Call for ideas: how to encourage more borrowing?

Borrowing is the lifeblood of Anchor, and high levels of it make all stakeholders (UST depositors and ANC stakers) successful long-term. Right now, the protocol is more-or-less breaking even, but a bear market could decimate everyone’s yields. As such, it is critical for borrowing to be maximally encouraged.

Let’s share our best ideas for how to stimulate more borrowing below, and we’ll be discussing them in the upcoming community AMA.

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I’ll start with two of my ideas. Idea 1: Can we skip the bAsset swap step in the UI?

bAssets is what physically gets deposited, but if someone wants to borrow with their LUNA or ETH (soon SOL and ATOM) as collateral, there should be a way to deposit either asset directly, without extra steps on the user’s part. The user would provide their asset to a smart contract, which would 1) swap the asset for the bAsset and 2) provide the bAsset as collateral.

This really simplifies the user experience (of course there would need to be relevant disclaimers, info about slippage etc.)

Ideally, either would be possible natively. Borrowers shouldn’t need to first bridge to Terra, they should be able to connect their Metamask/Phantom/whatever wallet, deposit in one click and get UST that lives on their chain.

Not sure if this is better done by the core Anchor team - it seems like a great opportunity for an outside dev team, a’la Orion but for the borrower side, not depositor.

Idea 2: More marketing for borrowing opportunities

The current net ~12% yield on what you borrow with Eth as collateral beats Aave, Compound etc. by a mile. Why isn’t this being promoted all over crypto social networks?

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This is a great idea. Similar to how on Acala where you can skip the two-step process of having to get the lp token and then Bond it you can get the lp token and bond it in a dual transaction on one click. Essentially what they’ve done is run two contract codes and parallel and aggregated the network fees of both into one. Can anybody comment on how we might be able to achieve this ?

I think you’re right that this possibly has to do with the complexity of rebridging back to the eth network where a lot of people still want to trade. I equate this to basic marketing research that shows the more clicks you have to do the less likely you are to have a conversion. The same is also painfully true and the blockchain space. So your idea of integration with metamask and other wallets is a good thought. Perhaps even building the Terra bridge right into ANC app might be something to explore to get those numbers of clicks down. I know this increases the code complexity but we really need to facilitate borrowing more than just on the terror Network to make borrowing demand go up.

Another thing to focus on is the fact that most borrowing demand is being used to trade, which creates the bull bear drag on yield reserves. Are there other use cases we can think of other than just trading? Perhaps a possible integration with Alice that allows users to borrow and spend with the debit card, essentially creating a collateralized credit card. This would also work with other card based integrations like zengo when they finally build anchor into their app.

Looking forward to hearing other ideas.

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Right on. Anchor has the opportunity to become maybe the first (?) truly interoperable lending protocol with shared liquidity (rather than fragmented across chains like Aave, Sushi etc.)

Also:

terror Network

On this day a meme was born…

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What happened with the initial discussions back in August about introducing bANC as collateral? I recall Ryan’s post stating this was the easiest next step following bETH (unless bANC is ready to go now)? Liquidity isn’t an issue at all as I believe it has the deepest liquidity already and the framework for bAssets is set in place - this would stimulate more borrowing and help with the ANC value prop. Perfect combo

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Also, regarding the framework that’s in place for adding bAssets - following IBC upgrade next week the Cosmos ecosystem will experience a much deeper shift in liquidity and composability thanks to UST.

Therefore is there a reason not add bOSMO as well as bATOM as new collateral? 2nd most DAU’s and Osmosis Zone will be a driver for UST adoption - seems like a no brainer.

https://mapofzones.com/?testnet=false&period=24&tableOrderBy=totalIbcTxs&tableOrderSort=desc

The short answer is that this is not possible in the current form of the application. Please read the anchor docs and you will understand. Collateral must be staked at a validator so free luna can’t be used for this. bluna is staked at good validators. Neither can staked luna be used for this because you don’t have control over them.

The necessity for yield bearing and interest bearing tokens

Curve and yearn created a very complex method to achieve this by creating there tokens to be composible across multiple pools

In this example we take the Iron Bank (aka cream finance) which is part of yearn.

Examples

cyY3CRV

cyWETH

Curve ibEUR

The reason I bring these protocols up is for good reason - as of right now ethereum dominates the stablecoin markets specifically because no other chain has such yield bearing stablecoins.

An incentive to hold anchor - could be the option of instead of paying out anchor in borrowing they are locked into a vesting vault - which you could implement a yield bearing anchor token specifically only acquired by vesting anchor tokens to obtain and the exchange is the anchor rewards for this yield counterpart

Good shout, would be good to cover this in the AMA call.

bATOM I think is already planned, dunno about bOSMO

I understand very well, my point was that borrowers need to 1. trade Luna for bLuna, 2. provide bLuna into Anchor. 1 and 2 should be combined into a single smart contract call, with the swap happening automatically e.g. via Terraswap.

Same with ETH - users should be able to 1. trade ETH for stETH/bETH 2. bridge that to Terra 3. provide that into Anchor, all in one smart contract call via Metamask. Then they should be able to borrow UST that automatically gets bridged to the chain they started on.

The technicals stay the same, only the intermediate steps should be abstracted into one action. Same with repaying/withdrawing - just going the other way.

Agreed. To me, this seems like a simple no-brainer that covers both the “Drive ANC Value” and “Drive borrowing demand boxes”, unless there is something obvious we are missing, bANC should be there already since it is ANC lol.

bOSMO is also a great idea since it is quickly gaining TLV and market cap and most likely will be the default dex on cosmos. There are also generous rewards that many people might want to borrow against. It would be a great win-win for both platforms.

100% As mentioned, the more clicks the less likely people are to do things - pretty basic. it still would be two contracts. The question comes from a coding perspective: is this possible on tendermint to run two contract validation simultaneously on one click and charge a compounded gas fee from the user’s wallet and split that as it comes out to each validator. In theory, it is, as in Acala test net you get an LP token and stake in a farm all in 1 click - this is where we should be going.

To attract borrowers who enjoy the stability of staking yields and still want to be exposed to the price action of the underlying. We could have a vault where the deposited assets are borrowed against to buy yAssets on Prism and be safe from liquidations with a Nexus oracle type set up.

Unfortunately, this wouldn’t work as the key to ANC protocols earn rate is taking those staking returns as a form of payment for net positive borrow APR and earn yields.

That’s why you’d post them as collateral. Then use the borrowed money to buy yAssets.

Was it clear to anyone on whether bANC is even being considered anymore as a bAsset? I don’t think I heard a concise answer or even any info in regards to the development of bANC?

Ryan did say (vaguely) that they are working on bAssets that were reliant on Wormhole, which obviously must mean bSOL and bBNB (Matic still under development for Wormhole integration).