Lowering 19.5% "Boil the Frog" style

I believe we should start ramping down the 19.5 earn rate in a “boil the frog” type way.

Depositors will be spooked if lowered from 19% to 15% right away. But slowly dialing down from 19% to 18% then later to 17%, and eventually to 16% and so on with increased adoption.

Anchor earn rate will still likely be the best game in town at the low to mid teens, and no one will leave the flourishing Terra ecosystem as more as built.

This way depositors start to get conditioned to what is sustainable once $ANC token subsidies run out.

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Kinda conflicted about this. → Edit → I am against a change through governance.

While I do agree with the point that a “sudden” decrease in earn rates could shock depositors and even incite fear in unaware depositors, I am not a big fan of interfering in protocols when they work as intended.

Yes sure, the degen box is draining the reserves but where exactly is the issue if the earn rates just quickly drop to the sustainable level? Depositors that are aware of the protocol’s mechanism know since the beginning, that eventually the earn rate will drop. It’s even a bit surprising for how long these 19.5% have been held.

What I want to say, I don’t think depositors will be spooked.

I am however, more concerned whether we open a box by actively interfering with ANCs interest rate. If we engage here, where do we draw the line?

You advocate now for 16%, others might want to lower it further. How do we find consensus? Additionally, will we then also start looking at ANC competitors and adjust interest rates according to the market? Will we adjust the interest to macroeconomic events or even take into account the “evil” FED rates?

TL:DR: IMO, let the protocol run as it’s coded. By interfering now, we create more questions and more challenges which we cannot solve properly, which would create a more ambiguous ANC environment.

I don’t think the rate should be decided by governance.

It should be a variable rate that depends on the amount of UST lent out, UST borrowed, and collateral yield.

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To be clear…

I don’t think it should be based on anyone’s preference (including mine). However, I do believe the algorithm can be tinkered with to “tighten the reins” a bit. I’m getting charged 11% and getting 9% kicked back to me in $ANC tokens (which will end someday). The protocol is making around 20% off my overcollateralized position, but much less from those that deposit bETH, and there is a disproportionate amount of borrowers (and probably will be).

I realize more borrowers will be coming with new bAssets and eventual native interfaces with other chains. But knowing human psychology there will always be more savers than borrowers at such a high rate of 19.5%. As a LUNA hodler, I very much appreciate the fact that Do is going to pump up the yield reserve, and I do believer the “bait” of a 19.5% interest rate will bring many new users. However, the FUD of the obvious unsustainability in play naturally repels others.

I just think that tweaking the algorithm to “tighten the reins” and make the deposit rate MORE in line with what is sustainable long-term will not detract many depositors since it will still be hard to match with a reputable stablecoin. This doesn’t even consider all the utilization options they have at their disposal on the Terra ecosystem. Those that do leave over 1-2% now may be replaced by others who recognize this is a move towards long-term sustainability. Bring on the bad press “Anchor lowers stablecoin deposit rate from 19.5% to 17.5%!” (Wait, I can get 17.5% on my stablecoins? - said many newbs)

Why not at least start the journey towards permanence by tempering toward the eventual outcome in a slowly-but-surely manner?

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