Dynamic Anchor Earn Rate

Both types , agree with you.

dynamic rate and stable rate , in separate workflows , for obvious security reasons.

This proposal is dangerous and against the whole ethos of Anchor.

From Anchor’s whitepaper: “We believe that the provision of a stable interest rate to depositors is a necessary feature of a savings product with broad appeal. Anchor thus overcomes one of the key limitations of Compound and Maker as savings products: the highly cyclical nature of deposit interest rates. Beyond offering low-volatility yield, Anchor is an attempt to give the main street investor a single, reliable rate of return across all blockchains. The plethora of staking products, each with varying terms and yields, makes DeFi inaccessible and unappealing to average investors. By aggregating block rewards from all major PoS blockchains, Anchor aspires to set the blockchain economy’s benchmark interest rate.”

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@bitn8 thanks for outlining a more sustainable future for Anchor.

Tons of really good perspectives in the comments, I’d like to highlight a few.

This seems to best summarize sentiment shared by myself and many others.

Keeping users informed, and slowly transitioning to a more dynamic rate is the best attempt to do so. I am appreciative of your framing in the proposals - reminds the community that this is an early stage suggestion and welcomes participation.

Maturing Anchor is imperative. This seems like a reasonable goal:

Eliminating the need for intervention further legitimizes Anchor as a cross-chain protocol, and no longer a Terra sub-product.

Quick question - the % earn rate change, is that applied to the 20% base rate? Or will another number be created as the baseline?

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The entire premise of what you’re suggesting is not only unworkable given the permissionless and composable nature of DeFi…it literally goes against the ethos of crypto in general.

This is all besides the fact that this isn’t the subject of this proposal at all. Not only that, a proposal was already effectively voted down.

The idea that you think it is ok to create walled gardens and whitelists in decentralized finance is extremely troubling. Your focus should not be directed towards the small subset of users who choose to use leverage, it should be on expanding and growing the protocol through additional collaterals, expanded tokenomics or mechanisms as suggested in this proposal.

Many of us have a vested interest in something much further beyond a 20% APR - we want to see the success of the entire Luna and Terra ecosystem as reflected in the Luna token.

Perhaps you should start thinking bigger. In a world where UST is serving many more users on many different platforms, leveraged users will always be there, and they will always be a small part of the ecosystem.

Think Bigger dude.

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For the purpose of transparency, are you currently using leverage to extract more APY than 19.5% out of Anchor?

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For the purpose of transparency, could you please identify your race before I evaluate the merits of your civil rights position?

This says it all about the credentials you are bringing to this discussion.

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I would challenge you to refute any one of the points I laid out before you. Until you can effectively do that, your arguments will fall flat as personal in nature rather than rooted in the merits presented to you.

Because you’ve chosen to go Nancy Drew and Dora the Explorer on me, I will round out your answer because it clearly does not ‘say it all’.

For every dollar I have leveraged, I have another 5 which are not, also in Anchor. I’m willing to assume that additional risk for a portion of my stack. Additionally, as I said, I back the Luna token, the Terra ecosystem and other protocols on Luna.

So again, I challenge you to think bigger. It is very clear you’re thinking like a small, scared man.

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I agree with this concern:

This proposal is dangerous and against the whole ethos of Anchor.

While the proposal works on the margins to tweak the runway for the current flightpath, the real issue is the flightpath.

I would rather keep a stable, governance-determined yield and lower it a few pegs as originally planned, than to revert to what everyone else is doing with dynamic yield curves.

If there’s something to be fixed, it’s on the yield generation side of the page. Supply, not demand modification.

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Correct the deposit target rate is currently how this is being proposed.

  1. 1.5% less the targeted deposit rate, currently 19.4%

  2. It goes to a completely dynamic money market until the yield curve starts to build a balance again.

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Made an account just to agree with this.

Everyone soy-faced, agreeing that we need to lower literally the only thing that makes this project remotely interesting from the outside, “for the sake of the project”… No, for the sake of aUST getting let out of the jar for 0 reason.

When we’re all grubbing 8% APR on USDT again, remember this ridiculous proposal for a BAD IDEA and remember the soyjaks that actually thought it was a good idea.

