Call for ideas: how to increase the value of ANC?

Well, I tend to think this can be done without complications to the borrower. For those that just want a simple yield, it stays simple and they just stake UST. For those that want more yield that is where it gets complicated and tend to agree that from a coding perspective it creates complexities costs to build and test that might not have the cost-benefit intended to drive ANC up. Something we probably have to discuss more. But agree this isn’t at the top of my list either.

It would be great to see if this is viable but tend to agree it would take a lot of manpower in terms of talks and convincing. This is why we need community ANC rewards for those that take the time or have the connections to make something like this happen.

I agree on this, it does belong in the lending thread. But since this is where

I’ll share this: My biggest focus is striving to find ways that borrow will be used for non-trading means because this helps buffer the bull/bear borrow demand cycle. I think it would be great, as mentioned above to talk with Alice and other cards to integrate a paid to spend credit card - what consumer would say no to that?

Again a lending idea, but I agree with this. Too bad Terra Fortuna never made it out f the space camp as a winner.

Yes I think this needs to be talked about more. It seems the focus has been more B2B but maybe is now shifting back. Your points are very valid and setting a strategy and although, not needing to stick it 100% is good to have as we consider what can be built. Either way, tokenmoics come first, business strategy next in my mind. What one of these strategies, or mix of these strategies, drives the most value for ANC?

While more of drive lending topic. I think this should be addressed. It also has to be seen through the lens of B2B or B2C again. Nexus has built an amazing app that handles all this because ANC doesn’t have it. Do we build it? or do we farm people out to Nexus and require them to bond some ANC to get these great rewards?

Liquid Gov staking: voting is so low because tokens are locked when voting and terra doesn’t have liquid staking. There is an opportunity cost we are making gov stakers lose when they vote, i.e. what I will call the voting tax ratio (farming yield minus/ staking yield). This is typically is about over 10 in ANC. Think of it this way, us election voting is low but imagine if voters had to give up 10x their daily earnings to do it, well that would be the disaster we see in defi voting of less than 3 percent turnouts. Therefore, we really need liquid staking or gov is not going to get better which adds value to holding the token. There is a possibility to use prism to do this. Maybe forking prism code to build a native liquidANC from gov staking that can then be used in a separate liquidANC-UST pool to get the same rewards. I am not sure the limitations of how this would work but it would be great for some coders to chime in here. Acala has done this over on DOT for reference.

If you put BTC collateral, you need to pay obviously higher interest rate. So maybe this flow: if I deposit UST into Anchor, then this money is available to be borrowed. Currently only PoS is developed and the borrowing cost represents yield stake of collateral and interest rate for the borrowed assets. So in essence we have final cost. ANd that cost can be easly charged to BTC collateral. Of course you would need to split the UI…but that is the logic of different plane tickets. You are still using the same plane (borrowed UST is same whether your collateral is X or Y). So think of borrowing as analogy with plane tickets.

Heh, yea. I set out to write one type of post and ended up with a somewhat different one. To put it in context of this particular thread, I am trying to identify specific factors intrinsic to ANC from which it derives value, of which lending tokenomics is just one. I’ve got other ideas, but I want to carefully read the ideas shared by some of the others to see where there is overlap or divergence.

Of particular interest to me currently is the idea that the Earn product is (or should be) risk free. While perhaps altruistic, there are no truly risk free investments – especially since risk is always relative and occasionally subjective. As much as is possible, I would like to define a clear set of risks to stakeholders in the anchor protocol ecosystem. If we know the risks we should be able to also define the opportunities.

The matter of “value” really does distill down to a matter of pure tokenomics. "You park your UST in Earn because you don’t have a use for it, but the ANC protocol does. As an Earner, you effectively lend those UST to the protocol. The protocol puts those UST to work in the following ways: X, Y, and Z. This activity comes with the following risks: X, Y, and Z. The protocol will manage these risks in the following ways: X, Y, and Z. In the aggregate, over some period of time, the protocol should generate a reliable yield paid out to you in the form of additional UST.

