# \[Proposal\] Adjust interest parameter to track 20% instead of 19.5% **URL:** \ **Category:** Community Initiatives\ **Created:** [November 25, 2021, 7:18am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590 "2021-11-25T07:18:12Z")\ **Posts on this page:** 10\ **Page:** 1
**Author:** ![bradley](https://avatars.discourse-cdn.com/v4/letter/b/c37758/32.png) [@bradley](https://forum.anchorprotocol.com/u/bradley)\ **Post date:** [November 25, 2021, 7:18am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/1 "2021-11-25T07:18:12Z")
_ **TLDR:** _ - Propose updating the `threshold_deposit_rate` in the Overseer Contract from **19.5%** to **20%**. - Improve and clarify documentation in [Anchor Docs](https://docs.anchorprotocol.com/protocol/anchor-governance/modify-market-parameters) on `target_deposit_rate` and `threshold_deposit_rate` ## 20% APY deposit rate Since genesis, Anchor protocol has advertised ~20% APY deposit rate. This 20% APY was true up until the May crash which had the protocol using the `threshold_deposit_rate` rather than the `target_deposit_rate` which 18% at the time. Currently, the protocol deposit rate has been pegged to 19.5% (the current `threshold_deposit_rate`) and yet those in the community are still advertising a “stable 20% APY”. Some could argue that 19.5% is close enough to 20% and I would agree. However, the [Anchor yield reserve](https://terra.engineer/en/terra_addresses/terra1tmnqgvg567ypvsvk6rwsga3srp7e3lg6u0elp8) is up 3.4% in the last 7 days and with ~1 million UST being added every 3 days due to increase `bLuna` staking yields. Why have a 19.5% APY rate when we can have the true advertised of 20% APY deposit rate? ## Proposal In [Anchor Gov Poll #2](https://app.anchorprotocol.com/poll/2), `threshold_deposit_rate` and `target_deposit_rate` were adjusted to **19.5%** & **20.5%** respectively " to maintain a tighter peg around 20%". Although this improved the deposit rate from 18% at the time (genesis threshold deposit rate) to 19.5%, this fell short of holding a tight peg around 20%. Ever since, the Anchor deposit rate has held a tight peg around 19.5% instead of the advertised 20% APY. Thus, I propose updating `threshold_deposit_rate` to **20%** : blocks\_per\_year = 4,656,810 annual\_threshold\_deposit\_rate = 20% Current `threshold_deposit_rate` = 0.000000036686454933 Proposed `threshold_deposit_rate` = annual\_threshold\_deposit\_rate / blocks\_per\_year = 0.000004294785486 ## Clarify documentation The [Anchor documentation](https://docs.anchorprotocol.com/protocol/anchor-governance/modify-market-parameters) gives the following definitions for `target_deposit_rate` and `threshold_deposit_rate`: > `Target Deposit Rate` , known as the Anchor Rate adjusts Anchor’s target deposit APY, which the protocol attempts to achieve by constantly controlling the ANC emission rate as borrower incentives > The `Threshold Deposit Rate` value is the minimum deposit APY that Anchor tries to ensure by making direct deposit rate subsidizations from the yield reserve if the current deposit rate is observed to be below this value. It seems like since Anchor Gov Poll #2 the `target_deposit_rate` (20.5%) is unused and the protocol targets the `threshold_deposit_rate` (19.5%) instead. The documentation needs to clarify when `target_deposit_rate` is used. The docs state `threshold_deposit_rate` defines a lower bound on the deposit rate but doesn’t state what happens the reserve is in excess (like it is currently). One would assume that Anchor would target the `target_deposit_rate` when the yield reserve was increasing, but that is not the case today or else the yield would be 20.5%. I suggest either the `target_deposit_rate` definition needs to be updated to reflect when it is used, or it needs to be removed since the current parameter is unused. Open to feedback on these two issues. ---
**Author:** ![stevedefazio](https://avatars.discourse-cdn.com/v4/letter/s/d9b06d/32.png) [@stevedefazio](https://forum.anchorprotocol.com/u/stevedefazio)\ **Post date:** [November 26, 2021, 1:52am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/2 "2021-11-26T01:52:38Z")
I would discourage this. Here is my reasoning 1 - 19.5% is (I feel) close enough 2 - Over the long term, 20% will not be sustainable anyway. Eventually, demand for ANC deposits will be too great. Eventually, the marketing will change to a different number 3 - instead of raising the deposit APR, which is already the industry leader, the money should be directed towards increased ANC buybacks. More buybacks = higher ANC price = fewer ANC tokens need to be distributed as incentives, thus creating a virtuous cycle I’ve argued on here in the past that Anchor effectively “overpays” its depositors, which will become even more true as the Anchor userbase over time is increasingly made up of non-crypto natives, who would be thrilled with a quarter of what we are paying. ---
**Author:** ![bitn8](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.anchorprotocol.com/bitn8/32/61_2.png) [@bitn8](https://forum.anchorprotocol.com/u/bitn8)\ **Post date:** [November 26, 2021, 7:58pm UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/3 "2021-11-26T19:58:21Z")
I agree with @stevedefazio. Dev resources can be used in better ways than penny-pinching a rate when over the long-term is going to come down or go semi-dynamic. ---
