This will be likely controversial. I put the word solution in quote marks, as while I think it is indeed a potential solution (and something that regardless has to be done, in one form or another), not everyone may agree. But, I think it’s a discussion well worth having.
Easy solution to the Anchor reserve depletion problem, and maintaining the 19.5% APY for longer than just the next few weeks:
- Adopt Terms of Service (ToS) for Anchor Protocol. (Community vote.)
- ToS clearly lays out prohibited uses, which is gaming, leveraging aUST to deposit more UST (no matter how it’s done and circumvented), and any schemes which are intended to provide an effective APY higher than the current APY.
- ToS clearly lays out that any parties suspected of prohibited use will have their funds frozen and not available for withdrawal, for a period of no longer than __ days. When and if prohibited use is confirmed, the funds deposited will be confiscated [in full / in part - __%, with the rest available for withdrawal (slashing of sorts)].
- The ToS breakers’ confiscated funds will always go to the APY reserve fund.
- A small portion (0._%) will go to the individual or entity who reported the abuse, to encourage a sort of “neighborhood watch” by the community. Conversely, if a report is found to be unsubstantiated, then the reporter will not get their “report abuse” deposit back (to report abuse, have to deposit ___UST).
- Probably have to be establish some sort of community-voted, or even better fully independent professional (paid), oversight board/panel, to review the abuse reports. (This is the Internet, nothing good lasts without moderation. That’s the reality, as much as it may be tempting to deny it.)
This would solve both the reserve APY issue, at least for the short term, and the existential threat (IMO) of abracadabra/degenbox, and any other such future schemes. The risks from those are two-fold: (a) eating the honest depositors’ lunch (APY), and (b) reputational. With such activity implicitly allowed as it is not expressly prohibited, Anchor can never gain widespread acceptance or be regarded as safe by the public. The way for Anchor (and by association Terra) to grow exponentially is for it to become another vehicle where savers, pensioners (and those saving for retirement, or anything else) put at least a part of their funds for a (relatively) safe (though not insured) APY, and ultimately even institutional - where pension funds, endowments, governments and other mega-whales may park a part of their funds, for a much higher return than Treasuries, bonds and other “safe” assets, and sure rated at a lower grade, but higher than stocks (and obviously crypto). If Anchor can capture the mid-risk market in-between treasuries, bonds, and other ultra-safe assets (low risk) and equities and crypto (high risk), that is the golden ticket. But, that can never happen if parasitic abusers like abracadbra are allowed on Anchor. For Anchor to be taken seriously, and for its depositors to be better protected, there have to be some basic conditions of use. Nothing fancy, just basics disallowing obvious and damaging abuse.
For long-term stability, reputation, and to be able to grow (10x…100x), and to hopefully soon add other stables like EUT, AUT, KRT, JPT, etc., where there is a sizable hungry market for higher yield, this is a practically a requisite. A basic ToS disallowing clear abuse (and other things like outright theft, as just because there is a bug and one can steal, doesn’t mean that it’s acceptable to do so) and giving a way to recoup losses (on and off-chain) in case of abuse/theft is an important foundation, that will instantly give Anchor more credibility. A basic ToS combined with friction-less USD (ACH) on/off ramp (third-party), for both deposits and borrowing, with built-in included protocol and depeg insurance (so naturally a lower APY than the “direct” one), could make Anchor soar. And isn’t real-world adoption and use the goal?
That’s my thinking on this. Would love to hear what are the community’s thoughts on this.
P.S. I know that for some the first instinct will be that “this is the blockchain, anything goes” and that “if it can be done, then anyone can do it.” That’s an unrealistically utopian view, and it also expects the impossible from code alone. Taking such a naive view ends up sacrificing the many - the real users - for the benefit of the few parasitic abusers, and ultimately dooming Anchor as a whole. Of course, if it can be addressed in code, it should be addressed in code.