According to Defilama: Anchor’s TVL currently makes 52,17% of overall Terra ecosystem’s TVL.
I hope you all realize that the day the APY drops to 12%APY or 9% APY deafening majority of depositors will flee Anchor and swap their UST for other (stable)coins on different chains. Thus reducing the overall usage of UST and Terra ecosystem, leading to tons of UST burnt and Luna minted, which is exactly what Luna holders and/or TFL don’t need.
Obviously the 19.5% APY is very generous and under current conditions unsustainable, but if it were subsidized by TFL, it would have net positive effect for every Luna holder.
Read on ‘loss leader’, one of its use as a strategy deployed in form of selling a product with negative margin to entice customers to enter shop. It’s a valid strategy deployed in all kinds of industries, mainly supermarkets.
I’m making this topic as a counter-point for those who think Anchor should be self sustaining protocol, because the 19.5% APY is able to be self sustaining, just not in current bearish conditions.
This is what I proposed last week. The original yield reserve top up was made when Anchor was less than 1/10th the size it is now.
TFL can remove all systemic risk and nervousness and subsidize the reserve. If they have the capacity to burn 3 million LUNA per month for Project Dawn ($250M per month), there’s more than enough to keep Anchor running even at this current deficit.
This will allow the Anchor team the time to build out cross chain borrowing, on chain bAssets, time locks, ANC based yields etc and deposit yield generation. These changes are not going to be rolled out overnight and the clock is ticking.
Anchor can be sustainable for years without needing support, but it sure needs support right now.
This is nerve racking to read, and an insult to everybody that has just a little understanding of how finance works and how DeFi works in particular.
This isn’t traditional finance, this is DeFi. DeFi, un like traditional finance is borderless. Anybody can get access to a loan and bridge it to another platform for profit in a matter of seconds. Add that to the fact that you can tokenize absolutely anything and continuously leverage these tokens and you have an EXTREMELY competitive space. And the abracadabra DegenBox is a testament to that.
In DeFi you can’t put maximum deposit limits because anybody can have an infinite number of wallets. You also cant set up time locks because it is extremely easy to create yield bearing tokens that can continue to be leveraged and exploited for maximum profits.
DeFi is and will forever be and extremely competitive space. There is not getting around that.
You people need to stop pretending to have a protocol with unsustainable policies that constantly bleeds money. This 19.5% deposit APY whim is stupid and absurd. You will always have an ever growing number of depositors and a more scarce number of borrowers, and you should expect that ratio to continue getting larger and larger.
NOWHERE on the entire financial system (Traditional or DeFi) are people capable of borrowing for cheaper than it is to deposit NOWHERE.
Financing an unsustainable system that has extremely high borrowing costs with a token that has close to ZERO utility is an insult to borrowers who take on liquidation risks, resign their staking rewards to finance something that doesn’t directly benefit them in any way…
@narco78 This illusion or vague idea that you can just demand a subsidy for an unsustainable system is so absurd and communist that is insulting to read. Anchor will never be able to sustain a 19.5% APY long term, period. Go do some simple math and then propose something that makes logical and financial sense.
If anchor want to keep afloat it has to offer a better business proposition than its deposit APY. Stop treating depositors as the only users of the platform and realize that borrowers are the customers who should be better treated and where the focus should be put on.
Firstly you need to chill the F out and cut this passive aggressive right now.
Secondly, TFL can do whatever they want. There has been 10’s of billions of dollars of marketcap generated in large part due to this platform and it’s flagship offering. If it’s in the best interests for all stakeholders to maintain the APY for longer then then they can do it without anyone’s permission.
The absolute worst action they can take right now is allow rates to collapse with a wholesale exodus off the platform and out of UST. If that means they need to dig into their pocketbook to avoid it, then they can do it.
If 19.5% is proving to be unsustainable after all actions have been taken (all of which we’ve covered in details elsewhere), then they can manage the market expectations accordingly.
Which part of “Anchor” is literally anchoring the whole Terra ecosystem don’t you understand?
Anchor is the foundation of Terra. Without Anchor Terra chain would be a mere fraction of what it is today.
Lots of people use Anchor in tandem with Mirror and perhaps other protocols too.
Do you have any idea how many people would leave anchor if the deposit APY was reduced to 9%? Anchor would still exist and function the same way, but the point is huge amount of UST would leave terra permanently to find better APY, which would have negative effect on all Luna holders.
If the only anchor business proposition is it’s unsustainable APY then we are balls deep in a big trouble.
First of all the current sustainable APY is 15.44% not 9% and I dont know of any platform that has been able to offer such high APY continuously and predictably for months on end. And that’s without leveraging its returns with MIM…
Anchor even lowering it’s APY can still offer one of the best deposits APY in a sustainable manner long term, in that sense it has a great edge…
You are mistaken with the fact that huge amounts of liquidity would leave. Because the more people leave the better the deposit APYs become for those who don’t. The market always has a tendency to find equilibrium, and anchor can leverage staking rewards in a way no other platform has been able to do yet, this gives it a great advantage and makes it way more attractive than other platforms.
Still it currently is running an unsustainable model. It shouldn’t have to be possible for borrowers to deposit their borrowed money and still earn profits. Borrowing APRs should always be higher than the deposit APYs if not you are running an unsustainable system.
Also borrowers currently resinging their staking rewards in order to have an opportunity to access leverage. Yet, those borrowers are also paying stupidly high APRs for borrowing. They are losing on both ends and soon those ANC rewards won’t be able to provide coverage for that. (the current net APR is -3.67%).
So you tell me how you expect to keep the beating heart of terra from drowning. The clock is ticking and I have yet to hear a bright and sustainable proposition for keeping a 19.5% APY.
Also want to point out but Larix TVL keeps going up and same with USDC curve utilization. Right now you can park USDC in there for a healthy 7% and loop it youself on their own platform for leveraged yield up to 12%. (borrow usdt deposit usdc).
I don’t think we would see a mass exodus actually. Abracadabra degen wont ape out if APR is reduced since they are leveraged and still earning higher yields on stable than anywhere else. We have an excellent proposal to adjust the yield curve which is the inevitable outcome from the data we’ve gathered so far.
Point being we’re on the right track reducing deposit yield.
with MIM we won’t have a collapse from leverage because they are earning the best yield in all of defi even if we dropped rates to 12%.
I was talking about minimum deposit APY. Larix isnt achieving a minimum 12% and it isnt a platform that has offered such premiums in a sustained manner over the last couple of months either. It clearly is a new platform, so it cant be really used as a point of reference.
In that regard anchor keeps its crown, which actually cant be dethroned taking into account its the only platform to provide depositors with staking rewards. So contrarily with what many here think, even with a 12% deposit apy it should still become the leading platform for depositors
When it comes to abracadabra I would actually expect a lot more leverage coming from abracadabra, which would actually make apys increasingly difficult to keep high…
Which yield curve proposal are you referring to? Can you provide a link?
If with “collapse” you are referring to de-pegging i agree. If you mean a collapse in deposit APYS i disagree for the reasons stated above.
I dont really see how the protocol could continue to grow if borrow apys dont decrease dramatically and also deposit apys decrease to sustainable levels… borrow incentives are starting to run really short and the net APY is currently sitting at -4% with a borrow rate of 15% which increases LTV % at an unnecessary rapid rate and makes borrowing more complicated and risky.
I agree, @mariano247, that there’s a more effective way to share your opinions. Let’s not turn these forums into another Reddit or YouTube comment section.