Anchor Earn vs Borrow. growing chasm

I actually meant the “Distribution APR” of ANC tokens instead of “Borrow APR”.

Since we have a growing chasm between Deposits and Borrows and we want to stimulate borrowing, shouldn’t we increase the ANC “Distribution APR”?

What mechanism controls the “Distribution APR”? The docs say its done via poll but I haven’t seen any polls, and I see the Distribution rate dropping every day. The docs also state that there is a “target deposit rate”. What is that target?

I have a feeling these are noob questions. Sorry in advance.

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That’s actually covered here in the docs - see Borrower ANC incentives. Simply put your thinking is correct. ANC borrow emissions are calibrated based on the deposit rate threshold. It’s a multiplicative increase / multiplicative decrease feedback control algorithm. It has a modulated lag that increases or decreases over a week period.

Should we not have expected a boost at this point in that case? It’s been weeks since the yield started to fall but the APR on the borrow incentives has remained steady. Is there a variable(s) that I’m not taking into account that means it’s not ready to increase to provide more incentives on the borrow side?

The boost is not based on the provided yield, but rather on the utilization ratio of the deposits, and that’s actually held pretty steady near the 40% mark, since two days ago it finally started to drop and incentives are starting to kick in.

This seems to be a flaw in the design of the incentives imo, it’s being used solely to control deposit utilization (as to avoid all deposits being borrowed and depositors unable to withdraw), but doesn’t consider the yield being provided by that utilization.

I think pausing deposits past a certain threshold would be very interesting. It would create a secondary market for aUST tokens, where they would trade at a premium to underlying. This has two desirable properties

  1. New people could indeed come into anchor if they are willing to pay a premium on the secondary market for the aUST for a lower implied interest rate after taking into account the premium they paid. (Maybe that loop pool isn’t so silly after all!).

  2. It doesn’t affect current deposits so there is no capital flight.

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$15m USD from reserve depleted in 1 month. 4 months of runway left. And no response from TFL. Am I supposed be paranoid?

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No need to be paranoid in the short-term. Longer term, Anchor has to attract more borrowers

There have been some Anchor AMA’s on Twitter talking about multichain integration with bAssets and a tweet by Matt Cantieri regarding his plan. I personally feel better about things but it has certainly been a dramatic ride!

As a user of the platform I am not worried, but I am closely watching to see if we get a yield reserve top up or a rate cut.

If the rate is cut I will likely be moving my funds out. You can get 20% in Convex or Yearn.

It’s just business at the end of the day and that’s how everyone should look at it.


Does Yearn guarantee 20%? To my knowledge Yearn yield rate is all based on market conditions and is not predictable.
There is no yield reserve such as on Anchor.

Not sure about Convex

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If Anchor yields drop then they become no longer fixed and based on market conditions?

Yields on Yearn Fantom Vaults (Dai or USDC) have been hovering around 20% for a while. Convex varies but there’s usually a 20% stable to rotate into (with some gas to deal with)

There are a number of other single sided (or dual stable LP’s) across multiple chains that are in the 20% ballpark.

Anchor’s unique proposition is the fixed 19.5%. Once we start dropping rates, I expect funds will start rotating out.

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yearn does the rotating for you. It pools liquidity to reduce fee impact. If there is a higher yield yearn available yearn will take advantage of it. I don’t think you need to look any further than yearn.
It’s probably our biggest competitor.

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Until the yield drops we probably haven’t got much of an idea on the impact in terms of withdrawals.

I suspect 1-2% will be tolerated, but expect widespread backlash against the Degenbox and people will want answers. There’s no question about it.

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I read this comment back when you posted it, and it’s been weighing on my mind for a while.

I don’t think this is a very realistic vision. The separation/unequal treatment you talk about that people come to crypto to escape is somewhat reasonable, but it’s not like crypto is some perfectly equitable environment that anchor has a moral duty to uphold.

Protocols need to protect themselves from exploitation. Protocols also have many facets to provide preferential treatment to some. After all, you likely wouldn’t call staking bonuses or voting with your ANC balance separation, though it definitely is, since only people who can afford to buy their voice can vote. So from that front, I don’t think ‘separation’ is anything new. Giving separate treatment different users with different intentions is simply how software, business, and crypto work.

Another thing, even if we think Anchor does have a moral duty to uphold the open and permissionless nature of the protocol in the name of fairness…what exactly is fair about the degenbox?

It’s on the Ethereum network, meaning even getting money in it is prohibitively expensive for small investors or ‘real people’ as you say. It would cost most people a significant percentage of their portfolio to even get into the box because of the ridiculous gas fees on the network. This prices out the people who would benefit from the stable yield the most, leaving only the already-rich to get even richer since they can afford to transact on the network. And that’s assuming you can even get in.

In reality, the MIM available to borrow sits at zero all the time, because it’s bots who are able to snipe any available MIM with their balance. This again tears apart the ‘open, equitable, fair’ vision you want to achieve, because what investor is going to feel like they lost their position in a fair manner because bots fought each other for 10 milliseconds to snipe MIM?

The blockchain has open, immutable, and honest data for anyone or any program to access. That is the fair and open vision that it promotes. Anchor protocol can see that data and so can the degenbox. But to say that Anchor is free and open to view that data (which says a billion dollars are being looped to exploit it), but should for some reason be disallowed to act on it, who’s the one that isn’t really free?

