Authorize use of emergency community funds if reserves run out

General
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  1. UST deposits - Attaching a withdrawal fee here would be quite detrimental to Anchor’s key advantage of instant & free withdrawals

I agree that a blanket fee on withdrawals of UST deposits will have a deleterious impact on depositor demand.

Do you really think Anchor’s key advantage is instant & free withdrawals? In my view, the protocol’s only “advantage” is the ability to use yield-bearing collateral from borrowers to pay higher interest on deposits than competitors. This is really a first-mover advantage as others will follow this scheme. So, we need to turn first-mover advantage into a scale advantage. For scale, we need borrowers, hence this discussion.

Please reconsider @bitn8 's proposal to attach withdrawal fees on UST deposits in certain circumstances, such as a withdrawal within x days of deposit.

What about a yield curve?

Another option is to move the interest rate into a yield curve that pays different rates for different deposit lengths. For example:

  1. For the first 12 months, you get the Threshold rate
  2. In months 12-24, you get Threshold + y%, and
  3. After x months, you get the full Target rate.

We could give depositors the option to “lock-up” their UST deposits for the required time to earn the full interest up-front.

Benefit: This scheme rewards depositors for being sticky capital without charging them explicit fees and reduces our negative net interest margin.

Cost: A yield curve and depositor lock-ups could create a mismatch in the duration of liabilities (long-term) and assets (short-term).

Thoughts on a yield curve and ways to mitigate the duration risk? Given Anchor’s ambitions, I imagine you all had envisioned a yield curve at some point–would love to hear how you are thinking about implementing it.

  1. ANC-UST LPs - This is actually handled by Terraswap contracts, which are outside of Anchor’s control and would require a contract change on their end … Perhaps with Terraswap upgrading to include an admin (exchange pair owner) fee, a portion of ANC-UST exchange fees could be used to supplement the yield reserve. But again, this would require actions from Terraswap.

Okay, so it sounds like getting any liquidity pool fees to Anchor will take a Terra community vote. I think this is one of our best options (no impact to customer experience, this rev stream would spike when we need it the most, limited engineering needed to implement? etc.).

@bitn8, do you want to post something in Agora about LP fee sharing with Anchor? Is there a mutually beneficial relationship with Mirror worth exploring too? Given Anchor’s importance in driving long-term UST demand, I think the interests are aligned well to make Anchor successful.

  1. bAsset collateral deposits/withdrawals - While the most doable option (compared to the above two), fees to here could have negative effects on borrowing demand

I agree that fees on bAsset collateral are an untenable option, as they exacerbate the very problem we are trying to solve (real borrower demand to match depositor demand).

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