After several weeks of feedback and consensus building, we are ready to push forward with our proposal. We have made a few final tweaks, but the spirit remains the same: reduce the overall yield paid by Anchor Earn to take pressure off of the yield reserve while continuing to pay stable, best-in-class yields to depositors. While no proposal is perfect, this represents a critical first step in shoring up Anchor Protocol in a way that increases the likelihood of self-sufficiency all while maintaining its central role of expanding UST market cap and bringing new users into the Terra ecosystem.
The adjustments made to our proposal center around deposit threshold tiers. We have increased the threshold for deposits earning the ~20% Anchor Rate from 10,000 UST to 100,000 UST. This was done to increase the number of depositors earning the full Anchor Rate. The 10,000 threshold was suitable for only small users, which while critical, excludes a significant number of individuals with larger, though not institutional-sized, cash balances who stand to benefit from the outsized yields from Anchor and the limitless potential of the entire Terra ecosystem. We have also established a new tier of 100,001-500,000 UST, in which deposits will earn 17.5%. This 17.5% will be implemented over time, starting at ~20% and decreasing linearly over 1.5 years, with new rates being struck every 30 days. This new tier was created specifically to cater towards small-to-medium-sized institutions as well as individual power users. Enterprise level interaction with Anchor will be critical to scaling UST’s adoption given the numerous end-users enterprises face. Similarly, power users, who can be characterized as influential individuals with large cash balances, are important to Anchor given their propensity to evangelize the products they use thus broadening the awareness of the protocol. Preserving high, though not maximum yields given deposit sizes, is critical to retaining these two cohorts. Consistent with our recent amendment, yields on deposits in excess of 500,001 UST will sunset towards 10% over the next 1.5 years. An indicative deposit rate chart is at the bottom of this post.
We are incredibly excited to move forward with this proposal and put it up for a vote. After countless hours of conversations with the community and ANC token holders, we are confident that it represents a critical step in improving Anchor Protocol and cementing its foothold as critical infrastructure within Terra and crypto, broadly. Thank you to all whose contributions made this proposal possible.
