Yes, I understand the ethos behind crypto and open and permissionless systems, but that does not need we need to accept any abuse or systemic risk.
TFL has been actively incentivizing supplying the UST to feed this strategy. It is simply not possible for any entity to just source that quantity of UST.
TFL have made a judgement error and we now have a parasite that is leeching yield out the system. It needs managing and dealing with by policy, to make it less attractive to provide such a leveraged strategy.
One idea is to set a max deposit per account of $1M (for new accounts). Once that limit is reached it will still accrue interest but not allow further inflow. This will make the degen box progressively more costly and cumbersome to manage on the Abracadabra side.
We could just rename EARN to INSTANT. Every account gets auto changed to 10% APY.
Then we could have a separate tab for EARN (for the 19.5% time locked) for users to manually deposit their funds into.
So far we have some good short term ideas that have stemmed from the above with the goal of limiting manipulation and improving the health of Anchor as it grows huge:
- Tiered system - likely two tiers - one with a manageable earn at roughly 10-15% for instant withdrawal and one with 19.5+% for extended lockup (and potentially more bonuses if you hold ANC for longer).
- A MAX deposit, perhaps capped to a larger dollar amount to prevent MIM-like attacks or tied to a ratio of bLuna collateral to UST earn to prevent deposits from running wild.
- Tying UST earn bonus rewards to ANC holder status / activity
- Adding a small withdrawal fee to UST withdrawals to generate revenue
- Bring in more borrow assets from other ecosystems with bridge. We are actually working on this separately and think it can be done to beef up the bassets and balance the system a bit more. Leverage Lido/basset conversion.
In terms of the impact on the degen box, nothing would change for their existing deposit apart from receiving the lower APY.
If they want to use the new 30 day timelock, they are absolutely welcome to do so. However, with a $1M MAX limit per account (plus entry, exit fees) it will be more costly and cumbersome in terms of managing it (plus the time lock for each account) they will likely taper down their rate of aping.
We wouldn’t require any MAX account size on the Instant Access side.
Happy with all other suggestions. How do we move forward with this?
We will start on a formal proposal and post here for any more comments and suggestions to enhance - then we can put up the community vote
Great, I am hoping we can quickly get broad agreement and a recommendation from the Anchor team.
The team will need to carry out impact analysis, communication and consultation with all stakeholders. It will also require additional (but not substantial) development work.
Where do you see that TFL is providing UST to the pool? As far as I know, the community voted to provide rewards to the MIM-UST pool to encourage others to provide liquidity. If there is an error with this strategy, it is as much on the community for voting in favor of it as it is on TFL.
It was voted on as part of a wide scale liquidity initiative with a single line reference to the MIM-UST pool being mostly Degen Box demand. There was no analysis on whether this strategy is correct.
There is a clear disconnect between Anchor and TFL and each side appears to have its own agenda.
TFL are looking to grow the supply / usage of UST as their primary objective. They are not concerned whether EARN yield’s are being trashed or whether systemic risk is being introduced.
I will be very happy to be proven wrong, but my investigations suggest we (Anchor) need to move forward to safeguard and protect the Anchor protocol as a community. I believe Do Kwon will be happy we are taking action to avoid being steamrolled by a third party.
The only other way this could be done is blacklisting but that opens up a can of worms. curve has done this before so it’s a nuclear option and would need to be replicated for every copy cat of MIM etc etc
It seems the proposals outlined above will have the desired impact and will be fair for all users. We can review it in 3-6 months.
After further investigations it seems the Abracadabra team have not been told there is an issue.
Is there anyone (within the Anchor team) who can pop over to their Discord and have a chat with their team? It’s clear they haven’t got the message that we’re drowning in deposits over here. Ideally before another 1 Billion UST drops in.
We should still run with the suggestions above.
This is quickly turning into a discussion on how to kill Anchor, carry on as I’m done with this.
What do you mean? We’re actually attempting to save Anchor from the wrecking ball that is recursive leverage.
The Abracadabra degen box is just the tip of the iceberg. What happens when all the OHM fork degen crowd start forking Abra and start piling in with leveraged UST? It is clearly a ticking timebomb, devastating for yields and a collapse waiting to happen.
If I see evidence of this happening without being addressed, I am immediately moving out of Anchor and UST. I have way too much skin in the game to sit around and wait for this to fall apart.
Here’s a snapshot of the current liquidation price story on the degen box right now.
