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.
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)
I think easiest way to make ANC more valuable is to introduce some processing time(Maybe 21 days like bLuna burn mechanism) when a user wants to sell their share. In this way, an “Instant Sell” option would take a certain percentage to contribute to ANC buybacks. If the user is happy to wait for “x” days to sell their ANC then the system could start staking those coins that could also contribute to ANC buyback.
Would it be possible to inject 95% UST + 5% ANC in aUST? (This will automatically happen when a user wants to deposit) Meaning 1% less interest for depositors, less ANC rewards and more ANC holders.
What if the Anchor Earn yield rate gating wasn’t based on percentage of deposits but rather actual fixed buckets of ANC tokens, increasing in size rapidly with invested capital in UST?
With this the protocol would demand great amounts of ANC only for investors that can deal with the requirement/have enough capital, leaving the rest of the “normal” world to have cheap ANC staking treatment, requiring as low as single digit percentage of ANC staked.
It can even be a flat amount if designed properly, as ANC demand will grow if it ever becomes cheap enough to encourage higher Earn “tiers”. In case of fixed ANC amount brackets (not percentage) early investors are rewarded with the price appreciation of ANC, having access to higher Earn tiers, all the while being protected from ANC price downturn, as their deposit rates won’t be affected, but they might grab the opportunity to buy cheap ANC to navigate the Earn tiers, further driving the token’s price.
I’m thinking about real world tax use cases, and how it relates to the ANC utility in deposit earn rates, as the idea is somewhat of a newly introduced tax to Anchor Earn - maybe the solution can stem from real world tax use cases, i.e. tax the rich/ones who earn most money/want great yields for large sums.
FYI I’m not saying tax systems in real world atm are ideal by any means, but maybe they can serve as an inspiration/starting point.
Hi everyone. I am new around here but I am all in on Anchor Earn. I just wanted to share my opinion about the proposal to increase yields when people stake ANC.
It’s a great idea BUT there are many other protocols which do the same with better yields.
Honestly speaking I would be ok down 10-11 per cent yield but I would not consider buying a single Anc token for the sake of increasing the yield. If anyone was to take the risk of buying other tokens/coins and taking the risk of their price fluctuations there are way better yields than 40-50 percent if you provide liquidity to other protocols. Forcing people to buy ANC tokens would only repel money out of Anchor.
Just like you, I am also very worried with the depletion rate of the reserves. I think it’s in everyone’s best interest to just reduce the rate down to 10-11 for a while at least.
Personally I think the reaction either positive or negative (in terms of adoption/success) would very much depend on the details.
As @bitn8 said - it’s very complicated (wrt mechanics) - but I can also see benefit to giving ANC some additional use like this - maybe it would encourage more participation in governance too?
Would be good to get some kind of analysis from other protocols that already do this type of thing. I know a few cefi (eg. swissborg) do it - but that’s a pretty different setup, with each account KYC etc…
With the introduction of the Borrow v2, and the possibility of having bANC (or any other ANC derivative) as collateral, could this also be an opportunity to include incentives for ANC derivative collaterals to the protocol?
For example, we could add a hypothetical 15% LTV increase for collateral amount in ANC derivatives over other types of collateral, valued in UST, i.e.:
other collateral = 9000 UST
total ANC derivatives collateral = 1000 UST
effective collateral value = (9000+1000*1.15)=10150 UST
With this the protocol would allow higher borrow rates and/or safer liquidation space for those using ANC (or it’s derivatives) as collateral.
A nerfed version of this would be to simply consider the LTV incentive at time of liquidations, not borrowing, and thus provide a liquidation safety net, which may on it’s own be worth enough as a utility. Feature like this would be very intuitive to display in the existing Anchor frontend - the term “anchoring” fits the use case quite well.
If people are incentivized to use ANC as collateral, liquid supply of the token will shrink, causing positive impact on the token’s price. Other protocols could take advantage of this feature and create interesting high yield looping strategies.
There is an obvious risk to having an incentive like this in a sense that if all of the collateral was in ANC derivatives, the incentive could make the protocol illiquid. However, this can be engineered around by providing a variable LTV incentive that depends on the amount of ANC collateral compared to the rest of protocol’s collateral (or total collateral) - the higher the ratio, the lesser the incentive.
Agreed. It might be fairer to say the amount of ANC is based on the price when you make the deposit. It is locked in a contract along with an aUST variant with higher yield. If ANC price soars and you want to cash out you need to close out the contract, convert your premium aUST back to UST and start again.
If there was a fixed term version of these premium yields then that might involve forfeiting some of your bonus yield - but I think that is fair, it’s part of the trade-off to get higher yield. Encourage people to lock up ANC when price is perceived to be low but in exchange for higher UST yield. At the end of the term they still get their ANC at the new higher price.
In fact I think I’d even go as far to say the premium for depositing ANC should always require a fixed term before you get back the ANC - or you forfeit all the UST rate premium and just get standard rate. The forfeited amount goes into the Anchor pot.
If there was some set of aUST variants with higher yields or higher yield plus expiration dates then I would expect someone to start a market for trading them at a premium which gives and alternative route to cash out early. Starts to sound like a bond market…