Anchor Earn vs Borrow. growing chasm

That will make it harder to understand for non native crypto people though.

We just need to increase the borrow side right? Add more tokens for example.

Getting into bed with Dani Sesta was a very bad idea. I thought Terra was trying to build a durable defi alternative to compete with tradfi.

Sesta is all about degen ponzinomics and exploiting loopholes. He’s a defi robber baron.

This is not the direction to go for long term sustainability. The numbers don’t add up as you’ve all pointed out. 20% yields can’t last forever, but this sort of degen exploitation creates serious systemic risks worse than just losing a bit of yield.


What about the idea floated a while ago by @ryanology045 to offer a lower yield for smart contract based depositors? (source)

Decreasing the smart contract yield by 50% or whatever amount would mitigate a lot of the damage that degenbox stuff is currently doing, while not harming regular savers.


We have a barrage of tools at our disposal to nerf the Degen Box strategy, protect yields and retain a fair playing field for all users.

The main issue is we have a vocal minority (which includes some of the Anchor team) who are determined to accept it at all costs.

All evidence suggests this is actually a strategic TFL/Abracadabra partnership and we are being told to back down and lump it.

Anyway, in the acute phase of the next global financial flash crash they are all getting liquidated. The only question is how much collateral damage they will inflict when it unwinds.


Yes, and after taking a look at the Wonderland folks on Reddit, they are mostly naive amateurs to say the least. Many have dumped big money into Dani’s ponzi thanks to the aggressive sales pitch and if it goes bust big time this will potentially draw a lot more regulatory scrutiny which hurts all of crypto.

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Increasing the borrow side will only delay Anchors (and Terra’s) sustainability problem, and does not solve it, as yields on collateral are too low to cover a 20% Earn rate. Collateral yields are further trending downward, as Lunas staking-yield decreases as the price increases.

Anchor has benefited from rapid growth due to a highly subsidised Earn rate, where the hope is, that some of the capital will stick as subsidies are scaled back.
But anchor has a long way to go: a stable yield reserve is not a true “break even” for the protocol, there also needs to be enough excess cash generated to buy back newly printed ANC tokens.

Scaling down the subsides is better done sooner (and gradual) than later (and sudden). A sudden fall in Earn incentives can cause large and sudden capital flight from Anchor leading and a chaotic unwind that risks de-pegging UST, permanently damaging the whole Terra ecosystem. Users need to time to adapt to a lower Earn rate.

To reach sustainability Anchor must either to lower Earn rates OR create a hurdle to get less deposits full 20% (hence lowering the average rate).

While several options have been discussed, I am strongly in favour of differentiating yields based on amount ANC staked. This will create a upward pressure on the ANC token, which will in turn improve the borrowing-incentives.

Otherwise I am in favour of algorithmically set rates, with such parameters that, over time, will bring Anchor towards profitability as TVL grows.

Users are coming to Anchor for the fixed stable yield. It doesn’t make any sense to try to entice them to buy a volatile asset such as ANC.

I do agree that if yields fall too sharply then there will be a wide-scale exodus from the platform.

Earn will effectively be stuffed with the recursive leverage from the degen box, and it’s only a matter of time before the market wipes them out.

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Would some sort of time lock disincentivize the degen raiders? It was brought up above and on Discord… seems worth exploring further.

If yield is a base 7% normally and plus 11% if you lock for some time period (60-90 days) would this make life more difficult for DegenBoxers? Or they just lock it up and wait anyway, they don’t need the flexibility?

All the solutions are buried in this thread. It’s up to TFL / Anchor to decide how they want to proceed.


Do that and you damage the Anchor reputation, possibly beyond repair, this kind of separation is what people come to crypto to run from… The degen box isn’t a contract by/for computers, it’s a product used by real people, the degen box is doing something that anyone can manually do, it’s not a cheat it’s an automation, a tool that makes life easier.

What’s the point of launching an open protocol if then you all want to go ahead and decide who’s worthy or not.

Any solution that is worked on should be for everyone, or no one at all.

Many of us got into defi because of the 2008 mess which consisted of a bunch of greedy assholes exploiting the rating and securitization system for their own benefit at the expense of systemic risk to all of us.

Just because you CAN do something doesn’t mean you should.

Dani Sesta is the same kind of asshole just in defi. Improving a system that’s open to exploitation that puts it at existential risk doesn’t damage the reputation. It means the system can adapt and is anti-fragile and durable enough to improve.


I do not understand this ‘open protocol’ ethical cryptocurrency agenda you’re consistently pushing.

All cryptocurrencies have design mechanisms built in to throttle, prevent abuse and ensure sustainability. Examples of such are Bitcoin (Proof or work + usage based dynamic fees) XLM/XRP (minimum account balances).

