I mean this type of mechanism isn’t new. So I’m sure it can be implemented. Although, I am a full stack web dev, not a crypto dev.
I think #1 makes sense and is a natural evolution of ANC / UST. Most major markets have a yield curve and some people are happy to lock up for longer (assuming there’s a benefit/reward to do it).
#2 will reduce some pressure as ppl who farm ANC generally sell right away.
You could also have a shorter lock up for ppl who prove ANC liquidity / do staking vs ppl who earn ANC as rewards. Locking up the rewards for maybe even longer than 30 days might make a lot more sense as they’re probably the primary sellers.
For dapps integrating w/ Anchor, how would they implement this tiered yield for their customers?
They will have to compete in accumulating ANC to offer the best yield to their users . I encourage everybody to read this article Rekt - Curve Wars . Similar tokenomics have been used on Curve
Curve is an excellent case study of “gated” yield for holders and the impact on tokenomics. I thought this writeup in the Curve forums does the best job of laying out the issues for the protocol: Double Dipping Megathread - Proposals - Curve.fi Governance.
Anchor will need to think through the Double Dipping issue while designing its tokenomics (cc @ryanology045).
Just a quick idea on the concept –
Having yield tiers be based on the amount of ANC holdings would discourage a lot of B2B integrations. Requiring them to hold a balance of price-volatile tokens is a huge headache to consider.
Instead, yield tiers can be given based on the deposit period. E.g. locking UST for 3 years gives out 20% yield, 1 year 15%, 3 months 12%, and etc.
If funds are withdrawn before the period ends, there is a penalty applied on the yield. This increases the predictability of deposit AUM while still being familiar to traditional users/institutions.
ANC is this case could be utilized to avoid the penalties here - having a sufficient stake in ANC would reduce the amount of penalties, or even reduce it to zero. Penalties can be captured back into ANC’s value. Basically the more ANC you have, the more your “savings account” is treated as a “checking account” - something that can be considered as a utility offered by the protocol
Interesting concept - would people wanting to withdraw without penalties not be able to buy enough ANC, withdraw and then immediately dump it though? What would encourage longer term holding here?
I really like this idea, and I think I’ve changed my mind on the original gated yield proposal because the B2B integration is big in this new one. Institutional interest will bring exponentially more capital to Anchor, and we should make Anchor more stable to incentivize them to come. I realize that while inconvenient to retail investors, lockup times are less of a concern to large businesses, who can lockup portions of their extra accumulated capital to continue earning 12% on it. Imagine a single Fortune 500 company locking up 30-40% of their reserves on Anchor.
This idea has the additional benefit of disincentivizing “bank runs” on Anchor in high volatility events (market crashes, large depegging, etc.) from retail investors. If these investors are penalized for withdrawing early, the opportunity cost of leaving Anchor for another yield strategy rises, preventing a hemorrhage of capital.
We still add a use case to ANC as well: it provides additional liquidity protection to UST deposits. Under this plan the relationship would change for depositors: it incentivizes them to borrow to earn ANC tokens that can ensure liquidity of their UST growth. If they don’t want to borrow they can buy, indirectly contributing to ANC price.
I’m in full support of this idea and would vote for it if a proposal was made.
This is exactly correct
This means that Anchor deposit contract is with fixed duration (1 year) and there is penalty in withdrawing early. This won’t be easy to communicate.
This is a good idea. There should be some notion of liquidity preference/reward.
There is some really nice “lived experience” in hedge fund structures that should point the way towards better implementation than lock-up by units of time.
Hedge funds used to have different terms based on how long an investor was willing to lock-up their capital. This is the standard “lock-up by time” approach. You could have one set of terms for no lock-up, better terms for a 1 year lock-up and even better terms for say a 3 yr lockup. The problem encountered was that access to capital for the investor was lumpy and subject to a cliff period where the investor had to decide to either re-lock up or redeem. From the fund’s perspective, there was a potential for periods of large redemptions if lock-up expirations happened to fall in the same period. Together, it wasn’t the best experience for either the hedge fund or the investor so many funds pivoted for a better implementation called an “investor level gate” which allows investors to have access to a certain percentage of their capital each year.
