I was thinking more on the suggestion to lower yield to smart contract-based depositors, and I think that it would be detrimental to the ecosystem in the long term by giving an advantage to centralized/custodial solutions vs decentralized applications.
For example, if we give lower yield to contract depositors, an exchange like Binance could offer higher ANC auto-compounding yields in their centralized platform than what a user could find in the Terra ecosystem dapps.
I agree with the above comments. Maybe instead of a flat 0.5% fee, the fee could be scaled depending on what portion of the loan is being repaid? That way it wouldn’t disproportionately penalize people who are paying small amounts back, while maybe you could justify a fee even bigger than 0.5%.
Hmm I think it’s already implied that 0.5% applies only to the portion being repaid rather than the entire borrowed sum every time. Worth explicitly confirming ahead of implementation.
The idea is to have the 0.5% fee applied on the amount being repaid, not the total amount borrowed
This might have the perverse effect of lowering the overall borrower’s LTV because people would want to reduce the number of times they have to repay in order to maintain a satisfactory LTV.
Why not just deciding to increase the interests paid on borrowed UST by 0.5% instead (as long as the Net APR is positive) ?
So you would higher the interest rate by 0.5% and buy back ANC with it and distribute ANC again?
That sounds like the same - but more complicated.
The fee applied to those who use the system more frequently might have a negative impact on the overall transaction volumes, right?
If people use it less, they might pay less fees for the overall network.
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The ideas are awesome. Being able to borrow against bANC would give a really good reason to hold it. It’s the Anchor, right?
I use Borrow a lot and would certainly not use it if I was having to pay a fee every time I repay. Not a good idea.
Even so still not a fan. Better to reduce the pay to borrow % and its clearer to the borrower what they are getting than adding hidden fees or fees that you don’t calculate till later, leaving borrower with a bad experience.
While I think this is a great idea in creating more value for ANC, it might have the effect of making ANC vol much higher.
Based on the current ANC buyback mechanism where 10% of value flowing into the yield reserve is used for value accrual of ANC, the value of ANC should theoretically be heavily affected by whether yield reserve is increasing or decreasing (value of future cashflows into ANC increase = higher net present value/price). This is essentially what we’ve seen over the past few weeks.
If bANC is added as a collateral type and assuming that bANC ends up becoming a respectable proportion of the total collateral pool, this means that if the collateral pool decreases (for whatever reason) → cashflow into yield reserve falls → buyback of ANC falls → ANC value falls → liquidation of bANC → collateral pool falls & the cycle repeats.
Of course, the true relationship isn’t so straightforward as there are other factors such as diversification of collateral pool and investor sentiment.
The reverse of the above is also true which would amplify the pump in ANC price as the loop would be self-reinforcing. However, as we have seen with bLuna, the upside loop is weaker because people are less willing to raise their borrow rate vs. when prices are going down.
All things considered, while this does create a good use case for ANC (which I’m fully supportive of). However, it also introduces more volatility/cyclicality/beta to the ANC token price which I’m not sure is ideal for the design of the token.
I believe the aim is to have Anchor be counter-cyclical; having the prices of ANC crash hard due to this feedback loop would be the opposite of what is intended.
Repay fees are good at boosting the counter-cyclical nature of ANC, but I agree that its not great user experience.
On a separate note - is it possible to take a larger slice out of liquidations and direct it to the yield reserve?
The money market sets the execution fee address to its yield reserve, transferring 1% of the bid value to the yield reserve.
Is this yield reserve the same as the anchor yield reserve? We can probably be more aggressive with the split by making this 10% of the premium for example (if premium is 10%, yield reserve gets 1%, if premium is more aggressive at 30%, yield reserve gets 3%). This will also be less punitive for liquidators looking to execute at a <10% premium.
Keen to hear your thoughts! Sorry if this has already been raised in other parts of the forum…
Good points on trying to have counter-cyclical mechanisms for the anchor protocol/token.
I think increasing the % of liquidation going to anchor is a great idea. We have already seen that current liquidation incentives are way more than enough to make liquidators massively profitable. Taking a higher share of this cash flow source in market downturns sounds like a good idea.