I think we can all agree that the key issue for Anchor over the coming months will be generating borrower demand commensurate with the massive deposit growth to date and escape-velocity outside interest in the wider Terra Protocol. This is an issue with all DeFi protocols and especially with Anchor because its depositor yield is so high, and will remain high even under the Polychain governance proposal.
However, within DeFi, virtually all borrowing to date (which is clearly insufficient relative to depositor growth) falls into one of a few categories:
- Large loans to leveraged crypto traders, easily marked to market to the second. This is a good business, but very risk management intensive and not really appropriate for a decentralized credit protocol, as Anchor aspires to be.
- Conservative loans to help whales indirectly monetize gains without triggering capital gains liability. This is a good business too, but it’s extremely cyclical, and to date hasn’t shown much capacity.
- Loans against various kinds of NFTs that have some sort of reference market value. This has no near term capacity on Terra and is way riskier than (1). Also not appropriate for decentralized lending.
I propose that we set up a separate, opt-in pool on Anchor to invest in real-world assets. Good examples of real-world assets today would be Centrifuge’s Tinlake dapp or Goldfinch pools; another example would be the Aave/Centrifuge Real World Asset Market (rwamarket.io). These protocols are designed to tokenize real-world loans to businesses and fund them with DeFi deposits, but they are in need of more deposits to grow.
The upsides are many:
- there’s virtually unlimited demand
- these assets have very low correlation with other DeFi assets
- these are great “real world” opportunities for the protocol to show off to the world how it’s changing ordinary lives
- these assets have real cash flows backing them
They have one big downside: because the loans are going to real-world businesses subject to real-world geographic regulations, the lender entity (whether it’s Anchor as a whole, or every individual depositor) must go through KYC. Typically, the depositor fills out 15 minutes of forms, and the third party KYC firm spends a few days verifying that the uploaded info (personal ID, address etc) are valid. It would be purely opt-in.
I know the Anchor/Terra community is probably the most averse to KYC of any DeFi community out there (Terra’s decentralized stablecoin nature was 100% why I showed up here in the first place). But we also need to find borrowers who can pay loans reliably, and at 10%+ yields before token incentives. I work with a crypto company that has considerable experience and resources in this area, but before I proceed with a detailed proposal, I want to poll the Anchor community if this is something the community would generally be interested in?
The community would set its own risk preferences in terms of all risk parameters (overcollateralization requirements, concentration limits, and so on). My company would set up the interface for Anchor at cost, and link Anchor deposits with DeFi borrowers. Anchorians who are willing to KYC, would be able to participate in a pool where they could lend their deposits to RWA borrowers, and borrow somewhat generously against an aRWA senior debt pool token, since this would represent a receipt of ownership of a low-risk, senior debt token (there would be a first loss, junior tranche, typically 20-25% of the pool, which would have much higher yields but also first-loss exposure).
How does this sound to the broader Anchor community?