If you fail to see an issue here I do not know what else to say.
I am reading the Abracadabra Discord and it seems people in the Degen box don’t even understand what a liquidation event means for their position. FML.
You’re tunnel focused on the issue you see in front of you, I don’t doubt your intentions but you have a target and anything else matters not, like the main goal of Anchor, that was to become the easiest savings platform in crypto. You’re complicating the product and in the end it won’t matter, the degenbox won’t be stopped because of tiered APYs.
And should it be stopped? Last time I checked we all loved crypto due to equal opportunity, my bank usually is the one telling me which products I’m worthy of and what rate they decide I’m good enough for. If Anchor can’t sustain the APY then we either address the problem (which is a lack of borrowing) or let the APY go down as it’s designed to do.
Liquidations on Abracadabra also don’t have to mean impending doom to Anchor or UST, as liquidators may choose to use it to swap for other stables, and if we manage to make it the defacto trading pair on other chains, maybe they’ll even use it to swap to whatever token they want. And that’s why there’s so many proposal about incentivizing UST pairs on other chains, to help achieve that goal of making UST the goto stable for pairs.
Instead of time locking deposits for higher APY, how about a linear/algorithmic increase from ‘BASE APY’ to ‘MAX APY’ after ‘X’ days without time locking.
This way we maintain the idea of a savings account as opposed to ‘staking account’ that time locking usually applies to.
Will this help relieve the pressure from the Degen Box deposits?
If someone can please explain how the Degen Box is threatening Anchor I would be grateful.
I understand the perspective, but with the given pressures and likely copycats, the short-term risk is that APY collapses, trending to 0%, and the reserve is taken down immensely during a volatile move in Luna price.
Ideally, we’d have more APY to work with from borrow, but this will take a bit of time to coordinate, and is in the works.
20% is pretty difficult to maintain for everyone who wants yield and if there are no barriers, eventually it will be completely unsustainable. This is why we are working to define what that base yield could be for instant, and what conditions would have to be met to pay an even higher amount without getting completely gamed. APY will naturally trend to 0% if we just leave it be without adjustment.
If you think that having no limits here and letting earn APY be variable is best, then we’d probably need to propose a defined ratio of b assets to deposit collateral so that new deposits would be paused until the ratio corrects.
Other option is nuclear, essentially blacklisting parasitic projects while this is figured out.
Worth modeling out to compare against a lock
Correct. MIM UST borrow is different from the Degenbox Cauldron that loops aUST. The terra community fund is not funding this part of the strategy.
As @paletas has been saying, let’s try to turn this into how to improve the earn side not vilify other protocols using the platform as it was designed (some context: It wasn’t that long ago that the strategy was stripe for savings with a plan to blow out deposits with neo-banks etc.)
Let’s get back to the plan on hand which is solving that short-term gains are perversely incentivized over long-term stability.
Moving in steps here is probably the best course of action.
- Looking at a short-term withdrawal tax on deposits removed in x number of days
- Evolving to a yield curve where a base rate is paid to all users and boosts are paid based on deposit timestamps or some variation of something like this.
- Adding ANC staking layer to create a boosted yield curve for Anchor stakers.
- Exploring how to get protocols that use Anchor to hold Anchor, i.e. pay a service platform fee or only get the base rates.
Pair this with
- a robust cross-chain anchor increasing the borrowing demand.
- Adding more revenue streams with things like flashloans and CDPs etc.
Would love to see what you come up with.
Correct, there are a lot of stakeholders that don’t post on these forms.
I understand that something needs to be done, I just can’t agree with the vilification of Abracadabra, it’s them could have been anyone, will probably be others in the future. I agree that we need to figure out ways to make the protocol sustainable, and I’ve been hinting at some suggestions:
- Find liquid ways to monetize idle depoits (Stable pools, Flash loan services, Forex markets liquidity in the future)
- Rework borrow incentives to incentivize lower LTVs (would incentivize users to keep that extra bLuna/bEth on the platform when the market is trending up)
- The Earn curve to achieve an increased APY the longer it’s deposited, with the boosted curved for stakers (@bitn8 mention of figuring how ways to make protocols hold ANC, this would help with that, imagine if Abracadabra would need to stake an increasing amount of ANC the more they allow deposits)
I personally dislike fees on Earn, I believe it complicates things and solves nothing in return. But yes allowing more collateral and making Anchor available cross-chain, I’m sure that would help both sides, deposits and borrows.