Make ANC more valuable by giving premium yield only to ANC holders

Greetings ,
I was wondering if making access to reserve yield only to peope who hold x % of the amount they put on Anchor in ANC token 10 % or 15 % ; An incentive mechanism to add to ANC use cases and at the same time lower the pressure on the yield reserve ( I’m aware of the 70 M funds from Terra Labs lifted some of the pressure but we should learn from the past ) . This current mechanism is used by Curve to boost yields . I have no technical background so i dont know the viability of this and would love your opinions on this . Thank you for taking the time to read this and have a great day

21 Likes

Yes, I agree with this kind of mechanism, but please educate me why it may be not ideal.

We need to give ANC (and MIR) a reason to hold, and not just dump. ANC and MIR LP is good now, but clearly not good enough, and thats just a short term rewards game anyway.

We need a deflationary mechanism. I know ANC was bought back/burned by the protocol when yield reserves were in excess, but thats not likely in the long term and not enough to keep up with inflationary ANC rewards.

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Incentivize people to stack ANC and they sure will do so

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Glad someone is bringing this up again: had the same thoughts: :grinning:ANC needs more value. Give a reason to buy it - #29 by Maleficarum

Anchor Earn

Option #1

  • 10% Yield–> No Requirement (Staying Competitive with other Defi Protocols)
  • 12% Yield → 3% Portfolio in ANC → Rewards paid in UST
  • 15% Yield → 5% Portfolio in ANC → Rewards paid in UST
  • 18% Yield → 10% Portfolio in ANC → Rewards paid in UST
  • 20% Yield → 15% Portfolio in ANC → Rewards paid in UST

OR

Option #2

  • 10% Yield–> No Requirement (Staying Competitive with other Defi Protocols)
  • 12% Yield → 5% Portfolio in ANC → Rewards paid in UST
  • 15% Yield → 10% Portfolio in ANC → Rewards paid in UST

  • 10% Yield–> No Requirement (Staying Competitive with other Defi Protocols)
  • 14% Yield → 5% Portfolio in ANC → Rewards paid in ANC
  • 16% Yield → 10% Portfolio in ANC → Rewards paid in ANC
  • 18% Yield → 12% Portfolio in ANC → Rewards paid in ANC
  • 20% Yield → 15% Portfolio in ANC → Rewards paid in ANC

Not sure if Option #2 would even work as where would all the ANC Rewards come from after 4 years

Gotta tweak numbers still I think…

6 Likes

On the surface I like this idea. But I am crypto punk and lunatic. I know the idea of ANC was to keep things simple for every day people and democratize defi yield in a way that is accessible to everyone. This does convolute this mission a bit.

That said, there are plenty of real world examples of this starting with all the Ce-fi protocols from Nexo, Crypto.com etc. All their coins have pumped based on user adoption of this model and have rewarded holders greatly. Even credit unions make you buy and hold a part of the Co-op to bank with them and get saving could that pays APY.

In your model option 1 above you give a way of opting out, just like Ce-fi does. A model like this could really work.

In option model 2, I think this deviates too far from the mission and complicates things too much.

I see both sides and I would like to see other people thoughts.

2 Likes

Just to define our terms here, for better communication…

There are two types of yield we need to be clear about:

  1. Interest on UST deposited in Anchor
  2. Rewards paid to those doing other things on the platform (staking, borrowing), currently paid in ANC.

IMO, interest on UST deposits in Anchor should always be paid in UST. Rewards can be paid in ANC.

2 Likes

I’d like to be a bit more specific about Option #1:

-We are talking about Yield on assets (UST) placed in EARN
-When you say “Rewards paid in UST”, you mean interested on UST in EARN to be paid in UST, just as it is now. I would call this Interest.
-When you say “3% Portfolio in ANC”, you mean: a individual’s UST holdings on EARN x 0.03 = minimum amount of ANC that must be staked to achieve 12% Interest Yield on those UST held in Earn.

An issue: What ANC in your portfolio counts? Does Governance count, earning 2%? yes, but no thank you. In Staking the ANC-UST LP, earning 45%? Yes, much better.
Options:
#a: all ANC held in Gov or Pooled/Staked, or in Terra Station Wallet combined
#b: raise rewards APY on Gov and ONLY ANC held in Gov counts

This is an idea that only makes sense today and won’t in 6 months.