Here is a simple example. Say an investor wants to invest 300 and wants the best rate so agrees to a 3 year lock. Every three years, the investor needs to refigure what their liquidity needs are for the forward three years and recalibrate their investment. This is annoying. The investor could do the clever alternative of investing 100 a year in each of the next 3 years in a “laddering” approach that will in effect result in 1/3 of the capital unlocking every year thereafter. This is better than the prior situation for the investor because now there is always access to at least 33% of the capital in any given year. However, it is a bit annoying to implement for the investor. So the best way to give the fund/protocol the equivalent predictability over the funds under management while at the same time giving the investor access to some of their liquidity is to substitute a 1/3 per year liquidity provision in place of a 3 year lock-up. To the fund, the duration of capital is extended and equivalent to a 3 yr lock under a constant rate of capital flows. The investor likes this better too because now the investor always has access to some percent of their capital in any given year and don’t have to worry or spend as much time trying to manage their liquidity.
Two simple examples for how this would work:
Investor puts in 500 under a 3yr equivalent duration structure. The investor can collect the sweet higher yields of say 20% for providing patient capital. However, when the investor wants to redeem the money, they would be able to get 1/3 in the first year, 1/2 of the remainder in the second year and 1/1 in the final year. The investor knows that in any given year, they can access at a minimum 1/3 of their capital. So if they borrow and need to refortify the collateral, they know that a minimum of 33% of capital can be accessed for liquidity purposes. This makes the option more attractive than an alternative where liquidity is needed but there is still say 1 year remaining on the “vesting” of their anchor investment before they can tap any liquidity. Or if not a degen, the investor might be willing to put more in anchor knowing that they can always redeem at least 1/3 for whatever life emergency comes up.
Say an investor puts in 200. Redemption would be 1/2 in the first year the investor wants to redeem and 1/1 in the second year the investor wants to redeem.
This properly values and rewards users who vest in the long-term project stability of anchor.
This is what I originally backed and came up with @e-gons a few months ago in this forum post Authorize use of emergency community funds if reserves run out - #31 by bitn8. It’s essentially a tax for removing funds from the pool too soon. It was decided that a tax would need terra votes and @e-gons proposed this yield curve as a way to get a similar result as a tax. We tried to push it but it gained no traction. I hope it is gaining traction now.
Here again to say yes
i Think, saver and borrower need arrage, one person need point credit to receive promote about interest rate for saving and borrow
Any update on this. Community what’s your thoughts?
Since it’s come a few times in other threads I think what @ryanology045 suggested is probably the most effective way to gate keep deposits, set the stage for making UST that is deposited more productive by being locked up, as well as giving ANC some meaningful value.
To me this should be higher up on the list than cross chain borrowing. As mentioned in other threads I don’t think it’s going to have the positive effect everyone is hoping for. And even if it is does, it will be temporary and we’ll resume the same trend we’re seeing.
I think the yield tiers should be considered as a bonus for human users. My suggestion posted elsewhere is a 5% (configurable by variable) decrease in the target APY and if they stake 10% of their savings amount as ANC they get a full extra 5% in interest yield. Pro-rata in between.
I realize that one of the goals of Anchor was to give a predictable APY that doesn’t bounce up and down daily like other systems such as Curve or Maker. However that would still exist as the base rate. I think it is fine of the bonus to be variable and for it to be contingent on a variable price asset. Encouraging staking is partially about getting more active community involvement. Have people thinking about ANC price and participating in governance vs just treating ANC as a disposable token they sell immediately.
