Dynamic Anchor Earn Rate

I’m not a coder but as far as i know one can code the token to be non transferable and only be able to interact with a specific contract. At least I know it works on ERC-20 tokens. But still that’s one way to solve it!

Yeah, I kind of have mixed feelings about that because in DeFi everything can be tokenized. Even locked up tokens can be tokenized, but the fact that they are illiquid does have the advantage of being able to acquire a bondlike behaviour on a secondary market so that’s a plus.

I think a lock up period defeats the purpose of making it non transferable and actually makes it a disadvantage as people will not be able to trade their tokens on a secondary market.

Now my second thought is that if it can’t be transfered, it can’t be deposited in other smart contracts. And if one wants a “wrapped” version it can only be done by a centralized entity which holds the private keys to said wallet. If that is the case it could be rugged and wouldn’t get much attention from the public.
Now if somebody where to be able to use a smart contract to deposit and withdraw. Me next question is: Is there any way that the token could be prohibited from interacting with other smart contracts?

Agree.

What about making it non-transferable and not allow it to interact with

6 Likes

Step 1: Once we move to 10% APY deposit rate, UST outflows will increase. Luna will be minted to maintain UST peg. Luna price drops, and total deposit & borrowing on Anchor drops.

Step 2: Less borrowing fees for Anchor + Less Luna staked = Less protocol fees.

Step 3: Yield reserve depletes even faster. Now we have to move to 5% APY deposit rate.

Step 4: Vicious cycle repeats.

In truth, there is no substantial usage for UST except for depositing on Anchor to get 20% APY (ie. Terra = Anchor). Once we take that away, everything falls apart. Mirror is a joke since the mAssets do not even track the real-life asset prices closely. All other alts are just pump and dumps.

4 Likes

Nobody is proposing a move to 10% apart from the current composable aUST version which is being used ‘by some’ to excessively drain yield.

This is the type of thing (below) that is the target of the aUST / a2UST amendment.

3 Likes

Anchor protocol’s yield reserves will continue to be consumed if the protocol itself is not competitive. In the current situation, this is more of a suggestion to simply “lower interest.”

This is far from a fundamental solution.

However, I agree that it is better to buy time than to spend the yield reserve without any plans.

1 Like

That may be true. But if so then we have a much bigger problem on our hands and whole of anchor is a huge ticking time bomb, as a rate reduction is inevitable.

Could I have your input on a suggestion I made a while back? Suggestion: ANC, aUST and getting depositors involved

It won’t have all the properties of your idea but it does share similarities…

@ryanology045 @bitn8

As mentioned. I am trying to hold the line here for ongoing initiatives and merging the best interest of the community. Your proposal is another well thought and research idea that holds a lot of merits. There is now more than 5 of these floating around - I’m losing count lol - with different ways of addressing the earn side issue, all with similar targeted outcomes but different means of getting there. .

I am trying to tie this all together by saying the best approach is to merge this idea with the ve-tokenomics that are coming and be a bit patient for that and the dynamic earn rate to take affect.

Then we can explore getting all these different ideas on the same page. I think the one that makes the most sense is the one @josedelphi lined out base on talks from AMAs and other research - [Proposal] veANC: Evolving Anchor Tokenomics - #50 by josedelphi

7 Likes

I think its 150bp since 30bp change per month is really low

3 Likes

We may want to look at this from the perspective of the cost of UST adoption as well. How much is Terra/LFG willing to pay (Anchor YR) to continue the growth curve in UST adoption?

1 Like

Good point. Has anyone consulted TFL / LFG regarding the dynamic rate change?

Reading the rhetoric on Twitter it seems to point to them looking to maintain 19.5% APY for approximately 2 years. Given that there’s a clear incentive (yield reserve top up = more UST = LUNA price rise).

If the dynamic rate change is to be implemented then it’s going to need a comprehensive communication plan.

It makes more sense to chip away at the low hanging fruit to help alleviate the pressure on the reserve.

2 Likes

The community / TFL has litigated the issue here in the forum for months. I think we are really at a point where it is obvious that the subsidy is here to help UST grow - this is fine so as long as Luna price keeps up and the YR is topped off. If that’s the model, that’s the model. Over the longer term, the dynamic YR can be implemented to slowly bring Anchor back to reality once UST is circulating in other use cases…hopefully not levered aUST pools etc. HA!

We should aim to fix what we can (yield reserve drain) without impacting organic UST growth. Some examples :-

Lowering APY = Less UST adoption (ideally last resort).
Requiring ANC tokens = Less UST adoption

Improving borrowing (V2/more collateral) = Positive impact
Generating productive yield (via Earn deposits) = Positive impact
aUST/a2UST collateral = Positive impact.

6 Likes

@narco78 I dont believe requiring to buy ANC tokens to get 20% yield will slow down adoption.

First because even if 5% ratio ANC to UST deposited is required it will be the equivalent to lose 1% on the 20%. Nothing else beat 18% auto compounding so I would personally still choose Anchor. And then the ANC will also appreciates like others crypto. Since Anchor protocol is successful, ANC token will also be and the appreciation on your ANC could even be greater than the 20% on your UST.

Secondly Stronger ANC will also increase rewards for borrower and also helps with borrowing.

Thirdly, that ANC could generate staking incomes the same way like other assets like bLuna, bEth does.

Even if 0.1% ANC to UST deposited was required, it will not affect much the yield of 20% received and provides all the advantages named above.

I understand there is technical limitation but that would be nice if the anchor development team could offers possible choice and then have the community vote for what they prefer.

4 Likes

I have yet to see any evidence that artificially driving up the ANC price (via forced holding requirements) will have much impact on borrowing.

