Borrowers, lets chat

So as stakeholders of Anchor and as the most desired product of every lending protocol out there I wanted to get an understanding of how other borrowers are using Anchor, what other lending protocols are their favorites and why, and what would encourage you to borrow more?

I’ll start. I found Anchor sometime around November last year, I use it for line’s of credit since 0-5% interest on cash is cheaper than what the bank will offer and stablecoin spread is low enough for me that fiat on-off is effectively free. My accountant has also confirmed that in my juristiction borrowing from Anchor then ramping to fiat is a tax free event so it eliminates the need for me to sell my crypto allowing me to allocate more capital to collaterals like luna/eth/atom/avax/btc , not that I ever liquidate or plan on doing so.

I do do a little yield farming on the side on other protocols with the borrowed UST however most of it get’s ramped into fiat for business.

I’m a big solunavax believer, I have tried tons of defi money markets out there with hundred more to try. Some of my other favorites are Larix and Apricrot on Solana since fees are cheap on that network and I can pull LP Mortgages where price and yield are more stable to help me project profit and mitigate risk versus holding collaterals. Negative interest rates from other protocols are not that appealing as what’s 1 or 2% compared to price action anyways. For me as long as the net borrowing rate is low or 0 I am happy with the loan as It’s being productive elsewhere. I think there is a bit too much gamification going on trying to incentivize native token value capture and borrowing, etc that are just not really working well, opening borrowers to incredibly complex positions. For me having the borrowing being simple, cheap is what I look for in lending markets. I try to stay away from yield chasing like “oh if i get 10% more here I’ll move my capital” or whatever since most of it is nonsense imo.

I would say between Anchor and other protocols my split is roughly 60/40 at this time and I’m slowly trickling more towards the Anchor side as I see work done on the git, discord, and forums, to make me feel confident in taking on the risk. Mars protocol has recently taken my eye however as the rate on UST is like 2% and doenst require rewards to support. My only concern is that people will catch on and arb Mars interest into Anchor for 20% like what happened on Edge.

I’ve looked into prism as risk free leverage however it’s just too complex of an instrument for my purposes.

I can see in the upcoming months / years more businesses and small businesses getting onboard with owning crypto equities and leveraging them for business line of credit operations. This is opposed to stock but looking at crypto tokens as bonded value of which I think puts Anchor right on the money.

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So I’ve been using Anchor since May/June last year, when the distribution APR was still over 200% (some of y’all will remember haha). The reason I got into anchor was because I was looking for a way to borrow money, so I can buy more cryptos (very noble of me ik ik haha). As I’m still quite young and didn’t have much other assets, borrowing from a traditional bank was almost impossible for me. So I looked into things like AAVE, but for a DeFi-Noob AAVE was way too complex and the ethereum gas fees were also quite unsustainable for me at that time. So that’s how I found out about anchor and I really enjoyed using it since then.

Since the beginning I was only on the borrower site of the equation. 20% on dollars might be a good yield if you have a couple million lying around, but if you’re just starting to build up your portfolio 20% seem rather insignificant compared to price appreciation in crypto assets. At the beginning I mostly used my borrowings to either leverage my LUNA or to buy NFT’s that I otherwise wouldn’t have had the liquidity to buy. With that I made a couple good bets and a lot of bad ones haha, you guys know how NFTs are.

Then in winter the liquidation cascade hit me pretty badly. But as you learn from mistakes I now play both sides most of the time with liquidations on kujira. Also as I don’t want to get caught up in a liquidation cascade again, I’ve been diversifying my collateral aggressively down from 100% LUNA collateral to just about 60% during the last 3 months. With that I hope to have a more stable collateral portfolio for the long term, with my goal being to bring the LUNA collateral down to 30% with the other 70% equally distributed in all other collateral assets.

For me personally I really don’t care about the negative NET APR as I’ll probably be able to live of the distribution APR somewhere during the next year. I know the distribution APR ends somewhere in the next 3 Years, but that still gives me about 2 years where I can fully live of the passive income of my debt (which I find super satisfying lol). After that I’m gonna close my position on Anchor, redistribute my liquidity to some other protocols while also opening a new smaller position on anchor, that’s gonna be more sustainable long term. This is of course not a strategy for everyone, but as I’m still quite young, I like to take some high risk strategies that might pay of more than stable yields (good ol’ game theory, if you have to take risks, take them as early as possible). Right now I also use Mars Protocol and Edge Protocol to enhance my anchor yields. On Edge Protocol I actually have a quite nice strategy where I have LunaX and ANC as collateral borrowing UST. My ANC is always growing bc of distribution APR and LunaX is always growing anyways.

Improvements that would really help me personally on the Anchor borrow side would be a way to partially repay my debt at 1% premium. That way I could use bull phase to repay some debt at good prices. As I can’t really do that right now, I’m instead just pushing all my borrowing in Kujira at that times instead. Which is okey as well, but it won’t bring me to pay back my loan anytime soon. I’d rather get liquidated lol. More Collateral types like LunaX would be cool as well, but this is happening quite fast anyways.

On a sidenote, I’m quite bamboozled about the way bATOM was implemented. Bridging an asset two times should bring quite the security issues with it. And the complexity of getting ATOM to Anchor is just insane. I always liked Anchor for the easy user interface, but with bATOM this has failed imo. I mean I managed to get it over, but don’t expect any anchor or defi noobs in general to understand how this works. Even the thread from pStake on twitter didn’t show how to get the atom on metamask lol. I really don’t understand why the IBC-Protocol wasn’t used, but hey I’m not a coder, just a degen defi investor, so what do I know.

So this is my personal take on Anchor borrow side, hope this gives some insights into how some smaller players use the borrow side.

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quick questions I am hoping you can shed some light on for me in regards to borrowing on Anchor. I used the bLuna as collateral to borrow UST. The “net apr” is -4.15 currently. 1) since we earn 19.5% on the UST, isn’t there an aprx. 15% arbitrage to be realized there? and 2) I am unclear as to why my “borrowed value” continues to rise? $200 in just hours? I can’t find an explanation for this anywhere online and am hoping you understand how that works or why that would be happening? When I look at my transactions, 2600UST where borrow, but now a week later the payback amount is 3600UST

The Net APR is calculated between the borrow APR and the distribution APR. The borrow APR is what is continuously being added onto your borrow amount and the distribution APR is the ANC that you earn. However if you use you’re distribution APR wisely you can get more than just the 6% advocated by Anchor. For example doing LP on Astroport or leveraged LP on Mars Protocol.

As to the arbitrage opportunity I’m not quite sure, correct me if I’m wrong! But I believe the Distribution APR shouldn’t be counted in, as it is just newly “printed” ANC that doesn’t cost the protocol anything. The thing to look at should be the Borrow APR at 11% + the yield that the collateral is bearing the protocol at about 5-8%, I believe. Considering this, there is indeed an arbitrage opportunity, but only at a range of 1-4%. But that should also be the reason, why we have way more Liquidity on the earn side than on the borrower side.

Regarding you’re increasing borrow amount, this indeed looks very weird, as it shouldn’t rise that high in such a short amount of time. If you are okay with sharing your wallet address, I can look at your transaction history, to see if there’s something wrong.

Gentle reminder: Never share your Seed Phrase or click on external links that look suspicious. There have been a few phishing attempts on this forum lately.