The current problem is that the max premium is so large that it creates gaming opportunities for short sellers when markets are volatile on illiquid exchanges.
- Simply by waiting for cascading liquidations while actively shorting Luna on exchanges and piling on sell pressure through Luna acquired through liquidations.
- At worst case, possibly creating opportunities for oracle attacks leading to cascading liquidations. (Short Luna → move price down → create liquidations on Anchor → buy bLuna w/ 30% premium → instant burn to Luna → sell on exchange to move price down further)
While it is true that this could technically be done with any other crypto lending protocol that uses oracles, the sheer size of the default premium (30%) makes this attack vector more likely on Anchor.
The folks who understand this are the ones removing their borrow positions from Anchor. It is undeniable that the liquidation mechanism currently in place is an existential threat to Anchor.
The general delevering of Anchor in terms of total borrow and the reduction of average LTV of the remaining borrowers are the things that are making this attack more difficult, but this situation also isn’t sustainable due to insufficient cashflow.