Is 20% on deposits too high?

General
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Here are the problems, as I see them

  • 20% fixed rate on deposits is something everyone in the world will want. Overcollateralized borrowing against PoS assets meanwhile, is something only some people will want. There’s a fundamental mismatch.
  • Anchor needs a strong ANC token. Not necessarily for a bull market when everyone wants leverage, but for a bear market when borrowing needs to be incentivized
  • Since TFL bailed us out, the yield reserve has slowly been recovering amid the current bull market. But imagine we get some Fintech integration and a hundred thousand “normies” are suddenly piling in and making deposits. Anchor would be sucked dry pretty quick.

If the rate for deposits were lower, the yield reserve would build up faster, and more ANC would be bought back, thus improving its value. Both of these things would make Anchor more resilient. And UST would still be the highest yielding stablecoin by a decent margin.

Imagine Anchor is a business. Borrowers are our customers, and lenders are our vendors who we have to pay. They could go to our competition, who would pay them an 8 or 9% steady rate on stables. But they come to us, because we offer 20%. It seems to me like we could capture essentially the same marketshare with several % less, and we’re overpaying for UST deposits.

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This is being addressed and has been talked about many times with several forums here debating this issue. Please see those previous threads.

That, said, to summarize, the rate is moving towards a stable dynamic market place which many on the TFL team have stated will lower over time.

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But I’m also suggesting that in lieu of some of the more aggressive methods of adding value to anc (gated yields, whitelisting banc, etc) that we simply lower the deposit rate now so as to build the yield reserve faster/burn more anchor tokens.

There’s a thread out there to move it to 10%. That seems rather drastic to me (and was made before we stabilized).

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