Requiring users to buy, hold, stake or do anything with a volatile token is a net negative to UST adoption. No question about it.

The only people who benefit from forced ANC requirements are those who get in early and at low price. We are not Nexo or Celisus (a for profit business) so it makes no sense for a entity to benefit from such a proposal.

If the ANC token needs a boost in price, a flat % withdrawal fee for ANC buy backs is a far more fair and simple way to achieve that goal. The protocol can then own those tokens rather than the user and can be use to support borrowing needs after emissions end.

4 Likes

If borrowers received a fix amount of ANC, is it not more interesting for them if those ANC are worth more?

I agree the withdrawal fee is a good idea to generate an additional incomes in the protocol and fight the fast reduction of the yield reserve. Sure adding borrowing asset will help but as it stand, the grow of the earn is faster than the borrowing and having a mechanism that generate a source of income in the same proportion is needed to slow down the discrepancy between ratio earn and borrow.

Again, even if they were to add a flat % withdrawal fee and a 0.1% anc to ust ratio the protocol will still yield around 20% and adoption will still be really fast.

I’m sure Anchor users priority is to have a well balanced system that continue to provides strong yield for a long time even if it is to slow down the speed of adoption, which again will be very fast as the offers of Anchor is unmatched.

1 Like

If the depositor buys $ANC at a % rate of UST, the price of $ANC will not matter.

e.g ANC worth $10 for every $1000 (Assuming 1%)

In addition, it would be better to design a mechanism that allows depositors to automatically purchase ANC when depositing UST rather than purchasing ANC directly in the secondary market.

I don’t think mass adoption will collapse because 20% of interest has been reduced to 19%.

Anchor protocol deposit interest is overwhelmingly higher than competitors.

I think this is a way for $ANC to grow with Anchor protocol.

Currently, Anchor protocol success and $ANC are completely independent and seem completely unrelated.

2 Likes

What happens when they withdraw, do they get 1% back in their wallet?

I’ve got no axe to grind with people being forced to buy/hold/lock ANC tokens, I just do not see any conclusive evidence it will provide any benefits. Some questions to consider :-

  1. What is the expected price of the ANC token if this is implemented?
  2. How much additional borrowing is expected?
  3. What is the optimal amount of borrowing subsidy?
  4. Who benefits from driving up the ANC token price?

We need to see some numbers before we sign off on something that adds multiple layers of complexity to a perfect deposit system.

It seems the people who would benefit the most out of such a proposal are the ones who get ahead of such a rollout in terms of ANC price appreciation.

I understand your concerns.

But why is the yield reserve of the current anchor protocol being exhausted? The deposit amount and borrowing amount of UST do not grow proportionally.

People just came into the anchor protocol for get 20% interest rate, and Anchor protocol is literally throwing money at people who don’t contribute anything.
(Even banks want to lock customers’ deposits for more than a year for a 3-4% interest rate.)
Look at how much interest Aave, the world’s largest landing platform, now offers. Twenty percent is an absolutely ridiculous figure.
I’m pretty surprised that people don’t want to contribute anything to earn 20% interest other than UST deposits.

This means that $ANC and Anchor protocol are now completely independent.

And I know this is kind of marketing. I know that huge companies start their business this way. But this never lasts forever. We need to create a business model. This is why there is no company in the world that pays 20% interest simply by deposit.

In order for the protocol itself to be competitive, it must benefit not only the depositor but also the borrower. Currently, bAsset interest is negative, and borrowers are completely dependent on $ANC compensation. If the price of $ANC rises, this will attract more borrowers and save some of the huge costs of Yield Reserve.

Anchor protocol is currently the world’s largest stable coin-holding platform, but it only affects $LUNA.

Sadly, only selling $ANC now is the best option for $ANC holders.

Before considering the expected price of the token, you can make at least $ANC meaningful, and as Anchor protocol grows, it grows together.

I just hope that holding the ANC or creating the ANC-UST LP will in part contribute to the long-term growth of this platform and be rewarded for that contribution.

2 Likes

It’s not that people wouldn’t want to contribute, it just doesn’t make any difference.

Depositors are always going to outweigh borrowers by orders of magnitude no matter how much we try and subsidize it.

The 20% Anchor yield is artificially subsidized in all aspects, from the yield reserve to the staked collateral primarily provided by TFL. This is exactly the outcome they wanted.

We have to come to terms that TFL/LFG are on a heavy adoption drive and not get concerned about it. Eventually yields will come down with a soft landing.

Forcing ANC tokens on depositors is just putting a barrier on adoption with no tangible benefits to show for it.

3 Likes

There is a difference between that the depositor is more important and only the depositor is important.

Ignoring the borrower’s gains just because the depositor is more important destroys the competitiveness of the platform itself.

The depositor’s earnings are now overwhelmingly efficient. Assuming that UST Peg is maintained, you earn 20% just by breathing. They will not lose anything.

Of course, what I’m talking about is just an idea. I keep trying to understand you, but anchor protocol…
I don’t agree with the argument that yieldd reserves cover huge costs, burn Luna, spray money, and continue to reduce interest rates if money is not enough.

It is likely to choose to sell because there is no benefit in holding the $ANC token after the borrower and LP compensation are terminated, which will adversely affect liquidity deterioration and the borrower’s profits.

If only 1% of the depositor’s interest rate can be distributed to other parts, I believe there is definitely an idea that can lead to more than 1% cost and sustainability.

And I don’t think it will have a big impact on depositors now that they are paying overwhelming interest rates to the extent that there are no competitors.

1 Like