Dynamic Anchor Earn Rate

The YR by default is a measure of protocol profit or loss. If the YR is going down, it is losing money, if it goes up it making money. This mechanism reflects that.

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Why is nothing being done about recursive leverage, specifically Abracadabra Degenbox and similar that are draining the system using aUST as free collateral?

This was raised 5 months ago and here we are with a protocol losing money and rates about to slide…


I think this is still being explored. A lot of unified support is forming around using veANC on the earn side as laid out already in the forum. Also, a withdrawal fee, has also been laid out. These both seem feasible in conjunction with this dynamic rate. And addresses all points you keep bringing up with minimal complexity.


@bitn8 when can see the sAVAX asset on anchor?

Nope, as until today the money inside YR was put externally plus, reducing by 1.5% with current deposit increase will led to an empty YR. Deposits are increasingly more than a 1.5% reduction can do anything. The formula needs to be on “how much money entering from borrows” - “how much money losing from deposits” + “incentive from YR and how much it has inside”. The formula would be good but if the YR today receives 500M UST, the formula will say “ehi money increased, +1.5% for everyone” and then 2 months will be required to get a reduction on the APY, thus giving a more bleeding for the protocol and bringing faster to non stability. I don’t know why it is difficult to see that

this is an interesting test case; probably worth mentioning in the pr/github

Glad to see the support behind this proposal. Looks like it will pass.

Guys, I wouldnt be too concerned about your 20% apy, there isnt going to be capital flight, people keep bragging about higher yield stables but I don’t see them anywhere lol and I use and know just about every money market in defi.

UST is the highest yield bearing token out there, anywhere that offers more than 12% apy is currently using some UST strategy so you wont find any capital flight and you can just wait and watch as proof.


As I see it, people seem to step over the “how much money entering from borrows” part, and the fact that growing it will stabilize the protocol. Like any other business - cashflow is king, capital and profit are just sprinkles on top.

I don’t agree and I will vote no, this is going to destroy the simplest feature of the protocol which is to offer stable yield!
We gotta find other ways instead of reducing the yield!

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Maybe not capital flight but yield reduction will happen, and this is bad!

I agree why not remove the degenbox that is draining the reserves instead of reducing the yield?
This is the best yield in the market and reason of the protocol to exist, why changing that?
And how about the impact in everything else like white whale, mars, astroport, Orion that is relying on the 19,5% of anchor?
This will be a Domino effect in everything!


This proposal is dangerous.
Anchor needs to use it liquidity and invest it to gain rewards. This proposal will prevent that:
If Anchor invests it’s liquidity and the reserves go down because of a bear market, this means (1) lower APY => (2) people leaving => (3) less liquidity to invest => (4) the protocol sells when prices are low and buys back when prices are high after APY has restored.

So effectively the protocol can’t invest or loses money if it invests if this proposal was accepted.


More nuances in complex systems.

Seems overly complicated and a big turn off if “yield would be paid in ANC on top of base earn rate.” No depositor wants to be paid in some variable rate token. Then Anchor is not a simple yielding deposit account anymore. In fact, you can’t even figure out the real yield (unless there is a feature to automatically sell ANC the second the ANC earn is paid, so as to get the advertised UST + ANC yield % in UST). Plus, there would be a lot more constant sell pressure on ANC, as depositors rush to cash it out before it’s worth less the next day.

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Exactly this - a yes vote to this proposal is a vote of no confidence in the future of the protocol and by extension the Terra ecosystem

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Prop 20 - This is why I’m voting NO:

Certainly well intentioned and well thought out – but what we have here is a proposal from the Finance Department (if this were, to draw a parallel, a corporation - a startup thats grown up - or classic tech giant - doesn’t matter - the CFO typically acts the same, for such circumstances).

We are over budget! Cut cut cut!

But… the result is Anchor looses its identity, and its the beginning of the end of this venture.

Two things in particular I’ll highlight:

  • The community has been shown something – yes it was jump-started from a pile of money – but it is a model of what could be – what can be built and sustained – a decent yield at a predictable, dependable rate. Without the “20%” (or so) yield and the predicable rate – this is not an Anchor. It is just another DeFi option amongst a boundless sea that is being explored further everyday. It may stay relevant for a short while, but as yield dwindles, it shall become only a footnote in history.

  • Should the proposal prevail, there is no driver for individuals to control anything, they may ride it as it is, for a while, til it is no more —
    There are good ideas above to move toward solving this – and I’ve seen other ideas that put, if not the steering wheel, at least the stick shift in the hands of the participant/investor – incentives to invest more into the protocol as they can get more in return – some mentioned above, and this one too: [Proposal] Terralytics - Increase Borrow Demand via ANC Value Capture from Deposit Growth - #30 by Gnawkz

The community has a savior (LFG) - and its been giving a boost to buy more time to figure out how to build this out.
Lowing the output is waving the white flag - or as your CFO would say: we gotta make the numbers.

Let’s turn to the Product Teams instead-- you’ve got brand, you’ve got an audience, you’ve got members – what can be done to generate the income? What incentive models can be built for existing and new participants?
Just cutting the budget helps you live longer — at the right time - it helps survive the storm — but this it’s a storm – its just how markets work - there are bull times, there are bear times – this is not surrender time.

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Looks like it will pass, unless there’s a lot more no votes in the next two days. Not the right time and not the right order, and it changes Anchor to just another variable yield savings protocol… but it should bring more short-term stability (but at the cost of in long-term Anchor fading into obscurity? may be…), though the YR is still likely to run out even with this, unless there is a massive drain in funds (which of course would bring its own set of problems and risks).

Would have given a lot more confidence if TFL/LFG had committed to replenish the YR if it is going to get close to depleted with this proposal passed. Without that commitment, there is still risk of the APY going down each month by 1.5% and the YR still being depleted over the next several months. That would a worst of the worst situation, if this just delays the inevitable. That looks increasingly likely.

Is there any way to push TFL and/or LFG to give a clear answer will they or will they not top-up the YR the next time it is getting close to depleted? And until exactly when, and up to what amount?

Still nothing addressing stopping the looping and exploitation of Anchor, however. Not even a proposal up (the aUST/a2UST or aUST/saUST is excellent in theory, if that works when not put it up for a vote? time is ticking!). If TFL wants to allow it and will use its heft to block any moves at stopping such abuse of Anchor, despite the reputation and other fundamental risks it brings, at least then TFL should open up the purse strings and commit cover the YR shortfall as long as such abuse is allowed, given that a large reason for the YR drain is the leveraged looping, which is plain and simple abuse of Anchor.


Could this dynamic responsiveness cause a death spiral?
Lower rates causes lower demand > Lower demand causes lower LUNA price > Lower price causes further reserve depletion (denominated in LUNA).

Would a better way to improve the reserves be to increase the cost of borrowing, rather than the reducing the compensation for lending? Or a combination of both?

Luna is now the #6 crypto by marketcap. UST #14. We’re big enough now. It’s time to mature a bit and realize 20% on stables is excessive. Cutting the rate in half wouldn’t lead to significant flight of capital. Brand is established, IMHO. Still, increasing the borrowing costs along with reducing the savings Earn yield makes most sense towards competitive sustainability.

This solution is unworkable, IMO. There will always be a way to create a synthetic asset and additional leverage. Someone will always try to take maximum advantage of a massive UST faucet. Appropriate design execution is needed to set the incentives such that we don’t need to rely on good-faith of users. The most obvious solution here is reduction in Earn incentives and increase in borrowing costs. Terra has such a massive industry lead we can now afford to be less generous with the advertising costs. Congratulations to us for reaching this next milestone!

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