I agree 100%. 100 days scares the crap out of me.
I tend to agree with the latest thinking from Ryan and Milo. A failure to cover depositor interest that was supposed to be stable would be a fatal blow to apps and services built on top of Anchor, who rely on the protocolâs stability. Their failure would in turn be bad for everyone in the ecosystem, we canât risk that. We should be ready for a 2018 style collapse (70-80% down while stablecoin deposits 5x)
So perhaps switching to 30% for now would be wise. We can then reassess in a few months, or maybe a year from now when at least historically-speaking the bull market is expected to end.
I also recognise the developer perspective, where itâs much easier to change a constant vs introduce totally new logic.
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Agree with ryan here. Small change then re-adjust is much safer than big change and something unexpected bad happen.
Anchor is a bank, stability is first priority especially we are in early stage.
After mass adoption happen, more deposit/ more pos from other chain, then we can see what changes we should do to reward anc staker.
Be patience, this thing is gonna be really big.
Donât make any rush to change anything we canât really predict the result and regret later.
@ryanology045 @milo I understand exactly where you guys are coming from. Right now we are in a bull so borrow demand is high and savings demand is low, in a bear it will flip and we will need to be able to sustain. Putting a contingency in the proposal that funds can be drawn down from the Community fund in the case of an emergency completely eliminates the risk of not being able to cover depositors yield. Currently, there is enough in the community fund to pay 5,000 days interest, or 14 years, thatâs if there was zero inflows. Also, we need to consider the entire value capture of the ANC token design comes from surplus inflows being used to buy ANC and be distributed as staking rewards. If we 3x them for now, and the staking yield becomes 10% with around $30,000 buying pressure on ANC daily, I donât know, just doesnât seem juicy enough for such an amazing protocol⌠My opinion is 100 days reserve with a contingency that community funds can be used if necessary is more than sufficient as a starting point. I would be open to adjusting the staking rewards to 30% for now until that threshold is met. Remember, this is just a starting point. We can always change the parameters as the protocol grows and its dynamics change.
In beginning I was excited about this proposal, but I have to agree 100 days seems not safe enough.
Keep in mind that the reserve also benefits us by removing UST from circulating supply. That increases value of Luna. And if Luna value increases, that means the value of collateral increased, the staking revenue protocol is getting increased, people can borrow more, etc. And with all of that activity buying pressure on ANC will increase just because the value in the protocol increased.
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Kamil makes a great point â many protocols in the ecosystem, not to mention outward facing integrations, will depend on Anchor maintaining its target rate. A failure to do so would be very damaging not only for Anchor but for the whole ecosystem.
Iâm for going with Ryanâs proposal and allowing the yield reserve to grow without limit until we can see how things will play out in a bear market. As Ernestas points out, a fat yield reserve will also benefit LUNA holders so itâs not as if that capital is entirely idle.
Tripling the rate would give a ~9% yield right now, which seems juicy enough to me.
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Hard disagree, the community funds are not for this purpose. Could we use them to bail the system out? Sure, but this is the sole purpose of the reserves. 1,095 days seems more appropriate.
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I was under the impression that the community funds are for whichever purpose the community decidesâŚ
Whatâs being missed here is that if there is one major weakness of the protocol right now it is the value capture of the ANC token. This to me is the high priority concern. I understand and appreciate everyoneâs concern about not being able to make payments on the deposits, but there is absolutely no danger of that right now or in the foreseeable future. I also understand concerns about sustaining through a bear market, but putting a contingency in that community funds can be used if necessary solves that as well, and takes all risk of not meeting deposits off the table. Personally, I could not think of a better use for the community fund. Defaulting on deposit payments is not a high priority concern right now, value capture of the ANC token is. If the market shifts and we need to make adjustments we always can, but it seems to me that some of you are trying to solve a problem that does not exist over fixing one that does exist.
To your point about increasing the value of luna⌠the amount of UST in the reserve will have a negligible affect on luna price as were talking about less than .1% of the UST market cap. Also, this should not be the priority of the reserve wallet. We need to keep the major issues at the forefront. The major issue is currently there is very little value capture for the ANC token, that is the problem I am trying to address. In this market, with all the bLuna deposited and generating yield in Anchor, ANC stakers should be receiving tremendous rewards, and we are not. Once this is addressed, it will greatly increase the value of the ANC token. Accumulating UST in a wallet because it benefits the price of luna is a secondary issue.
ANC value is not a major issue. The main goal that ANC needs to fill is to be at least somewhat stable, as the incentives are paid in ANC. If ANC starts going down all the time, then it could be an issue because suddenly the incentives on your loan are depreciating and you are getting way less than you thought. And if it goes up all the time, then incentives would reduce over time, and on correction everyone would be hit harder.
The goal of the protocol isnât to pump ANC price as much possible.
So what is your issue with just increasing the parameter from 10% to 30%?
- We triple the buy pressure on ANC, and the rewards for staking.
- Itâs just a parameter change that does not require development and can be executed instantly
- We can keep changing this parameter through individual proposals as time passes.
It seems like doing this would actually increase staking value way quicker than waiting for custom logic implementation.
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@sebastian - Really good initiative. Letâs approach this problem from first principals.
If Anchor is analogous to a decentralized bank, itâs essentially running a marginal âbusinessâ where the margin being captured is 10% of the systemâs income (rest going to the yield buffer).
I think the discussion of whether the systemâs margins should be changed is when we are able to ascertain that the value being captured by the system is insufficient to align certain incentives.
- Imo, not enough time has passed for anchor to see what the steady state & growth rate of the AUM is going to be.
- I am confident that growth rate will be extremely high in the coming months
- If ANC charges too much margin in the early days, it opens up attractiveness of forked versions that charges less rent.
Perhaps we can defer this convo until a bit later?
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Iâm not sure I would think of it as raising the rent, we are not charging more to use the platform, its more like sharing the rent money with the stakers. This, in my opinion, would make the protocol more competitive, not less. I do understand that we are still a very young protocol and we need to get a better sense of growth rate, so if you think we should table this discussion for now, I will respect that. I look forward to when we can move forward as I believe this to be a key to massively increasing staking rewards and buying pressure on ANC.
Staking rewards for ANC is not the product. I feel that you are hyper focused on lining your wallet which is not what this project is about. I do agree that ANC price is important obviously, but I donât agree that we need to increase the ROI on staking at this point in time.
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Ryanology045 whoâs the dev for anchor and whatâs going on something seems not right ? Iâm new to this can you please fill me in ?
This thread a research discussion on finding out the appropriate target size of Anchorâs yield reserve. Not sure on what you mean by something not seeming right
Another suggestion, since there is discussion of burning significant portions of Luna in the community pool, as well as using some of it to bootstrap Ozone insurance protocol and then burning the rest, what if instead of burning the rest it was converted to UST and put in the Anchor yield reserve? Weâre talking 10âs of millions of UST, would go a long way to protect depositors yield even in a bear market. Seems to be a better alternative than just burning the Luna. Just a thought.
Thought I would bump this discussion up as it is germane to the current situation. In a separate thread regarding emergency use of the community pool, I argued that the reserve wallet should have 365 days of reserves assuming the collateral is worth 50% of market value. Bear markets may last longer than a year, but I think you capture this dynamic by solving for 365 days with the collateral at a fraction of the current price. Plus, 365 days gives the community time to adapt and react to unforeseen developments.
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