Post prop-44, since there will be a tremendous boost in swap fees (and as Do states a potential 5x increase in LUNA staking returns), won’t this free up the protocol and allow a solid increase to the ANC purchase factor to potentially a 20-30% level ?

Hmm if I understand correctly this is a one time Luna → UST swap. So it will be a significant one time boost to the yield reserve and a buy impulse for ANC, based on the staker fees earned for that single transaction. However, this is not going to be a recurring thing that sustainably grows protocol profitability.

As staking yields rise for bLUNA though (potentially 4-5x), will this not generate much more revenue that will in turn top up reserves at a more efficient rate allowing a much higher % used to buyback ANC?

Yes, but it’s a single transaction. A one time jolt rather than long-term sustainable buying pressure. After it’s done, the same systemic challenges remain, it’s only postponing them by a little.

However because of the large amount being burned to mint UST in prop 44, the significant boost to swap fees post prop 45 will in fact have a much larger affect on bLUNA yield for up to 3 years (or am I way off)? Either way I am interested to hear the team discuss this as I believe that these changes and more bAssets may open the opportunity to jack up the buyback to +10%.

Ah I see, I wasn’t aware that the TIP45 change is also in there and that this will be more of a long term thing. Fair enough!

The recent Bitfinex listing is definetly a step in the right direction. The name of the game is exposure and awareness, and the easiest way to market a protocol has always been by making the underlying token readily available across the market (as a bulk of the market is still CEX heavy).

If tokenomics would be an issue, then MIR would not have been listed across the market in months 5-6 post-launch (plus some of the most highly inflationary tokens are listed across every tier1-2 exchanges). If the protocol can’t sell itself at this point in regards to ANC listings, then I’d assume we have an issue.

It’s the first cross-chain PoS savings bank with nothing else on the market that competes, this should be an easy sell. Obviously a native listing would be optimal for an easy transition to the webapp and governance, etc., but any exposure is good for awareness and future participation.

Building upon this idea from @clorophilla:

One topic which can be discussed is to implement certain tiers for borrower interest depending on the amount of ANC they have staked (e.g. <1000 ANC staked represents -30% from standard borrow interest). This way they would be incentivized to keep ANC and restrain from selling borrower rewards.

I wonder if a more elegant way would be to require borrowers to hold a minimum % of bANC as their loan collateral? E.g. 5% or 10%. This adds massive productive demand to ANC, without requiring the user to hold what can be perceived as additional dead weight.

ANC might fluctuate in value during the loan so perhaps there can be a requirement that the right level of bANC only needs to be there when the loan is taken.

@bitn8 you also had some ideas here, what do you think?

I think we probably have to be careful here as the lending side drives the protocol revenue. It’s a great idea in theory but it complicates the borrowing process that I think still needs to be further simplified.

That said, maybe it could be worked in as an added layer for those that are already active users gov stakers and doesn’t change the standard advertised rate and acts as a coupon discount for those that chose to activate it? This would use a decent amount of resources to build and we would have to weigh the cost-benefit of that. Just guessing, but it’s probably somewhat higher up the latter than other low-hanging fruit.

I think another idea that would maybe have a similar impact would be incentivizing the b-ANC loan rates at a slightly higher reward than other b-assets so that borrowers and protocols like Nexus would have more incentive to bond the rewards than sell them. Obviously, ANC will still be sold at some point, but the more ways to give it a return the fewer people will sell it and therefore drive the price with a virtuous cycle.

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So I think the first step is to reduce the sell pressure from borrowers, then the liquidity can be cut down (making buy backs more effective at increasing price) and the emissions for LPers can be cut down as well. Another thing people should consider is you wont have community governance without whales doing all the heavy lifting.

So one idea is to have ANC lockups in which your borrow can get a boost on the ANC distributed, this incentivizes the people who really matter to the protocol : borrowers and governance. LPers are WAY over compensated here and there doesn’t need to be this much liquidity if we get rid of the constant sell pressure from borrowers.

