Spitballing here … Does Luna or TFL have any community governance mechanisms? If so, there could be a proposal to not utilize TFL funds to support degenbox-style projects …
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…and to ban TFL from minting UST for such abusive and/or illegal (leveraged, money laundering, etc.) projects.
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Without proper governance, no. How I proposed it, anyone could report potential abuse (it’s all public record on the blockchain anyway), but there would be a community elected compliance/governance body that vets and validates the abuse, following clear written (community agreed) guidelines.
The Terra stablecoin stability fee (which was recently removed in a short-sighted move) from Anchor deposits and withdrawals could easily pay for this professional compliance/governance body, which should be comprised of respected individuals (not associated with TFL or Terra in any way) beyond reproach.
And as for how is this different from a bank? More transparent. 1000s of folds more cost and operationally effective. Yet keeping Anchor clean and out of trouble with the law, ensuring that it has a long-term future. While - and this big bonus is not to be underestimated - having a material way to fund the yield reserve, if a portion (not all, perhaps just the gains since date of original deposit) of abusers funds are redirected to the yield reserve. IMO the best way to address abusers would be that they earn 0% yield, that’s it. Their yield goes to the yield reserve fund.
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How do you determine what is illegal? Out of the ~180 countries in the world, which countries laws have jurisdiction? When do the lawyers come in, and how much do they cost?
And how do you determine what is abusive, without more lawyers, or trusting some little committee?
I would much prefer a solution that either (a) can be coded into a smart contract, or (b) can be specified simply and clearly in a governance proposal, or (c) can become an unambiguous policy of the TFL.
In the end, people will always be able to use collateralized borrowing in the Terra ecosystem to implement Degenbox style strategies. BUT, if TFL can be persuaded to not aid and abet operations such as Abracadabra, then the actual volume of degen looped borrowing would be much, much lower, because most people don’t have the knowledge/ability/interest to do it on their own without the automation that Degenbox provides.
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This proposal is absurd and downright stupid, we’re trying to police an open permissionless protocol and the MIM degenbox is not doing anything but using the product we’re offering. So no, we can’t all agree that enough is enough… this is, I hope, driven by blind fear and naivety, because if not this is pure malice and willing to set a precedent. Fork anchor and go police that, we’ll be fine…
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You don’t even get how DeFi works and what DeFi is about. It’s absurd to even bother explaining to you why what you propose is a horrible idea and why it would never work.
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That’s what I said in my post. “That external source was TFL.”
Anyone could write a contract that is using a new address for each transaction. If you start this fight you will lose because its easier to counter any measure that involves humans or blacklists with a computer program that creates a new wallet and moves money around every few seconds. How often do you want those reporters to report and anyone to vote on this? This proposal if voted yes would harm anchor more then the Degen box. If you would confiscate money from just one single wallet you will lose everyone. You don’t even need to do it…you just need to write it into the contract and you lose everyone that can read code at least and i’m sure one of them would tell those that can’t read code about it on twitter.
I’m not a fan of the degen box. They are like a fisherman that fishes to much fish and after that is surprised when no fish is left. But any solution technical protection would be temporary. It would even motivate others to prove that you can’t prevent something like this. We need to concentrate to protect and incentives more borrowing. Higher LTV is one way !
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I’d argue that this proposal being done on the wrong protocol. As others have pointed out, there are limited ways to specifically stop this since Anchor is permissionless (as it should, and is intended to be). The MIM degenbox is a product of Abracadabra Money, and therefore a governance vote/proposal to disable it as such should be done on Abracadabra not Anchor.
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Please elaborate on how it’s been a “complete disaster”
It is practically impossible for Anchor itself to regulate Abracadabra’s product. Seems like a lot of people on this thread would prefer a protocol where depositors are vetted and whitelisted, before lending out UST. But that defeats the whole purpose of DeFi. In fact, there is nothing preventing people who don’t like the permissionless aspect to just copy Anchor and make a version where you can only borrow with a whitelisted/KYC address on Terra. If that is the version people prefer, go ahead and do it. Very hard to regulate people’s use of leverage and other tactics in an open capital market.
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Additionally, there is nothing stopping someone from copying Abracadabra by creating a real life CeFi institution to accept aUST as collateral. Say a company like Nexo is set up to accept aUST as collateral for USDC. Nothing stopping someone from doing the loop like that off-chain.
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I know there is a lot of emotion about MIM/Abra/Degenbox boiling over now (weeks of FUD over declining yield reserve and now 0xSifu), so I’m sorry if this is a dumb question.
Isn’t part of the reason for the meteoric rise of LUNA because of massive increase in demand for UST? And isn’t much (or at least part) of that demand driven by Degenbox?
