Dynamic Anchor Earn Rate

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.

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@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.

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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.

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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.

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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.

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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.

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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.

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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.

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The more I think about it the more I like this going forward combined with some solid value capture to ANC to incentivise borrowing on the other end. I think the dynamic rate, combined with a toned down version of the veAnc model and the terralytics proposal could work very well together.
Can’t wait to see where anchor goes next regardless!

@narco78 Forcing ANC tokens on depositors is just putting a barrier on adoption with no tangible benefits to show for it.

The ANC tokens on depositors must be used by the protocol the same way that other asset like bLuna, bEth are used, which is to generate staking incomes for the ANChor protocol. The protocol needs more asset and this is a way to make sure there is always one asset that grows at the same speed as the deposit. The adoption is already lightning fast, so fast that even the new yield reserve that was supposed to last 1 year is now expected to run out by August. Sure Terra said they will replenish it to keep it going for 2 years but the community has to come together with a solution that will make that Anchor protocol sustainable. Even if it was to slow down a bit the adoption of UST, it will be a good thing for Anchor and allows to have more time to implement a solution.

We have to come to it with all we got, more asset borrowing, small withdrawal fee, very small %anc to ust deposited.

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That’s the definition of deposits. You make a deposit in currency and get the compounded yield with it. It’s unheard of (outside of fringe crypto cases) to mix something other than your deposit currency along to get the yield.

That’s the beauty of Anchor, it’s simple and easy to use.

Remove that and try to remake it into something convoluted (to the average depositor) like an LP and you lose the majority of deposits and use cases.

KISS (Keep It Simple Stupid). So far that’s been the case with Anchor and that is why it is so successful.

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1-1 Use of automation mechanisms. Simply deposit UST automatically proceeds.

1-2 It can be solved by paying the fee when withdrawing money.

There is no process of being added or converted. Everything is done when the user deposits or withdraws UST.
so it does not interfere with mass adoption.

Reference
1-1 : [Proposal] Terralytics - Increase Borrow Demand via ANC Value Capture from Deposit Growth
1-2 : [IDEA] Increase Anchor Protocol transaction fees to support $ANC profit sharing - #22 by dojakron

It’s not a complete proposal, but it’s simple and interesting, and it doesn’t seriously violate interest rates, it’s an idea that can make $ANC a meaningful token.

2. And as many people seem to forget, the additional 450M yield reserves are not only to guarantee interest, but also to change the tokenomics of $ANC to be competitive.

reference: Capitalising Anchor’s Reserve with $450m - Governance - Terra Research Forum

In conclusion, it is very funny that there seems to be no correlation between the UST deposit and the price of $ANC. Even using only 1% interest can help secure liquidity due to rising prices of $ANC and increase borrowers due to increased borrowing compensation, laying the foundation for the platform to grow. Most of UST depositor want to earn 20% interest that is distributed free of charge rather than the growth of the platform.

Burn LUNA, refill UST, sprinkle UST, lower interest when money runs out… stop this meaningless vicious cycle.

Borrowers, and those who stake out $ANC to participate in governance or provide liquidity, should of course be rewarded. For now, they are more valuable than the overflowing UST depositors.

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already vote started.

I like the methodological approach, but it’s not as ‘clean’ as a static rate set by governance. It will require some advanced dashboard visualizations to make the effects and operations of this mechanism transparent and understandable by the public.

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Our friends from Prop 18 should best be alerted to this second round to make profit!

Have noticed Maker has changed their voting lock in to 21 days and if such a proposal hits anchor it’s game over for their strat. Better do it quickly before you can’t anymore boys!

Agreed, would like to see simulation results with the chosen dyn_rate_threshold & dyn_rate_maxchange given in that pull request and the proposal forum example formulas.

Ok, so the poll is up. What’s the timeline for the rollout?

I think we need to be very careful not to slam this change through without a comprehensive communication and rollout plan (if it is voted in).

Have we conducted a risk assessment in the inevitable event yields start to decline?

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I agree, I think we need to incorporate the ANC token into the system more to create more buy side demand for the borrowers that are selling. And this would help to solve the underlying fundamental issue of the Earn being higher than the Earn.

not a big fan of this, more borrowers will solve the problem…

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