Increasing the Yield Reserve

The entire amount of bLUNA deposited as collateral earns a staking yield. It isn’t the full 11.4% though. Some percentage is used for ANC buybacks and some % goes to validators. This yield currently is not enough to cover Anchor’s deposit interest rate.

There has always been plans to introduce bETH, bATOM and other POS coins. The problem is that if the bonded POS coin has a higher staking yield than bLUNA, a borrower would expect to pay a smaller explicit interest rate as he is foregoing his staking yield. We should not expect other bAssets to produce significantly higher effective staking yield + borrow interest rate relative to bLUNA.

A revenue stream outside of Anchor seems like the ideal solution to this problem.

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Got it, v helpful. Thanks.
Wondering what ideas terraform labs has for making the Anchor yield sustainable. A revenue source outside of Anchor implies that they may have to build that revenue source or acquire it.

I agree that the borrowing side is the long-term issue. Remember that the loan is over-collateralized though.

Anchor is young so I’m hopeful that the attractiveness to natural borrowers will increase. It’s obviously not sustainable to offer 100-200%+ APR incentives

the lack of a compelling borrower value proposition hits the nail on the head here!

Does the problem also get solved if luna price goes up? As collateral increases, and staking yield is a function of this, and also ability to borrow against it increases. Isn’t that the big elephant in the room, luna price is a third what it was when Anchor was launched. Will be very hard at $6 to square the circle. Luna whale says 35% (presumably of free circulating luna) is bonded, at 66million which we see from the Anc dashboard.

If you take the 66m and look at smartstake liquid circ of 134.5m, it’s 48% of liq circulating. Not sure there is much more borrowing headroom regardless of solutions to drive it from luna, at $6 or less.

Seems like Deposits on Anc at the moment going up $10m a day. Proper growth. Should this filter back to the positive feedback loop on Luna price?

I’d vote for number 1 here - should buy us time for a v2 (with improved mechanisms to incentivize borrows).

@ryanology045

Tapping into the Terra community pool would be a great one time boost to the Anchor yield reserve that can give depositors a greater confidence that high yields are not going away anytime soon. The success of Pylon depends on Anchor’s ability to generate a high and at least somewhat stable yield. If that ceases to be true even for a day, there could be some terrible consequences that ripple across all of the protocols that rely on Anchor’s stable yield.

From a practical standpoint, I imagine we can’t have ANC stakers alone vote on “raiding the Terra community pool” right? Do we also need a vote from LUNA stakers as well?

I assume using the Terra community pool requires a Terra community vote. I posted a topic on the subject on Agorra. Join the discussion over there: Capitalizing Anchor's Reserves - Governance - Terra Research Forum

Need alternative revenue sources besides borrowing. For most people, once you get burned (liquidated) once you don’t want to do it again.

These high borrows yields aren’t enough for people now.

I said in other threads to just duplicate Orion’s mechanism into ANC or drop to 15%.

Primary goal is sustainability, because nothing matters if isn’t.

That’s a really bad approach my man. With yields as high as they are for borrowing on Anchor, you can get liquidated multiple times in a year and still come out ahead.

With some crafty compounding of LUNA and LUNA->bLUNA action regularly and factoring in a change in the max_premium_rate, you can get liquidated more than once PER MONTH and still come out ahead at these rates.

Never a bad approach to have more revenue streams as you can see it is hard to support the 20% APY

@ryanology045

I think the situation is critical with Mirror v2 coming online soon. We will have aUST as collateral for minting. With hundreds of million in mAssets out there that are 200% collateralized, we could have a huge influx of UST deposits into Anchor. I think we really need to get a vote soon to replenish the yield reserve or face the consequences of having a floating rate.

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Yup support from Luna stakers are required

Sure. Could you have a poll formulated for this?

I think in long term - we should add dynamic target interest, not the fixed target interest as we have.

Agreed. We need a dynamic interest rate model that will make adjustments during periods like these. This should be at the core of Anchor v2. Who is leading this effort?

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I think a dynamic interest rate model breaks pylon, suberra, etc. They are all relying on stable yields.

I also think a decent chunk of the liquidation fee should go into the yield reserves. People who get liqqed wont borrow again any time soon, so having a large portion of the fee go into yield reserves tops up the reserves when they will be needed most.

I really do not think LUNA community pool should go into yield reserve. ANC holders should be on the hook for this, not LUNA stakers. This sets a really bad precedent. If its truly just a stop gap, some of the ANC community chest can be sold to fund runway. Not LUNA stakers… Having LUNA stakers fund an unsustainable interest rate with LUNA that was ‘burned’ is giving an inflationary reward to people who take the least risk in the system (aUST holders) at the expense of LUNA stakers who take the most risk. This is backwards.

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What revenue streams do you suggest?