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That comes down to the currency denomination, be it fiat backed or by peg.
If TFL had the foresight to make a SDR-pegged (SDT) savings product in Anchor, it’d be harder for any one country to claim jurisdiction over it, as it’s not any one country fiat denominated. And the World Bank has no jurisdiction, AFAIK, to regulate what SDR is used for. But for UST denominated actions, the US laws would apply. For EUT denominated actions (when and if Anchor adds EUT), EU laws would apply. For KRT, Korean laws. And so on…
There’s decades (if not a 100+ years) of legal precedents that the country in whose currency the transactions are in laws apply. That doesn’t stop others from stepping in, of course… but primarily, it’s based on the fiat it’s denominated in.
That being said, I agree with you 100% that by far the best approach here is
Whenever possible (a), which should be backed by (b) - though in my view it should be by a Terms of Use and Acceptable Use Policy of Anchor (just like there is - must be - for any Internet service). Just not sure about (c), as if TFL is legally the provider of Anchor, they may need to seek a banking license sooner or later. I think TFL is likely to do with Anchor what it did with Mirror, which is to cut all ties to it and wash its hands clean when the regulators or government lawyers come knocking.
Yes. It’s been claimed by others - in my view plausibly - that it was so because it was in TFL founders’ interests to pump the LUNA price due to some new investors or what not coming on. Or even if not that, just to pump the value of their own personal holdings. But, that’s just what I read online. I can’t say if it’s true or not, but that’s what’s being said (and well yes, now I am repeating it…but you asked a question, and that’s the answer).
The big picture view here is that there is far too much control in hands of a few individuals not accountable to anyone but themselves, with no (required) transparency or regulation. While it might be called DeFi, the level of centralization, both in control (or de facto control, the one God-like figure that so many blindly worship), and in deposits (abracadabra) is worrying. Certainly not what anyone who just took the word DeFi for what it’s supposed to mean would expect…
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That’s just the nature of capitalism…Some people hold significantly more power over others via their accumulation of capital. Same thing with bitcoin price manipulation by whales. Some billionaire could accumulate 4B of UST and dump it on spot market…That’s hardly centralization, just the power of their capital.
I hate to say it but the behavior of Sesta and Do Kwon are starting to make me see wisdom in the idea of more regulation.
Cults run by reckless meglomaniacs aren’t better than the old system.
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If it’s honest accumulation of capital, that is one thing. But how much did Kwon pay for his LUNA? How much did TFL pay? Nilch. Nothing. Zero. It was printed out of thin air and given by themselves to themselves. And more keeps being handed out of various reserves. That is not accumulating. That is printing. Capital that one gives to themselves by printing it/creating it is not the same as capital that one has accumulated by their hard earned money. Heck, even the government has to borrow money from the central bank and ostensibly repay it back.
I am not saying that there is something wrong with this. That’s how it is, for a business owner who creates a business from scratch. But, this is the blockchain and supposedly decentralized, not a one-man-owned business. At the very least, those whose capital is printed and comes from reserves, without any actual money being paid to a counterparty to purchase it, need to be held to a higher standard. That’s the ideals of crypto, DeFi, and the big difference between a blockchain network and a closed privately-owned business. Otherwise, manipulation and scams will be the death of crypto. (Speaking in general, nothing I have against Terra. In fact, I used to think that Terra has some of the most potential of any crypto. That view has changed over the last two months, seeing and knowing the real source of the short-term pump (and dump? too early to say…), but still I hold out hope that Terra can - may be, just may be - reach its true potential and not be taken down by its unsavory “friends” and associates.)
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To my knowledge, Bitcoin is the only crypto that was created without setting aside funds for founders, investors, employees, strategic war chest, etc.
Every other crypto more closely resembles a tech startup, where founders and early investors risk their time and money for huge potential payoffs.
You’re right. And nothing wrong with that.
What is wrong is that too many are either pretending, or have outright fooled themselves into believing, that newer crypto chains such as Terra are decentralized. Yes, they use the blockchain. And that does get decentralized pretty quickly (usually…at least to some degree), but development, marketing, partnerships, and all such things are usually very centralized. Which again is a necessity, at least in the early stages. Well managed crypto chains will, over years, graduate to greater and greater levels of community governance, community-backed development, and thus greater and greater decentralization. It’s just outright funny to see how some bestow the virtues of decentralization on Terra, where other than running on a Cosmos IBC based blockchain, it is not decentralized. Not really. Not yet at least. (With good leadership in a few years, may be…) I would argue that Terra is more centralized than the average, as like a few other well known crypto it has a single figure that some lunatics view as the equivalent of God.