As deposits went down two fold, from 20B to 9B, the reserve actually increased and for several hours has been nearly steady.
One of the ways to address the diminishing reserve always was to limit the deposits, i.e. when the deposits amount exceeds the yield required from the lending, no more deposits allowed. That would have been unpopular, but like in an exclusive club, than harder it is to get in, than more everyone wants to get in. And that could be done in code (I mean not limiting per depositor, but just total cap, and when it’s reached, i.e. when depositing any more would cause the YR to be depleted vs. remain steady or replenish, then do not allow more UST->aUST deposits). Of course, that would kill a lot of applications built on top of Anchor…
Anyhow, now it’s happening naturally. BUT, an over 50% drop in deposits over just two days is NOT healthy. It can’t be due to 19.5%->18.0% APY. Either abusers have left Anchor (good!), or else the smart money is getting the hell out of dodge, before… well, whatever they know that the plebeians don’t.
Edit: I should have checked on the UST price before posting. I got too taken in by many here saying that the peg will always hold. No wonder why so much money left. Is it the smart or the not-so-smart money (selling at a low) though is an open question.
I agree. We should limit deposits so that the protocol is sustainable and prevent another bank run. This one has caused permenant damage to the protocol and I’m unsure if we can rebuild the collateral base we lost disregarding the borrowing.
Community trust has been shattered and those of us left in the dumpster fire have a lot of work to do. Much much more than just xanchor and veANC now. Lots of depositors and borrowers will take years to get back what they’ve lost and will most likely never use anchor again.
This bad press will be hung over our heads for a while so right now we need to wait for peg to restore than coordinate a publicity damage control campaign. We also need to find a way to enable transparency and better communication between the devs, major stakeholders, and community. Clearly the community was not aware of the algo stablecoin concept, what arbitrage is, and what deviating from the peg off chain means.
Most depositors only knew UST was worth a dollar and earned 20% on anchor, this was obvious based on their behaviour, most of those guys have left now and we shouldn’t be looking to get that kind of deposit demand back, it was extremely unhealthy. Lots lost to scams and fud.
In the borrowers side, well depositors nuked them, nuked the guys who valued the peg. I too was caught in the contagion, I knew the peg could restore over a long period of time but didn’t know how fast and violent the contagion could be. I had a safe risk in the low 20s and even that got tapped and milked. We’ve discussed flashloans but we didn’t enact on them? That would have saved a ton of collateral on anchor and given borrowers some breathing room. Well billions in collateral got liquidated and it will take years to rebuild what was lost. Not to mention the risk has changed now that the event has happened.
I think we need to start with Anchor UI, it needs to convey what TFL, LFG, and Anchor devs are constantly doing and provide immediate up to date information and in a clear way to ensure there is a body that users can trust versus when the read on the news (UST down 60%). Otherwise we will keep getting bank runs no matter how large anchor grows and this entire monetary system fails eventually as trust in the tech erodes. We also should have killed the 20% apy long ago, it didn’t benefit anyone, an algorithmic stablecoin needs organic demand not incentivized demand for this very reason. We had 8bn UST with no exit and so they nuked the terra ecosystem as their exit. Can’t blame the 3 pool actor or them just our own incompetence for letting it happen.
Why didn’t we have a indicator for on chain UST peg on anchor earn UI? Why didn’t we partner years ago with jump to defend the on chain peg? Instead we paid billions to defend an off chain peg it’s laughable really. Why didn’t we make peg insurance mandatory? Lots and lots that we definitely shoved our heads in the sand and ignored.
The peg insurance really was, and is, a rotten deal. You’ll only get some 90% of your principal back, not the full value. And it doesn’t pay out in real money (as it is not real insurance, not backed by an actual licensed, bonded, insurance company with real-world, real-money reserves - that is what is needed).
This… Yes.
It may have made a lot of people less interested in Anchor. But it could have reduced the market cap by billions, making Terra less interesting to get on board with - thus making it not as worth attacking.
20% is not sustainable no matter what.
Vote Yes to reduce it to 4%.
If people don’t want to come back, then that’s fine.
At least it may be more genuine growth for the Anchor ecosystem.