Cross-chain Anchor

Cross-chain functionality issues on Anchor are restricting borrow demand from users because they cannot natively borrow on their chain of choice. Even if a user does bridge ETH or SOL over to terra, they are still restricted to terra with UST if they don’t wrap the UST to send it back to their chain of choice.

The launch and expansion of Wormhole means a new cross-chain Anchor can be built that addresses the issues which constrict borrow demand from other big market cap chains.

On the backend, Wormhole allows tokens and smart contracts messages to be sent cross-chain. Building a UI on top of this will give users access to Anchor on their chain of choice and allow them to natively bond collateral and borrow UST.

For example, an Ethereum user goes to: → connects metamask wallet - bond ETH → Natively borrows UST →UST use cases for other yield opportunities on Ethereum. This can be expanded to all EVM chains, allowing Anchor to be chain agnostic and making it easier for users to borrow and use UST natively. The UI design can mimic that of the native chain branding and ethos to appeal to the user base of those communities.

Building a cross-chain Anchor in this way can unlock collateral from popular large market cap protocols. Consider the following:

  • 15% of Terra Luna’s market cap is bonded as collateral on Anchor
  • LUNA’s market cap is significantly smaller than the combined market caps of ETH, SOL, AVAX, Polygon, DOT, ATOM, Fathom.
  • bETH is less than 9% of Anchor collateral despite having a market cap 14 times bigger than LUNA
  • Capturing just 1% of ETH, SOL, AVAX, Polygon, DOT, ATOM, Fathom could bring in nearly 6 billion USD of new collateral

Building a cross-chain anchor in this way can bring a wave of borrowing. This is a long-term solution as opposed to a short-term solution of lowering earn rates, which doesn’t address the borrowing issues. Yield curve issues would be buffered in this approach by massive amounts of new borrow demand that helps bring scalable borrowing sustainability to Anchor.

As a community, we can now come together and determine how this strategy works:

  1. What chains are we going to target first?
  2. What strategies will be deployed to incentivize users from other platforms like Aave and compound to use Anchor?
  3. Other thoughts on these topics?

(ex)-borrower here as of this morning, due to the Abracadabra stuff and nervousness about lack of increased borrowing, but certainly open to coming back.

There has to be a reason to put up collateral on Anchor. Just being able to do it doesn’t mean I should do it. If I can do better with my AVAX on Anchor than I can just staking it myself, then of course I’d go to Anchor.

The reason why I put up my Ethereum on Anchor is because my effective yield (by borrowing 35-40% LTV and putting the UST in Anchor Earn, which is the simplest strategy) is higher than merely staking my ETH on Lido (and doing nothing with the stETH). And the reason why I can achieve this higher yield on my ETH than I can by staking ETH myself is that LUNA’s staking rewards are much higher (and most of Anchor’s profits come from LUNA collateral). In essence, I as an Ethereum holder, am milking LUNA’s staking yields.

I personally wouldn’t put up AVAX as collateral in Anchor, because right now AVAX’s staking yield would be the highest amongst the current collateral options on Anchor. So I know that Anchor would never be able to pay me enough incentives so that the simplest strategy of borrow UST and deposit into Earn would be better than staking AVAX myself. But I don’t know what other people do with their borrowed UST, maybe I’m in a minority.

In conclusion, I believe that the best way to attract borrowers is to introduce chains whose native staking rewards are lower than LUNA’s. But it seems to me that from your perspective, you’d much rather have collateral that has high staking rewards so that you can afford the borrower incentives.

@bitn8 - this is something I have yet to think about before but now is painstakingly obvious.

The benefit of Anchor across chains is gargantuan.

Ethereum is a no-brainer - I would love to see Polygon, Solana, Avalanche, FTM, and NEAR as others.

Would Anchor Earn be able to be scaled across networks? This seems like a product that is most differentiated from other DeFi protocols and attracts the most usage. It is incredibly simple and powerful.

