Dynamic Anchor Earn Rate

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

2 Likes

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.

4 Likes

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.

2 Likes

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.

5 Likes

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.

2 Likes

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.

2 Likes

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.

6 Likes

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.

3 Likes

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.

2 Likes

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.

1 Like

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

1 Like

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

1 Like

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!

2 Likes

Prefer to keep the stable APY as stated in Anchor’s original mission.

Why not copy a page from LFG? Have Anchor have yield reserves of other crypto currencies, meeting community agreed upon criteria/standards and voted upon by the community of how/when to purchase/sell and how much (clear and open algorithmic setup for the reserves preferred that can be tweaked by voting).

Start with an in-house BTC reserve, why is it outside LFG doing it? Anchor can start building up foreign crypto reserves too to become more self sufficient and decentralized. I think LFG had a good idea. Many thanks for that move.

Introduce reserves of native currency of every blockchain Terra connects with as well as has liquidity pools on same. Similar to banks having reserves of foreign currency.

Not my idea, stolen from another’s twitter post discussing LFG’s bitcoin reserves. I don’t wanna just make them public here without consent but suggested on their post to make a proposal, my above is a poor summary.

3 Likes

We know that earn rates need to come down - the key is to exactly when the bandage needs ripped off, and in what manner - gracefully, with reckless abandon, etc.

Abstractions/obfuscations on the borrow side may help in the short term, but the earn side is and always will be Anchor’s bread and butter.

Earn demand is a product of at least two things…the psychological attachment to ‘20% stable returns’ and, let’s not forget, where Anchor rates stand with respect to what else is in the market. Our growing ecosystem of apps also take this rate for granted as they market to new users.

With Crypto.com recently reducing stablecoin earn rates, let’s stay keen on how the music plays out in the greater market. If other platforms look to follow suit, that may be the time to make the move. The longer we can afford to wait, the greater the legitimacy gained.

Time will tell if tolerating degenbox strategies in the short-term in exchange for increased UST demand (legitimacy) was a worthwhile tradeoff, but once the box is opened, it is much more difficult to go back and seal the lid.

1 Like

@Kamil
l like anc , adjusting the rate with forecasting demand is predictable
i mean not accurate . i like the idea of moving variables
@bitn8 algorithmic rate that can move in a very stable and sustainable direction
is anchos etos i guess.
i a m triggered by maths. i need to take a coffee pause
thank you

We can all quibble about the mechanics, but it’s past time for Anchor to rationalize its deposit inflows with borrower demand. I think this is a sensible proposal.

I just don’t know why you’d want to wait so long to reset the peg. Anchor is burning $7M per day, and rising. Why take 6 months to rationalize a massive imbalance in rates? If it kicks out $3B in degen hot money, who cares… it was just pillaging the protocol anyway. Plus, doesn’t UST have a capital control system that effectively taxes them upon exit from Terra, to the extent that they pull money out?

11 Likes