**Author:** ![bradley](https://avatars.discourse-cdn.com/v4/letter/b/c37758/32.png) [@bradley](https://forum.anchorprotocol.com/u/bradley)\ **Post date:** [November 26, 2021, 10:28pm UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/4 "2021-11-26T22:28:45Z")
I appreciate the feedback but I think we are arguing different things. This proposal is about correcting [Anchor Gov Poll #2](https://app.anchorprotocol.com/poll/2) which intended to maintain a tighter peg around 20% not 19.5%. This proposal is not asking to increase the rate beyond what was already voted on by the community: 20%. 19.5% and 20% for that matter is currently more than sustainable as shown by the rapidly increasing yield reserve. As for sustainability in the long run, that can be a separate proposal decided on by the community when the yield reserve is decreasing and it no longer seems sustainable. Although, this 20% is likely to be sustainable in the next 2 years due to bLuna staking returns being \>10% due to [Terra Prop 133 & 134](https://twitter.com/terra_money/status/1462906170520317953?t=Eq6W54Sk3zHTmtqdwx2RCw&s=19). To address your last point, ANC buybacks and having the deposit yield be 20% are not mutually exclusive. ---
**Author:** ![bradley](https://avatars.discourse-cdn.com/v4/letter/b/c37758/32.png) [@bradley](https://forum.anchorprotocol.com/u/bradley)\ **Post date:** [November 27, 2021, 6:26am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/5 "2021-11-27T06:26:10Z")
This proposal requires zero dev resources. Modifying market parameters can be done directly through an on-chain Anchor governance poll just as it was done in the past for [Anchor Gov Poll #2](https://app.anchorprotocol.com/poll/2). ---
**Author:** ![Kamil](https://avatars.discourse-cdn.com/v4/letter/k/94ad74/32.png) [@Kamil](https://forum.anchorprotocol.com/u/Kamil)\ **Post date:** [November 27, 2021, 12:10pm UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/6 "2021-11-27T12:10:13Z")
Anything close to 20% is unsustainable long term; let’s design for the next 5 years rather than 6 months. ---
**Author:** ![xwdx](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.anchorprotocol.com/xwdx/32/358_2.png) [@xwdx](https://forum.anchorprotocol.com/u/xwdx)\ **Post date:** [December 1, 2021, 10:15am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/7 "2021-12-01T10:15:30Z")
I wasn’t here for the last vote ([Anchor](https://app.anchorprotocol.com/poll/2)) so I read what it was about. My understanding in summary is that the community voted FOR: Adjusting `threshold_deposit_rate` and `target_deposit_rate` were adjusted to **19.5%** & **20.5%** respectively " to maintain a tighter peg around 20%". What we’re proposing now is to continue with this agreement, which is to maintain a _tighter_ peg around 20%. It’s seems to me this isn’t a discussion on sustainability or how to increase the value of ANC. Instead it’s about doing what we originally intended to do and then did, but better (19.5 is more tight to 20 than 18, but 20 is much much tighter 😜). Why? Because we can now. ---
**Author:** ![bradley](https://avatars.discourse-cdn.com/v4/letter/b/c37758/32.png) [@bradley](https://forum.anchorprotocol.com/u/bradley)\ **Post date:** [December 10, 2021, 4:23am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/8 "2021-12-10T04:23:45Z")
@ryanology045 I spoke with you at the recent AMA about this proposal. Could you elaborate on the feedback loop you mentioned in the AMA? The feedback loop that sets the deposit rate that you were referring to doesn’t seem to be working as advertised in the docs and what was expected in [Anchor Gov Poll #2](https://app.anchorprotocol.com/poll/2). Under my (and the greater community’s) understanding, the rate is supposed to fluctuate between 19.5 - 20.5. It should rise above 19.5 and up to 20.5 before increasing the yield reserve increases and the opposite should happen before the yield reserve decreases. However, that isn’t what is happening and it’s just targeting a tight band around 19.5 the `threshold_deposit_rate` with the yield reserve increasing. ---
**Author:** ![fred](https://sea2.discourse-cdn.com/flex016/user_avatar/forum.anchorprotocol.com/fred/32/338_2.png) [@fred](https://forum.anchorprotocol.com/u/fred)\ **Post date:** [December 10, 2021, 5:36am UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/9 "2021-12-10T05:36:26Z")
I actually agree to this, a small increase of 0.5% will somehow increase visibility for non users. Isn’t our goal right now is to bring as many people to use the protocol? For people who said anything about long term sustainability - if in the future Anchor could not sustain 20%, it probably wouldn’t be able to sustain 19.5% as well. I believe our goal now is to attract as much borrowers and lenders to make the platform ‘too big to fail’ and a small modification on the `threshold_deposit_rate` would solve that. Just my 0.02, open for more discussion! ---
**Author:** ![RabbitHole](https://avatars.discourse-cdn.com/v4/letter/r/ed655f/32.png) [@RabbitHole](https://forum.anchorprotocol.com/u/RabbitHole)\ **Post date:** [December 12, 2021, 7:06pm UTC](https://forum.anchorprotocol.com/t/proposal-adjust-interest-parameter-to-track-20-instead-of-19-5/1590/10 "2021-12-12T19:06:06Z")
I like this idea. 20% is not 19.5% as already hase been voted. Thanks for this. Let’s see.