I agree with this push here:

UI design is important branding and sometimes the “voice” of native chains - SOL is techy, FTM spooky, DOT fun and colorful, etc.

This seems to be a massive build by the Anchor team - is there an estimated delivery date of the products? And are certain chains of limits due to a knowledge barrier with coding languages?

Something to keep in mind is that ideally this would be paired with another protocol that gives them something to actually invest that UST they borrow into. So for example, on the ETH chain the UI making it really clear that they can invest that UST into mAssets.

Otherwise you could have large eth whales borrowing UST, then swapping it into other non-terra assets which puts downward pressure on UST price. Maybe this isn’t a problem for Anchor protocol itself to solve, but something for the broader community to keep in mind.

We need to prioritize what chains we do first. But ETH should be done end of Jan, depending on audits and UI help. We can start coming together to target where we go next.

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They will be on another chain borrowing wrapped UST so won’t be able to tap into Mirror directly. They will want to borrow to use on their native chain, and that’s absolutely fine.

This multichain borrow proposal will be a game changer for Anchor and should be implemented on ETH ASAP. Start there and let’s think about the others later.

The main thing we want to avoid is that the borrowed UST doesn’t find itself being funneled back into EARN via the degen box… A topic others are already discussing.

So there actually is Mirror on ETH. It’s how I found out about Terra initially. I think this Anchor proposal is amazing, and was just thinking that eventually we also want to have more and more applications that use UST on the other chains so that borrowers don’t just dump the UST that they borrow, but put it into a ‘sink’.

On the back of this proposal and from Matt’s earlier Twitter post, my suggestion is the Anchor team should put forward a case to Terraform Labs to increase the yield reserve.

The case should include the analysis of the current yield reserve and projections of current / future expectations based on the plans for cross chain borrowing and on chain bAssets.

A yield reserve increase would increase confidence that the teams are committed to serving up reliable, fixed yields (where viable) while providing the team some time to build out and promote cross chain borrowing.

It is worth noting the post May crash yield reserve increase was done when Anchor Earn was less than 10% of the size it is now.

The alternative is we drop yields now and see what happens. Has there been any impact analysis of dropping the yield, specifically how much UST is going to exit at what yield level?

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If I can get low single digit % borrow APRs with Compound, why would I bother using Anchor that has similar APRs and requires me to take on several kinds of extra risks:

  • hope ANC maintains its value
  • UST peg
  • wormhole risks (far from being proven/battletested)
    Even if I’m fearless (in other words irrational), I still need to keep dumping ANC to sustain my position. Lastly, the stablecoin I get right now is a lot less useful.

Anchor borrow needs something extra marketing wise, right now it’s strictly inferior to a ton of native protocols.

Only thing coming to my mind rn is offering 0% interest loans. Assuming edge cases around utilization/liquidations are worked out and UX stuff like dumping ANC is automated, this can become a compelling value proposition.

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@bitn8 We are building a cross-chain perpetual swap that leverages Anchor to generate interest on user’s collateral. Our product would definitely help Anchor go cross-chain, as it will expand the use cases of Anchor.

We are thinking which chain our DEX will launch first though. I see Anchor will launch on Ethereum on February. But which chain will Anchor launch after Ethereum? We would really love to collaborate with Anchor on our shared quest to go cross chain.

My Telegram is @zhew2013

Looking forward to chatting with you!

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This is great! so glad to hear what you are working on.

We are going to be moving towards AVAX next!

With sAVAX and cross chain anchor on avalanche launching soon, is it time to vote for more audits to be done on the borrow v2 model as well as cross-chain anchor?

@bitn8 would new audits be necessary?

@Kamil you damned right my man
we have millions ton funds to secure cross chain so no need to hurry
safety first, batch by batch brigde by brigde
security fix by security fix

Yes, new audits are in store and they are already paid for from the last poll 12. We targeting to have the code4rena audit after the cross-chain contracts are done so those can be audited in that audit as well.