For example you can get a ‘boost’ on your borrow emissions by locking ANC up with either a 21 day unlock timer or fixed time intervals. What this could look like is: lock up 1000 ANC, get a 0.05% boost to you ANC borrow distribution on $1000 borrowed. (these numbers can be more carefully balanced, just throwing them out there).

So with current 25% borrow, 25% distribution borrowers net 0% loans. By locking up their ANC they get positive APYs again (however these gains cannot be realized, and they dont need to be as Luna is going up in price and the market is bullish).

2 advantages is borrowers are ACTIVE participants in the system, they are the people who will participate in governance much more than hodlers. You also greatly reward them for this activity and for holding the price up (which is what you want) instead of giving it to pool2 and people taking ‘self repaying loans’.

tldr make the power users paper rich and youll get better governance participation and community as well as less sell pressure

lmk what you guys think.

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ALSO:

  • Put ANC into Osmosis/Sifchain/Emeris and give good incentives…so at least one part of ANC is short term locked

  • Make bANC as high priority

  • Use part of yield reserve for ANC support? For instance if Yield reserve is rising, than increase % that goes into buyout of ANC.

  • ANC listing on different CEXs

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Agree with those except for the yield reserve usage. We need it to grow as much as possible

I agree on the key concept here and it seems the majority of the community keeps coming back to the general idea of varying ideas for “better rates on borrow/lend by locking up ANC”.

I think we need to keep this conversation going, understanding the key here is to still keep borrowing and lending as simple as possible because it drives the revenue. To summarize a few key points that are similar:

  1. Make protocols who use ANC have to stake a certain amount of ANC
  2. Yield Curve Money market that users with staked % of ANC get the highest rewards
  3. Better borrow rates for staking ANC

I agree that on the surface this is basic economic incentives 101. However, we have to be mindful of a few things here:

  1. The build complexity and cost vs other ANC value driver builds
  2. The UI simplicity for users
  3. The UI simplicity for B2B

I think if we went down this road, it would probably be best to focus on the earn side rewards for ANC staking and protocols using ANC for yield.

Also, how do we keep Anchor simple still if we implement a somewhat complex tiered rate structure requiring staked ANC to get maximum returns?

I agree and I also think we should look into making b-ANC have higher borrowing rewards to further incentivize bonding it. If b-ANC paid a slightly higher borrow rate than other bassets, it would be less likely ANC is sold for paying down the loan, etc.

Agreed. I have been talking about this as well. And also asked on Agora why ANC wasn’t included in the OSMO reward incentives proposal. I have also been looking at Sifchain and perhaps if anyone is connected there they can start some talks?

Also agree we need to look at this. However, first, we need to get a yield curve money market structure in place to lower draw on reserves as well as more b-assets to increase borrowing demand. Also the above points of lowering returns for those that don’t stake ANC.

Then I think we look at modeling out what 15-30% buybacks look like. 10% is just too low and users are incentivized to take advantage of higher rewards at the expense of governance and token holder value - mercenary style tokenomics.

I also agree we can get creative and have a dynamic buyback rate based on a 90 weighted average of yield reserve percent change. For example, if it hits certain weighted average percent increase thresholds over time it can raise x amount so that it dynamically adjusts based on market and borrowing conditions. I’m sure with some gigamath brains we can work out something simple that works. But I don’t like static things in hyper-dynamic space.

Also, if staking rewards increased over 10% we could look at creating self-paying loans for users that stake or already have staked an equal amount or greater of ANC into governance whereby staking rewards pay down the loan. It would have slight selling pressure from selling ANC staking rewards to UST but overall would encourage holding greater value of ANC in gov. which the demand of would far surpass the small selling pressure.

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So let’s translate all these ideas into tasks and give them priority. And then push it toward governance vote? Or will this be Matthew Cantieri job?

We need to be concrete. Community can help. But let’s sync first.

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