[Proposal] Polychain Capital & Arca Anchor Tokenomics Governance Proposal

What is to stop someone from creating a new wallet, and depositing their ust in that wallet by 100,000 at a time. It seems a little odd as it can be so easily dodge.

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This is another key question. TerraForm Labs / LFG are fully subsiding the yield reserve to provide 19.5% APY for all without limitations.

Is anyone from the Anchor team or TFL able to confirm if this subsidy is an ongoing intention?

If this is the case then perhaps nothing actually needs to change… Just a thought.

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I don’t understand how this can be a valid governance proposal:

  • requires dramatic revision to existing Anchor code base, and thus a new audit, etc.
  • the proposers have not provided this code nor such audits, nor are they proposing to do so
  • the proposers are not offering to fund someone else to write such code and conduct such audits
  • the proposers are not making a funding proposal that the ANC DAO will fund the necessary coders and auditors (and would need to come up with a budget, etc. to make such a proposal)
  • without a plausible plan, budget, timeline, development team, audit team lined up, the proposal is intrinsically meaningless & impossible to evaluate

I think the proposal should be voted down, and that even if it passes it is void.

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This would be gamed in a minute, the incentives are there. People would split funds among multiple wallets.

The only thing this proposal does is make the UX worst for the biggest investors in the platform.

I can create 100 wallets and split funds in an hours work, earning me $1m per hour of work after a year in anchor at 100k deposit per wallet.

You cannot police something without the authority to do so. This system is permissionless and no KYC. There is no power. This would be gamed.

As for the comment that adding wallets adds risk : This is not remotely true. I can add as many wallets as I want on a single ledger.

People will either game this or put their capital to work somewhere else, 10% APY is not sexy in DEFI a the moment. There are plenty of places to earn more yield with possibly less risks. This proposal has 0 upside and 100% downside IMO.

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People like Anchor because it’s simple, because pays high Yield.
Why don’t we just wait for the new collateral coins to be available, analyze the impacts and then take a decision?
We have time, that’s why the Yield reserve was topped up, I think we should wait for the TFL to confirm what is planned next to the protocol and then decide what to do.
We are in a phase of expanding the horizons, the markets, the partnerships.

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This is overcomplicating the main advantage that Anchor has over other DeFi savings/lending protocols. Anchor needs to be as simple as possible for everyone to reach the masses and fair for everyone, both fish and whales must be treated equally. DeFi should not discriminate. (The rules on the proposal can easily be bypassed by the way, as others have mentioned)

I say no to this proposal, we should just let the yield reserve drain out and let it reach its organic yield. If the yield reserve gets topped off then good, if it doesn’t get topped off then good too. Also we should wait for new collaterals to be added and other improvements before we even try to lower the high yield, the competitive yield is the main reason that the Terra ecosystem has been growing as fast as it has. It helps us bootstrap UST.

We should definitely not be fundamentally changing Anchor in ways that change its code (this opens up risk vectors) and the mess that comes with auditing the new code.

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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 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.

Edit: To all that say we shouldn’t touch Anchor yield for now - Anchor 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!

Edit 2: 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. In addition, instead of Z = total trades conducted in Terra, it could instead be Z = total volume of trades conducted in Terra.

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I’m new here but wanting to learn.

How can I monitor the reserve to ensure I understand when we may see volatility.

“~60mm UST since the TFL injection less than a month ago, and increase protocol sustainability.” is a concerning quote from your post - albeit appreciated.

I don’t like the idea of messing with the code. I also think overcomplicating the system and user experience is a bad idea.

Therefore, my opinion is to either (1) drop the APY across the board to somewhere between 15% to 18%; or, (2) wait to see how the market and system responds once new bAssets are introduced. In the case of (1), those rates are still damn good. I wouldn’t expect you’d have a UST flight from this suggested APY drop.

Just my two cents. Thank you to everyone (including @josh_rosenthal) for putting time and effort into Anchor. I appreciate all of you.

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This is a bad idea and a waste of implementation time. Whales will create multiple wallets as a work around to get the higher percentage tier and this will not solve anything. There are much better options and solutions coming to the table soon. Buying more anchor to vote NO. This is bad for marketing and the terra ecosystem — if we pass and keep this proposed model WNGMI.

