Update:: delta param removed due to coding complexity and added a maximum and minimum gov param for the rate, meaning a floor and ceiling in which the rate can’t move past.
As xAnchor cross-chain efforts move the protocol towards sustainability with increased potential for ramped-up borrowing demand, it’s time for the community to consider setting a semi-dynamic earn rate that reflects the success of these new efforts. The key point to consider here is staying true to Anchor’s mission to create the highest stable earn interest rate in de-fi.
One possibility for creating a semi-dynamic rate while honoring the key points above would be to tie the earn rate to a measurement of change in the yield reserve over a period of time. If the yield reserve is growing, the earn rate could increase; if the yield reserve is falling, the rate could decrease.
For example, we can create new governance parameters for the period of time for which to measure the delta change of the yield reserve.
Assigning the above, if we define a 1 month period in which to measure the change of yield reserve, we can get the following formula that runs every month:
(% Earn Rate Change) = ( (Yield Reserve % Change) )
Further, to ensure maximum stability in the earn rate, we could limit the amount the earn rate can increase or decrease per period to 1.5%. From this we can get the following formula:
(% Earn Rate Change) = min( abs(1.5%, ((YR % Change) ) )
So for example, if the yield reserve increased by 5% in the period of one month:
X = min( abs(1.5%, (5% - 3%))) = min(1.5%, 2%) = 1.5%
The earn rate would increase by 1.5%, conversely, if it dropped by 5% the earn rate would drop by 1.5%.
Setting parameters such as these would create an algorithmic rate that can move in a very stable and sustainable direction. As Anchor protocol matures, it’s important that the mechanisms which guide the sustainability mature alongside it.
Looking forward to hearing back from the community on this protocol suggestion.