The issue of diminishing Anchor treasury has been a contentious one lately. With that being said, here is a suggestion:
Why don’t we introduce a variable K = XYZ specific to each wallet address that determines one’s Anchor yield? In this case, X would be the base yield of 12%, Y would be the percentage suggested by @josh_rosenthal based on total deposit amount, and Z would be amount of trades made in the ecosystem so far. The cap on K would be 19%. Along the way, we can introduce and remove variables as we see fit. This introduces a time-weighted deposit cap that incentivises users to keep their funds in Terra to garner higher Anchor yields. Furthermore, it would prevent whales from blitzing the sustainability of Anchor’s high payouts. Regarding protocols that depend on Anchor to function, we could whitelist their contract addresses to ensure they receive the same yield they always have.
Edit 1: Instead of K being max APR, I think K should be the cap on the aUST you can buy/hold. This way, we avoid making dramatic revisions to Anchor, thus reducing the risk of smart contract failure and maintaining the composability of aUST. All else in the equation remains the same; essentially, a wallet’s max deposit cap is progressively capped starting from $50,000, and the capped amount is a function of variables X, Y and Z. In addition, instead of Z = total trades conducted in Terra, it could instead be Z = total volume of trades conducted in Terra.
Regarding some comments here that we can rely on the new bAssets such as AVAX to prop up borrowing rate, I believe that is similarly unsustainable. As Anchor garners wider attention from borrowers on chains such as Avalanche, we must also expect that yield farmers from those chains will swarm to Anchor, worsening the free rider issue we see now.
Of course we have to focus on borrowing-side improvements, but I believe that’s not the only solution. By implementing the above, we can make Anchor deposits more flexible and harder to game for whales.
Edit 1: To all that say we shouldn’t meddle with the Anchor yield for now - the treasury might not fail now or anytime in the next 12 months, but it’s important to stay on our toes and keep prepared. Even if we do not deploy any changes now, we should at least have contingency plans for the future. Anyway, I’d love to hear opinions and feedback!