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This proposal here is fine and needs to happen.

What doesn’t need to happen is the escape of aUST used as free collateral to continuously cycle UST back in Earn. It’s a guarantee of zero sustainability as we already saw last month.

The only people pumping this are the degenbox type cretins who think it’s perfectly acceptable to milk out 100% APY at everyone’s expense. No mention of the build up of systemic risk when their house of cards comes crashing down. They are even expecting to get insurance on it!

I guess this is the world we live in these days. Give someone an inch and they will take a mile.

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dynamic interest will change the anchor from counter-crypto market into the just another yield bank. According to impossible trinity, the yield reserve will still continue to dry out but anchor will die faster from the low yield (which will not solve the problem) to match with the market.

In bear market the collateral value will go down, staking reward (other collateral than luna) go down, borrow amount go down, the anchor revenue will surely go down. That will force anchor reward go down cascadingly. the formula will force it to take time to reduce the yield rate but it will take time to restore too. But at the time market crash both yield and reverse will continue to go down. We would lose a narrative of safe heaven and counter crypto volatility protocol. At worst, we could lose both reserve and tvl.

But yes, I agree that the yield will eventually has to come down to match with the market. But I hope that will happen at the time when ust is the main stablecoin, when this yield reduction would not quite matter there.

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Hey, a good first take at this - but 1.5% a month isn’t nearly enough to stop the YR drain. We’d suggest moving this to a much tighter window and a more significant percentage change. It’s gotta be dynamic and responsive more similar to past proposals we’ve seen.

Has any modelling been done on this topic? What interest rate, today would be currently sustainable? I’m wondering if we could drop to something like 17.5% now and flatten the YR loss or reverse it, and in a few months revisit the topic if market conditions change and the YR drops again.

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Good proposal. I do agree with it as a part of general improvement of anchor protocol (the borrow side will also need to be work on, etc).

One concern, as noswag say, it does change the ethos of what Anchor wanted to provide.

Myself, I did land into the luna ecosystem thanks to Anchor and it’s stable interest rate (during may crash). I think it’s what also appeal to other lunatic at the beginning (apart from the high interest rate). If it goes completely dynamic, Anchor will be like the other money market and will be less attractive.

I do understand however the need to go dynamic to adjust to market “crash” but I was wondering if it would be possible to cap this interest rate? To sort have a kind of semi-stable interest rate.

For example, let’s say that we define that Anchor will deliver a minimum of 14% interest rate and a maximum of 20% interest rate. The interest rate will then range dynamically between this 2 value as per the formula you proposed. If Anchor can deliver more than the 20%, then it will just add even more money to the yield reserve. If it can’t deliver at the minimum rate, then we use the yield reserve but it should happen only in severe bear market. If Anchor cannot provide the minimum interest rate for a certain period of time (perhaps has also to be defined), then it should be revised with a new government proposal.

So the minimum rate would have to be chosen carefully but I’m sure we can find something. I remember that Do say that even if the yield reserve was empty, Anchor could bring 10% at least because of the yield of the collateral. We can perhaps start from there with an average of the yield of the tokens that will be added to Anchor as collateral + perhaps a conservative number of an estimated minimal borrow ?

This way, I guess it could still re-assure newcomers about the stability of the interest they gonna have and have a rough estimation of what they could earn. We will bring even more lunatics with us!

No matter how you cut it the EARN APY has to come down. Dynamic EARN APY based on the health of the YR makes sense. Just make sure the mechanism is truly dynamic not something that only goes down.

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Previously, R&D , suggest the equilibrium in arb dynamic rate
http://www.personal.ceu.hu/staff/Peter_Kondor/research/kondorjof.pdf
My nexus protocol positions are aligned with anchor luna

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Considering the anchor as ust mining, 20% a year is not much. Anchor has locked nearly 8.4 billion ust, all of which are aimed at 20%. The lock-up rises, the price of luna rises, waiting for various dappa to land and share the lock-up of the anchor. It’s not too late to change the mode. Now change will ruin everything

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Great idea, but to make the protocol even more sustainable, wouldn’t it be appropriate to limit the loops? This would be a great first step!

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