If some B2B entity want’s to white label Anchor (eg. Kash) and offer additional bonus by staking ANC I think that’s up to them. They can use governance to authorize ANC staking and unstaking, and reflect the same variable bonus rates to their users. Or they can stake ANC behind the scenes and pocket 100% of the bonus assuming price volatility risk of ANC themselves.
However I do agree that time locks on deposits are a familiar concept to consumers via Certificates of Deposit and bonds.
But introducing the ability to use staked ANC to forgo early redemption penalties seems equally complicated for B2B. And how does that work anyway - do I have to stake ANC for the entire period? How much? If ANC price crashes and I have no longer staked enough, even for one day, do I lose the redemption penalty protection? Or is the amount of ANC to be staked fixed at the beginning of the savings deposit?
Anyway, whatever works I guess - it is good that people are thinking about this.
My further suggestion is a similar thing is done for loans - staking ANC should get some benefit to people taking loans. Ether extra LTV or reduce interest rate.
I am slowly coming around the idea that this might be our best option. It certainly would put a floor under the price of ANC while at the same time clearing out some of the rent seeking.
I still prefer timelocks and I would really like to see Anchor utilizing idle UST for generating productive yield.
We may even be able to offer both instant boosted yields with ANC, or boosted yields with time locks.
Dropping yields to 12% for all as some have suggested simply cannot be an option and would be a total disaster. This should be the final resort (throwing in the towel) after all other avenues have been exhausted.
Something to consider this proposal will create high volatility on the ANC token as people front run it. If the proposal doesn’t get through, the price will likely crash.
Why not both?
Let’s say for example the decision was to increase max LTV by 15%. Instead, this can be “decoupled” to 10% LTV increase and 5% increase in interest rate paid to the borrowers, further incentivizing the borrowing/use of idle funds.
This can be placed behind a ANC staking guard, where a certain % of portfolio (capped to a UST amount maybe) needs to be staked in ANC. This both increases demand for ANC token and decreases the amount of liquid ANC, possibly driving the price up.
The 5% interest rate incentive to borrowers could instead be provided through always positive interest rate (never goes negative, or stays as 0), instead of 5% boost. This could turn out to be cheaper and more advertisable, as you could say something as “Anchoring” your interest rate to never go negative, feeding the rest to yield treasury.
P.S. I don’t have any data to back this up, just thinking out loud.
I think you’ve touched on a very important point - For borrowers to have some guarantee like that would be huge IMO. I would not use Anchor to borrow unless I had a very strong certainty that the rate would not fluctuate much (or guarantee to never be negative - even better) - but, disclaimer - I would not borrow for something like speculate on assets (ie. short-term borrow, easy to exit the position if needed) ymmv etc. Because some people are borrowing to buy real world assets, like homes for their families to live in, or finance a business. I think this is something to at least consider - a stable or even guaranteed non-negative rate could be very attractive - perhaps more so than a higher LTV.
In terms of lockups - I am in favour, with these points in mind:
If someone wants to exit early, I think this should be possible with penalty. But the details are important here: Durations, APRs, Penalties.
Not sure about ANC holders getting better rates - seems like in reality this just decreases the APR, eg. I have 1000 to invest, but I need 100 worth of ANC to get best rate, so I have to buy 100 of ANC and now I only have 900 to invest and gain interest.
Also - seems like it could be a bit complicated to calculate/maintain how much ANC required (if based on a UST value of ANC) or how much UST of ANC required (if based on a fixed qty of ANC), to enable better rates for deposits. In the case of the former - what if ANC price drops and the ANC holdings become lower than the threshold required for better rates?
However I know that this model exists elsewhere, so perhaps it’s worth the sacrifice in terms of complexity. If ANC holders can also stake and have predictable returns there, then it’s not so bad. But price is going to be volatile to some degree, so it will undoubtably put some people off. (in essence making the stable coin less stable, if people bought ANC with their UST with the goal of converting back to UST finally - in the 1000 investment scenario listed above)
Option 2 is great
After 4 years,
People need to buy ANC to stake to get more yield
That’s use case of ANC