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So this proposal means that if you use your aUST as collateral , for example in mirror, you only get minimum earnings because all the collateral is stored in one big wallet?
Seams like a very unfortunate side effect for everyone.

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Is this proposal some kind of governance attack to waste the devs time? Its trivial to create new wallets to circumvent this, its not trivial at all to implement this.

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For now, it helps drive UST adoption so yes this helps expand the ecosystem and is part of the reason LFG put the funds in. However, the idea is to make borrowing more robust and bring the yield down over time with a semi-stable dynamic rate.

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How about instead 0.25, 0.5, 1.0 % or whatever adjustable rate is LOCKED from user deposits for 5 days, 10 days, 21 days, 30 days (haven’t worked the math) and used by Anchor smart.contracts to reinvest in one sided liquidty pools with that have no impermanent loss? This is reinvesting a small portion of deposited ust, gains go to keeping the 20% base apy for everyone and if ever is excess give bonus apy% to depositors and after that any eccess goes to Anchor community poll / reserve. Multiple wallets/accounts won’t matter as is flat % locked for all. Have the unlock not be exact time but like 12pm on the 30th day, that way the bulk of LP pool changes by Anchor code backend will be one transaction to add/remove each day rather than thousands wof transactions with associated fees.
Perhaps even give users options to boost base APY % by lockng X portion of deposit for X days to get partial returns from community investmmests without all the degen hassle.

Hey folks, just thinking about this for five minutes and I would echo the concerns about multiple wallets being created but beyond that:

  1. you’ll need three separate aUST tokens which generate different yields. This fractures liquidity & breaks aUST composability.

  2. The whales already have the original “20%” aUST token in their wallet. What do we do about these?

This is an idea which requires a lot more thought; I don’t see the point of doing it, it seems technically impractical and if it could be done it actually makes aUST worse.

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If lock 0.5 % fro users, say user deposit 500 dolars, 2.50 can’t be be withdrawn for 30 days. But it’a not taken, not a fee. Returned after 30 days, perhaps with interedst. Used in mean time to generate revenue for the protocol and kicks back a big portion to the users.

How will you switch between yield rates if you start out at less than 100k, then earn a balance over 100k? Will anchor have different versions of aUST to accomplish different yield rates? Seems like this is not very well thought out or is a malicious proposal to change the fundamental code of Anchor.

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BTW this is cool, speaking of needing more borrowers, Outlook Finance thinking of adding loans on their front page that advert getting money paid back rather than interest paying more each month, to USA consumers who use their UST accounts / debit cards. Sure, probably relies on the ANC emissions, and Outlook probably takes a cut of those, but that’s a few years of new borrowers about to hit the system, helps. Holy sh*t, regular non crypto user can take out a loan for bills, rent, car, whatever and get it % reduced each month rather than a huge increase in payment %??? Amazing. I’m not pushing Outlook Finance, hope there’s competitors. Glad to see they thinking loan-side not just deposits.
Edit: Even loan auto payback of, ANYTHiNG, is way better than current finanve of people pay interedt on loans. 0% interest.paid be awesome. 0.01 PAID BACK is unbelievable i current stat eof affairs unless a defi degen.

This seems like an absolute nightmare for devs. Also why the big difference in rates for deposits over 500k?

You’re going to have three aUST tokens that accumulate interest at different rates? Leave it to a VC firm to complicate a simple protocol. How about you guys leave it to TFL and the anchor team to figure out the protocol and leave the rates alone to attract a bigger user base for terra.

Going to crush other projects that want to build on top of anchor.

Sigh.

I dont think this is the direction we should be taking at this time. Also it needs to be more thought out and implicated in a simpler manner.

Simplicity = Key. No need to get complicated

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Speaking of, someone else brought up other protocols are built and being built on ANC protocol as backend. Any major change they should be notified with plenty advance. Outlook Finance, Kash, Alice, etc are designed/designing/marketing around Anchor’s steady APY. Projects such as these market the rest of the world not us degenerates er degens.

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