anchor is attractive enough, we could shop it cross chain
  • We could allow people that stake ANC to have their own personal repayment bots
    • You could set them up with particular strategies like “take money from earn to replay debt” “sell my Kujira tokens on astroport, to get UST to repay the debt” etc
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One idea to improve borrowing would be to allow users to purchase bonded assets using loans from anchor. Here is how I would see it working:
Note: Users would only be able purchase tokens that are already bonded by the protocol (i.e. Luna and Ethereum)

  • The user want to purchase 1 Luna. The price is 100. He provides 70 UST and wants to borrow from Anchor the balance 30% of the assets value.
  • Anchor purchases 1 Luna from an AMM (astroport or terraswap) and immediately bonds the purchased Luna into bLuna.
  • The user now has a normal anchor borrow position (with Anchor rewards). And liquidation would work as normal.
  • He can now either pay the interest and unbond the Luna. Or sell it (i.e. reverse the process) where the user will get the fees after Anchor interest has been deducted.

The 20% earn reward rate is inherently unsustainable, and was only meant as a short term incentive to onboard capital to Anchor in an early phase of the protocol. Anchor is no longer in an early phase, considering the TVL and the white-paper clearly lines out how the various rates should relate to make the protocol sustainable and profitable. (Where earn rate depends on collateral yield, amount borrowed etc.)

I suggest that anchor VERY GRADUALLY start moving towards the rate-mechanisms outlined in the white-paper. Any abrupt changes could cause liquidation-cascades with rapid reduction of UST supply and potentially instability in the whole Terra ecosystem. The right way to approach this, i believe, is to announce well in advance that such a move will be made and proceed gradually. (In this case it might be wise to look to how gradual central banks are.)

Blaming MIM misses the point entirely, they are just taking advantage of an opportunity that is presented to them - as they should.

The other option is to drop the EARN rate to 10% APY and then offer an EARN30 with a 30 day time locked bonus 9.5 % APY.

This will create far less panic than simply lowering the APY for all.

As far as MIM-UST / Degen is concerned and something I have recently suspected. TFL and Anchor are actively managing the release of UST alongside Abracadabra as confirmed by the Wonderland lead developer.


I can’t speak to why someone would do that, but LPing is a different beast than depositing on Anchor, maybe they’re using the liquidity token for other things, the volume on the pool also seems to be generous so maybe fees aren’t that bad. Maybe they don’t want to use the Terra blockchain, they’d rather be on Ethereum only.

EDIT: There’s also smart contract risks, maybe they believe that Curve is safer than Anchor in that regard.

Yes, it happens on the background, $aUST liquidity on Ethereum is non-existent, wouldn’t be viable to ask for $aUST, so they made the choice to use $UST and handle the convertion.

There has been a number of great suggestions scattered throughout this thread. How do we collate them and move them forward towards a community vote?

I would suggest a TFL/Anchor employee can step in to lead the way and push things forward.

We are far away from being fully community driven at this point and we are seriously in need of strong leadership.


Well stated. I was hoping the recent AMA might provide a little more insight and guidance but it seems that multiple issues plagued the discussion. Perhaps for noobs like myself, there is a better platform to seek understanding of concepts such as “multichain is coming” , which was offered at the AMA. Would Very much appreciate some guidance/leadership from Anchor. Willing to learn and help if I can

Maybe we should rethink aUST as a collateral?

I do think it’s an amazing idea how a ‘deposit receipt’ can be a collateral, but as time goes on, there will be more derivatives of this. I don’t think it’s necessarily a bad idea, but just a point to think about.

The more derivatives available for UST, the bigger the liquidations are going to be. Also not a bad thing, but could cause a negative sentiment on Terra. We all know how people are so entitled hahaha.


Wouldn’t an option button on the borrow side to use ones deposits, if present, as repay loan reserve, a way to incentives borrow growth? So basically i will only be flagged for liquidation if my deposits are not sufficient to keep the LTV safe by using deposits dynamically to adjust the borrowed amount?

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I am really glad that you are committed to solving the Degenbox problem. I myself did not quite like that as well. I am not very well versed in this whole borrowing and lending thing but based on some of the comments I read here, and with my basic understanding, it does seem to hurt this protocol quite a bit.


How about we require depositors in Anchor Earn, to stake ANC in order to et 20%. The amount of ANC staked will determine how much UST can be deposited to earn at this rate.
Much lower rate for UST that are deposited without corresponding ANC tokens staked.

Just flagging an idea, not sure if this has been discussed before.

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