The Anchor protocol is no different. Recursive leverage is protocol abuse. It destroys yields and introduces unquantifiable systemic risk. It adds no value and it can be easily prevented via policy.


You say I have an open protocol agenda, I’m just stating a fact, one that’s also mentioned in the documentation, you can go and check.

Anchor is an open, permissionless savings protocol, meaning that any third-party application is free to connect and earn interest without restrictions.

I could also say you have an anti-abracadabra agenda, but that brings us nowhere. See, the difference between your examples and what you’re proposing is scope, so many of you are focusing on nerfing one particular strat, Bitcoin rules are universal and for everyone using the network, I couldn’t speak about XLM or XRP as I’ve never been interested.

This focus on finding ways to nerf one particular strat is what I’m against, let’s find ways to sustain the APY, if we can’t we may need to discuss how adaptive the APY is and how low it could go, and if it goes lower than what we want, then let’s discuss way to block deposits for everyone.

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This was a nice utopian vision most likely written many months ago. Unfortunately we now know this vision isn’t feasible.

There’s nothing wrong with evolving to provide a sustainable platform for all organic users of it. It makes no sense to keep pushing a failed narrative.

I suspect if no action is taken (which seems highly likely) we are going to be back here in 3-6 months time discussing why we didn’t do anything.

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It’s interesting that just when we need to Incentivize borrowing, the borrow rate goes negative while the earn rate stays put at 19.5%. I don’t understand that logic.

Apart from tokens, I think we should allow depositors to borrow from their aUST deposit, like banks allow you to borrow off your fixed deposit.
For example if a user has 1000UST worth of aUST we allow him to borrow up to 20% (200 UST).
The user would not be charged an interest. The yield generated from the remaining 800 worth of aUST would be used to start paying back the loan. The only way for the user to unlock his aUST would be to wait until the yield pays back the amount borrowed. Or he can pay the remaining balance due and unlock.
The product marketing pitch would be that you get your 1+ year earn now as an interest free loan. No liquidation risk. No repayment obligation (the protocol will do that for you automatically).
I feel a product like this will lock in aUST for long periods. With the added benefit of keeping the yield within the protocol.
Note: Yes, this is the same keep in 200 UST in hand and putting 800 worth of aUST on anchor earn. But consumer psychology is such that using that 200 UST will be seen as a “loss”. Whereas “borrowing” 200 ust from your future deposit earnings would only be seen as a loss of future earnings (money that you didn’t have)

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I have a much better idea guys.

It’s time we pull all our collateral and supercharge nexus. Might as well since it’s the only insurance for our funds from this volatility.

Then we let anchor be the dead husk it is while nexus and Abra rake in the money.

Better yet if we get enough voting power on nexus we develop a nexus strategy for doing what abra is doing but no liquidation risk.

Psi yields are 300% up rn and with more borrow demand in the upcoming months with all this ponzi UST on supply we can make a real killing.

TL DR, nexus is your borrow solution. Raise LTV please so us borrowers can profit off your ponzi.

Better yet, how about we allow neth and nluna as collaterals. They are yield bearing just like Beth and Luna, then I can be in the nexus abra anchor ponzi and borrow against it to degen further.


You do realize that making things more complicated for the regular person would make it harder for global adoption right? 90% of people can’t be f’d doing some sort of strategy to really milk their apy.

Anchor is already as easy as it gets. We just need to brainstorm how to balance the earn and borrow so it can be sustainable.

If you think that strategy is amazing, why don’t you design something on top of Anchor. It can be done.

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Disclaimer: I have no funds with Abracadabra.

There is another similar strategy being played right under your nose with Mirror and nobody mentions it.

Cle4ncuts: The Terra Degen Stablefarm Strategy | by Cle4ncuts | Medium

Also everyone expects TFL to intervene, but it was Do Kwon himself who promoted the partnership with Abracadabra on Twitter.

There are several problems with Anchor, one being that the ANC token is not very useful, the second being that borrow is not attractive enough. With emissions being negative it’s even less now. My question I guess is why aren’t the emissions adjusted as deposits are growing? Isn’t that integral part of the Anchor protocol mechanism?

Something needs to happen to make Anchor’s borrow value proposition more attractive.


Apologies if I made it sound complicated. From the user perspective it would go like this:
I have 1,000 dollars deposited on Anchor. I can wait one year and earn 200 dollars from the interest accrued.
Or I could provide my deposit as collateral and get a 200 dollar loan from Anchor against it now.

As the principal won’t get liquidated. The average person might be more willing to do this kind of borrowing.