Anchor longevity potential "solution"

I see what you’re saying regarding risk and certainly nobody would want any exposure to excessive risk or USDT. In terms of OUSD they have performed equally as well as Anchor considering real rates have dropped to around 9% and are currently heavily subsided.

The main point is we can’t keep stockpiling billions of dollars of idle UST especially in a bear market and expect borrowing to take up the slack. It simply not possible nor sustainable.

Even if a basic, safe yield diversification strategy adds another 3-6% back into the protocol, I think it’s definitely worth investigating and infinitely better than zero.

You’re not wrong and it does make sense, but it may turn some depositors off. I am thinking that with continued growth we may want to bifurcate Anchor, so there’s a higher APY pool that has external yield amplification on (but is exposed to more risks, doesn’t have all UST “sitting and ready for instant withdrawal”), and a ‘regular’ APY pool that’s more stable - in that billions of dollars of idle UST are actually sitting and readily available, which for many is probably a part of the reason they are with Anchor in the first place: the liquidity and security of being able to withdraw and access their funds at any time, knowing that it’s there.

Posted this in but it’s better here.

Larix actually stopped their token bleed with no buy backs by changing the mechanism borrowers receive their rewards. They had the same setup as Anchor originally however they changed it to this:

If we do it like larix they got a split of 10x for borrower’s staking their rewards (180 day lockup in LP). Plus an additional 100% APR for LP rewards. Borrowers receive the additional 100% LP reward APR as well since they own the LP. I have no idea how long it would take. Not entirely sure how they did it themselves. I would imagine it wouldnt be the same numbers we’d have to work it out.

Also I would add that Larix asks the borrower to put up the USDC half of the LP from their pockets, Larix will then donate the remaining 9X rewards to you, combine that with the rewards your staking, then deposit that and the USDC into the LP and lock it for 180 days.

If you choose not to lock up you do not receive the quoted Borrow APR listed for borrowing (distribution APR in Anchor’s case). You will instead receive 1/10th of the quoted rewards amount. This basically incentivised people to lock up their distribution into LP’s instead of selling off which in turn pushes back the sell pressure without having to actually offer any more rewards. Infact, even less is needed because they will get the kickback from the LP rewards as well.

Naturally this comes with impermanent loss risk however holding the tokens comes with holding risk, I bet if we look at how long people hold their tokens we would see the mode around 2-4 weeks. What larix does in this case is offer a lower lockup period with a lower return of 5x for 90 days. This would mean you would be receiving less distribution than the quoted amount however you will get your LP released earlier. I’m sure anchor can do 30 days, 60 days, 90 days instead of 90 days, 180 days and the effect on sell pressure would be the same since borrowers will continuously lock up their new rewards thus delaying that sell pressure as well.

Once the sell pressure from rewards is lessened people feel happier holding their tokens, staking in liquidity pools means you wouldnt feel the price impact of the token as badly which is why I think larix implemented a 90 day and 180 day runways as opposed to 30,60,90.

Aditionally I want to add on Apricot they have the option to lend and borrow their own governance token. Francium and other protocols provide auxilaries for such options. This can help drive order flow for people looking to gain passive return from their Anchor and people looking to hedge their Anchor risk, improving the overal health of the ANC market.

If we can do this AND anchor buybacks we will literally go to the moon. Instead of people selling Anchor of UST they will put up their own UST in the LP equal to the value of the anchor at the time they are staking the rewards so the pool will continuously increase in liquidity equal the the rate that borrowers receive their ANC rewards. This vastly reduces sell pressure and improves overall market health. If we have this options market for Anchor as well (maybe binance can list anchor for borrowing?) Then people will hedge their risk driving more liquidity towards the token. Its basically a black hole or sink for lending tokens or rewards tokens. Naturally this is more Shiba Inu like however it’s a good compromise. Those who don’t want to stake can receive less rewards, anchor wouldnt have to do the same 10x stake = borrow APR but they can do like 2x stake = Borrow APR and instead of 180 or 90 days do 30 days. The effect would still be the same.

That is something totally different. Many - most - don’t have a clue how LPs work and want nothing to do with such high risk, or simply complicated and not understood, things. Anchor is a simple “deposit it and forget it” savings account. If it’s any more complicated than a bank savings account, a lot of deposits will be lost. KISS. Keep it simple stupid. Always keep that in mind.

Even adding term deposits makes it more complicated. But I can see Anchor having a few products down the line, such as

  • regular savings (variable yield, no yield reserve) and term deposits (stable yield locked for the duration of the deposit, guaranteed and backed by the yield reserve), OR
  • a regular yield product where the full UST deposited balance is always available - i.e. low risk, and a “turbo-charged” yield product where a portion of the UST deposited is used for actively managed yield strategies similar to how OUSD does it, and thus a lot more cross-chain, counterparty/smart-contract, other stablecoin, etc. risks are assumed (add the actively managed yield APY on top of the guaranteed one for this product).

I’m talking about borrowing not the deposits. Even your borrowing rewards are far more complicated than just selling your anchor as soon as you get it and your getting 0% interest rate. Token price volatility is far too high to be garunteed any borrowing APR regardless of your sell cycles. Staking into an LP actually means out that risk and provides a better average borrow rewards APR.

Upon implementation its the same as a simple staking contract. I don’t see why this is so complicated.

Your about to claim rewards, there is a button that says stake 30 days for 2x rewards, you press the button, you deposit a bit of UST and your rewards are locked for 30 days but your garunteed 2x the Anchor. This is really nothing that complicated.

If anything it is automating what we WANT borrowers to do anyways with their anchor, we want borrowers to receive thier rewards, deposit into a lp by putting up UST. That was the whole idea originally.

How does this help? Well it actually reduces ANC sell pressure and increases the effectiveness of ANC buybacks. This will draw in more borrowers. It will also enable use to provide a much higher distribution rate for borrowers than what is possible now by locking up the distribution and extending it over a longer time frame.

Another option is having LPs on Astroport such as UST-USDC and UST-DAI and UST-BUSD etc and using idle Anchor UST to generate yield through transaction fees.

People can bridge UST to Terra using Terra Bridge. Why not collect the conversion fees by allowing users to directly bridge in / out their DAI/USDC/BUSD?

This might be a win-win all round for and make it easier to attract capital into the Terra ecosystem. Of course we would need wrapped versions of these stables on chain. I am not sure why this hasn’t been done already.

I am sure there are other safe yield generating initiatives that can be put together.


I agree it’s time to start looking into loaning out idle deposits. But let’s see where the v2 borrow and cross-chain Anchor does first.

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