To summarize, the only people that can get into this Degenbox are the ones rich enough to transact on the Eth network, and those with the skills to create and use bots to snipe MIM fast enough. Not very fair nor equitable, and certainly does not ‘work for all’ as you say.

Speaking on that line, “Any solution that is worked on should be for everyone, or no one at all.”
The solution that works for everyone is getting rid of the degenbox. 19.5% yield does work for everyone. Anchor was seeing its yield reserve increase for a long time before we saw people leveraging into 110% APY.

A lot of people in here are saying ‘we need to make borrowing more attractive’, but how is that a solution?

We need to incentivize more borrowers for sure. That I am not arguing, as they are necessary for the protocol to function at all. What I am saying is that more borrowers is not a solution for the declining yield reserve due partially to the degenbox strategy.

What amount of borrowers do we need to make (and siphon 25% yield from), in order to sustain already-rich eth investors that get 110% APY? It’s not recognizing the real problem to say we need to increase borrowing and not touch the degenbox, because Anchor has set a rate of 19.5%, and any attempts to increase that rate for yourself through leverage is exploiting the protocol. If we want to support such a thing, what’s the point in even setting the rate at 19.5%? Why not save the degenbox some effort and just give them 110% APY to begin with? There is 0 sustainability potential at 110%, and to say we need to incentivize borrowers so we can steal their yield and provide it to rich eth investors at 5x the rate is just kicking the can down the road and giving more wealth to the people who need it the least.


I 100% agree with dm_ss. It’s all great to say we need to increase borrowing to solve this issue. Increasing borrowing should be a priority, however without addressing the MIM Degenbox strategy increasing borrowing just means increased yields for those able to patricipate in Abracadbra.

We increase borrowing, abracadbra increases UST within the protocol in a neverending cycle that we cannot win. The ability to stack leverage will always outweigh how quickly we can increase borrowers.


I wish there was a creative way to compound our borrowing power, without massive risk, to counteract the earn-side raiding…

It’s true that crypto is not perfect, but if we all look at that and say f… it then it sure won’t get there, the ethos of Anchor is to be an open and permitionless protocol for savings and borrowing, that 's what I read in the docs when I first started using Anchor and that will be the vision I’ll uphold until the community decides as a whole to shift that ethos, and then I’ll make my decision if I stay or leave.

Also it’s never been my goal to defend the Abracadabra degenbox, but rather fighting the discrimination of a single protocol, what they do isn’t exploitation but a simple automation, anyone can manually do, you just need some debt-backed stable to accept aUST for minting and a liquidity pool to swap that stable to UST. MIM is one such stable, there have been attempts to make DAI also take on aUST as backing. Heck, you can even do this today with Mirror, use aUST to mint mIAU, sell for UST and repeat… shall we ban Mirror users too?

It’s true that the degenbox exposed an issue in Anchor, but how quick this conversation turned into blacklisting and banning a protocol is worrying, it’s a slippery slope after that.

Also, on a side note, it’s true that Ethereum fees excludes many, hence why Abracadabra plans to also deploy the strat on Fantom, a far more acessible L1 in terms of fees.

Agreed with Paletas on this. You can not and should not deny access to anyone wanting to use the earn side of the protocol. Aside of the technical challenges that would come with such policy there is the question who would take ownership of the processes deciding over who should and should not be allowed. The arbitrary element is in strong contradiction with the very foundation of what crypto should be all about.

Imho, the problem lies with a the fix rate. It is a great marketing tool but it is absolutely not realistic to keep fix on the longer term. Madoff promised fix rates of 10% for many decades, till he didn’t. Rates are in the end subject to borrowing / collateral / deposits. You can fund the negative variance with token inflation for only so much time. Read the docs, it is all in there.

I am in favor of trying to keep the 19,5% for as long as possible, that means increasing the ANC distribution rewards to increase borrowing. At the same time get bSol, bAvax, bOne, bDot, etc… up and running asap.

But, I am convinced that at some stage Anchor will need to make the earn yield variable to make it sustainable.

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Hi all. I’ve done some quick calculations based on Anchor’s most recent (Jan 10 2022) numbers. Let me know what you think.

Total Deposits: 5,401,588,485 UST
APY of 20% (for simplicity’s sake): 1,080,317,697 UST
Therefore; the amount that must be paid back to depositors = 1,080,317,697 UST

Total Borrowed: 1,773,685,544 UST
APR of 14.98% (assume 14% for safety): 248,315,976.16
Therefore; total interest that Borrowers must pay back = 248,315,976.16 UST

Subtracting this from the amount owed to depositors 1,080,317,697 UST - 248,315,976.16 UST = 832,001,720.84 UST
Therefore, depositors are still owed 832,001,720.84 UST

Total Collateral 4,837,495,463 UST
Assuming a conservative yield from bAssets (5%) 241,874,773.15
Therefore; amount available to potentially use to pay back depositors: 241,874,773.15 UST

Using this to pay back the oustanding amount owed to depositors: 241,874,773.15 UST - 832,001,720.84 UST = - 590,126,947.69 UST

And with only 61,264,838 UST left in yield reserves, this seems concerning.


your calc is missing the pos collateral block rewards.