The problem with gating yield to ANC holders is that in the future most Anchor deposits will probably not be coming from the end user.

The deposits will be coming from secondary apps building on top of Anchor. Examples of this would be Pylon, Angel Protocol, Alice, Saturn… etc, etc…

When the end user does not interact with Anchor directly, this whole idea of ‘premium yield for ANC holders’ becomes very awkward. The end goal is that most people who use Anchor won’t even know what it is.

Orion Money can get away with token gating because EthAnchor is a product that is really only going to be used by crypto-literate people on Ethereum. There’s no reason for people to build consumer (normie) apps on top of EthAnchor when they can just use the Terra version. There’s a very big difference in the markets that are being addressed by Anchor and Orion Money.

4 Likes

That is a great point.

But isnt it also a problem? I mean, if you have tons of people only using EARN, the system kind of is in trouble, right? We have seen this when EARN is way bigger than BORROW/bonding.

So its really two problems:

  1. how do we provide value to hodler/buyers of ANC
  2. how do we encourage those who benefit from EARN to also ‘contribute’ with borrow/bonding

If you are contributing to borrow/bond, then you are getting ANC, so if you increase the value of ANC, you accomplish both, I think.

But your point is well taken… except, when a secondary app deposits a bunch of money into EARN (like Orion), they should be incentivized to take the collateral they are getting (USDC, etc) and bond them in Anchor, which would in turn give them ANC rewards. Orion only using the EARN function, and staking their collateral somewhere else only hurts Anchor. Of course we need added options for bonding/collateral, which is coming, starting with bETH, I think.

So, even if a normie ether person is just depositing USDC into Orion, with never really having heard of Terra or Anchor, it should be Orion (on the back end) who needs to support ANC to get full benefit to make their business competitive.

Thoughts?

I tend to think higher of the every day person, as you have stated CeFi has these mechanics and the masses use them no problem. Respectfully, people aren’t that dumb. I have seen this argument multiple times in keeping Anchor simple. Keeping things dead “simple” is hurting Anchor sustainability.

The only main complexity for every day person is getting UST. After that is solved, it ain’t complicated.
As a US user, my main path is Coinbase (buy USDC) > KuCoin > (Trade USDC for UST) > My Wallet (Anchor Protocol).

Yeah Option 1 is a first step.

My apologies! Yes, in my original reply. when I say “Rewards in UST” or “Reward in ANC” I meant Interest. Just a thought to save the Yield Reserve even more, by paying interest in ANC.

Yes, we are talking about interest in Anchor Earn, not Rewards. What is considered “3% Portfolio in ANC” is still up to debate…Here are your options laid out, not sure if feasible from a technical standpoint. I am a developer, but not blockchain developer.

  1. ANC held in Earn only counts
  2. ANC staked in Gov only counts
  3. ANC staked in Gov counts and Raise Rewards APY
  4. ANC held everywhere counts (Wallet, Earn, Staked, LP Token)

You said, you aren’t interested in ANC Gov earning 2%? As long as ANC is a requirement to get the best yield on Anchor Earn (UST Interest), ANC price will increase. Yes…2% is low, but what you still get is ANC growth. In traditional world, stocks were either (high growth, low yield) or (low growth, high yields). This proposal is focusing on ANC price growth.

Yeah, the protocols dependent on Anchor would need to maintain the percentage of ANC Tokens. This would would drive the price up. Aren’t the deposits still coming from the dependent protocol’s end users? I know the protocol itself is depositing in Earn, but that money came from their end users…I think.

I mean there is always going to be an imbalance between Earn and Borrow. People (the masses) will always gravitate towards the simple, lower risk method (aka Earn). Especially, the fact that everybody just markets the Earn side as well. I haven’t seen anyone market the Borrow side of Anchor as the main thing. That is why we need to gatekeep Earn to balance the system out.

  1. By Gatekeeping Anchor Earn with tiered % portfolio of ANC. Incentivized to buy.
  2. Market the Borrow side as much as the Earn side? Add in measures to reduce risk as much as possible?

