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
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.
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?
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.
What revenue streams do you suggest?
Then they will have to adapt to dynamic yields then.
Anchor isn’t sustainable. Gotta get creative on more revenue sources. Maybe we can look at other financial services as inspiration?
In principle, I agree with this. For the record, my position in LUNA is over 1,000 times larger than my position in ANC right now so I am significantly more concerned with LUNA metrics than ANC metrics. At the same, I think what is good for ANC ultimately is also good for LUNA. Anchor is the engine that makes the magic happen on Terra. We have effectively 4 products working today on Terra (Chai, Mirror, Anchor and Orion) and Anchor failing would likely cause a collapse in both Mirror (a significant drop off in minting with aUST may occur) and Orion with the side effect of hindering one of Chai’s potential future avenues of growth. The next protocol out will be Pylon, which heavily relies on Anchor’s stable yield to create their alchemy. Without Anchor, the value proposition of LUNA is bleak.
There’s several ways the Anchor team can get the economics of Anchor working again in a self-sustaining manner. This one time UST infusion into Anchor’s yield reserve should happen to ensure we do not let Anchor’s deposit interest rates become a floating rate that could decimate Pylon before it even launches or prevent institutional money from considering Anchor as a potential place to park cash. We voted to bootstrap Ozone to the tune of the entire community pool of 70 million+ LUNA. We should have funded Anchor’s yield reserve in the beginning with some of the community pool, but made the mistake of not doing it. This proposal is to fix that early mistake. Let’s give the Anchor guys some time to adjust and create a sustainable model. A beefed up yield reserve accomplishes that goal. Taking 3-3.5 million LUNA out of the yield reserve is a pretty small amount of capital compared to the potential benefits to the entire Terra-verse if Anchor v2 proves to be self-sustaining.
What is the best course of action to address Anchor’s diminishing yield reserve?
- Use 5% of the LUNA in the Terra community pool to fund Anchor’s yield reserve.
- Use 10% of the LUNA if the Terra community pool to fund Anchor’s yield reserve.
- Cut the interest rate on deposits from 20% to 12%.
- Do nothing and let the yield reserve go to 0. Floating rate interest is acceptable for Anchor depositors.
- Do nothing. Wait and evaluate what happens to the yield reserve over the next week or two.
IMO - all that adoption you mention is the problem.
Anchor is unsustainable as long has there are to many depositors and not enough lenders (at these rates)
Interest rates need to fluctuate otherwise the risk is all on the peg-stability of the coin.
Yeah we even put salt on the wound with the recent poll of a tighter peg…We can’t support the the peg even when it was lower
People say that we can “Market the 20%”, but that makes it even worse. We should be marketing the borrow if anything…
Money injection does buy time…but until there is a sustainable method to Anchor we are just kicking the can down the road.
And by kicking the can it can lead to full losses, meaning, aUST being impossible to move.
I’m both a depositor and borrower and voted for Do nothing. As a depositor i’m fine with floating rates even if they would drop to 5%. I think the big problem right now is that the crypto market is fearful, and too many people do not dare to touch Luna and borrow, because for most people it will be considered as a secondary crypto with high volatility risk. That is something that is beyond control and we can’t change… and it will become worse if the crypto market goes south.
For me as a borrower, I would be highly interested in more bonded assets. I read that bETH is in the pipeline. That could be a really big deal. Personally I would increase our borrowing positions the moment that bETH is launched, since there are much more strategies that can be implemented to hedge against the liquidation risks on ETH vs Luna.
I think our number one priority should be to begin accepting other bonded assets as per @wtzr suggestion to increase revenue outside of the terra network. A combination of all the suggestions seems as a good fit and provides stability which is what larger institutions are looking for. A flexible interest rate with a minimum of 12% and a yield reserve for at least 12 months. After a period of time we can reassess and move the peg upwards if we discover a higher interest rate is in fact sustainable.
I spent some time in discord and there I finally understood that the effect of the reserve being exhausted is just a reduction on the rate (that would self correct itself by exiting depositors and motivated borrowers)
My comment now is that none of it is clear in any part of the forum/discord/dashboard. Better minds should do an for dummies explanation of this, it would benefit the lot that are overreacting.
Why does everyone want to appeal to institutions?