Solid point, if they only use EARN. Not good for Anchor…Pretty much a parasitic relationship. It needs to be a symbiotic relationship. Anchor gives and secondary protocols give as well. So far its just everyone taking from Anchor

Yes, they would need to purchase ANC token to get the best yield on Earn. It is a very good thing that these protocols using Anchor have to purchase ANC.

1 Like

I think you’re confusing a few things.

Orion Money doesn’t hold stables as collateral. They are converting deposited ‘foreign stables’ into UST through Curve and then depositing into Anchor.

There most likely won’t be any ‘normie’ apps built on top of Orion Money or EthAnchor since there’s no reason to build a consumer app on top of EthAnchor when it can be built on top of Terra-Native Anchor.

The reason why this idea fundamentally cannot work for ANC is because secondary apps building on top of Anchor will never purchase ANC tokens to acquire token gated yield. They would never ask their non-crypto literate consumers to buy ANC either since then this no longer becomes a saving protocol, it becomes a gambling protocol.

Imagine putting your stables into Anchor and earning a yield only to realize a loss because ANC token went down in price.

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Why wouldn’t they purchase ANC to get the gated yield? They have no choice. In order for them provide the amount of yield they are promoting they need to maintain max Earn yield at all times and the only way to do that is for them to maintain ANC percentage in portfolio by buying ANC.

As their customer deposits rise on secondary protocols, they have to keep buying ANC. This is a symbiotic relationship. As secondary protocols grow, so does ANC

4 Likes

Any thoughts by others? ANC under $2 now.

I think the solution proposed here isn’t correct - Anchor should offer high stable yield without such strings attached. If someone needs to buy a volatile crypto - ANC - the high yield is by definition no longer stable, killing Anchor’s main selling point.

Having said that, it is important to figure out ways to grow ANC’s value; ANC is a key borrowing incentive, needed for the protocol to be mid-term sustainable. In Sep, 200 million ANC allocated to investors will start to flood the market - there’ll be increased sell pressure and the price could start going down even faster.

Given that ANC is yield-bearing (via gov staking), could it be allowed as borrowing collateral? This gives the token extra utility, and stimulates demand for borrowing to improve protocol utilization.

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Yeah adding ANC as collateral would add some value, but I don’t think will help much. Adding ANC as collateral ends up doing nothing because nobody would use it as collateral because the price is dropping rapidly.

I am still a fan of ANC portfolio requirement. Yield actually is still stable as long as your have ANC portfolio requirement.

  1. Everybody wants highest yield
  2. Buy ANC to fulfill portfolio requirement
  3. ANC price increases, maintains stable yield.
1 Like

For my guide, is anyone stacking ANC right now? I don’t see the purpose of holding it. Is there any benefit?

I sell ANC as soon as I get it. It is a depreciating asset. I’m not the only one doing this… look at the chart. You must incentivize people to buy and hold ANC or it will drop to 0 and the whole protocol won’t work. I like the idea of a gated yield, I’m on some of those other platforms and have purchased their tokens for a SMALL uptick in yields. I think it’s fair to reward people whosupport ANC with higher yields and if you don’t want to support ANC, you can get lower yields.

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I agree with this solution. As mentioned above, it works on other platforms (generally centralized) and it is the ONLY feasible idea I see here. Everyone seems to want a free lunch but I don’t see any other proposed solutions to the problem of ANC’s collapsing price.

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Forgive me if this is a naïve or silly question, I’m a real noob to the crypto world and DeFi. But
a) what would happen if and
b) would it be possible
to burn a certain amount of ANC when aUST is created via deposits?

As aUST is used for Mirror protocol investments would that not help in reducing ANC supply thus increasing its value to help create a self-sustaining incentive to both borrow and hold ANC due to increasing ANC value? The demand to deposit coming both from the attractive APY and usage of aUST on Mirror protocol.

As I say, just a thought from a simple mind.

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Anything that creates demand for ANC and/or reduces supply would benefit the price of ANC. So yes, your suggestion would do both and definitely help support the price of ANC but we don’t know how much it will help without knowing exactly how much demand it will create.