[Proposal] sAVAX collateral onboarding

Whitelisting sAVAX as collateral on Anchor on Terra will provide Avalanche and Terra users with more options to borrow on Anchor. sAVAX is BENQI’s liquid staking derivative (wormhole wrapped wasAVAX on Terra), one of the most liquid token staking derivatives in the Avalanche ecosystem.

The most exciting part of this whitelisting is that it will be the first truly cross-chain collateral type that allows AVAX users to natively borrow on Avalanche while at the same time allowing native Terra users to borrow against the wrapped version on Terra as well.

This whitelisting will increase Anchor TVL, improve protocol cash flow, and further diversify Anchor’s total available collateral.

Background

BENQI Liquid Staking is a non-custodial liquid staking solution that allows users to stake AVAX and receive sAVAX, which is an on-chain representation of delegation positions with Avalanche validators.

Traditional staking on Avalanche requires users to lock up AVAX on the P-Chain, which prevents them from accessing the asset until the staking period ends. BENQI’s Liquid Staking solution provides users with the opportunity to unlock their “staked” assets through liquid staked sAVAX.

By supplying AVAX into the BENQI Liquid Staking protocol, users receive sAVAX which earns rewards from staking on Avalanche network. The price of sAVAX goes up each epoch relative to AVAX with rewards being accrued to the underlying staked AVAX.

sAVAX can be used within DeFi applications on the C-Chain including AMMs (Trader Joe, Pangolin, etc.) and lending protocols (BENQI, Anchor, etc.). Users will now be able to access their yield-bearing sAVAX as liquidity to participate in DeFi and earn additional rewards.

Motivation

  1. Increase TVL by bringing more liquidity to Anchor by onboarding sAVAX as collateral
  2. Break ground for the truly Anchor cross-chain experience
  3. Diversify the total collateral pool on Anchor
  4. Allow AVAX stakers to borrow UST easily
  5. Lay foundation for future collaborations with BENQI & Ava Labs

Proposal

Whitelist sAVAX as collateral on Anchor with a max LTV of 60%

Risks

  • Smart contract/technical risks
  • Counterparty risks: BENQI’s sAVAX has been audited by Halborn
  • Liquidity Risk: the current deepest liquidity for sAVAX-AVAX LP is on Trader Joe with 150 million in liquidity
    • More DEX listings are ideally coming with LOOP and others planned in the future
    • If liquidity continues to grow as quickly as it has, an increase to 80% LTV in the next few months is possible.
  • Bridge risk: aAVAX and cw20 standard wasAVAX is bridged to Terra through the Wormhole bridge and can lose all value if the bridge is compromised

Analytics

  • 1.5 million AVAX is staked on Benqi representing 0.7% of all staked AVAX

Testnet Contracts

Avalanche (Fuji)

sAVAX Deployer:

0xbCB7a4D75AFA2bFbd397bfa73C989D5430CbF686

sAVAX (regular ERC20 token):

0x56bbcc9149A355E8fF7A5B676C67Eec33a12F613

Terra

sAVAX (Wormhole):

terra12x8dnuzuqpywue9d8qy2dlc2n2ux5a77yjg0zl

Oracle Feeder:

terra1mm4xmq67wezl9mn9h7w6lszzrpnw2kfdpx5dnm

Custody:

terra1eyylxl2g300vyfwnclpyqndus78ypnurqp8tgk

Mainnet Contracts

Avalanche (C-chain)

sAVAX

0x2b2C81e08f1Af8835a78Bb2A90AE924ACE0eA4bE

Terra

sAVAX (Wormhole)

terra1z3e2e4jpk4n0xzzwlkgcfvc95pc5ldq0xcny58

Oracle Feeder

TBD

Custody

terra1t4x4393l2kx8e5rpdkjkmt8c4ghkkpak6mdwxn

32 Likes

Yes please. I am in full support. Been waiting for this!

2 Likes

Already bought AVAX in preparation for this, support

2 Likes

This would be another awesome step forward for Anchor and the Terra community at large. Fully support this. I’m sure every Lunatic would agree to push this through.

1 Like

This is a great idea, we need more assets that can be used for collateral on Anchor to support the whole ecosystem and to encourage new users onto the terra blockchain.

AVAX is a natural next step. High 5s all around.

This would be great!!

Full support for this proposal

Seems like the community is in agreement - this would be an awesome add.

While there are inherent smart contract risks, this integration further moves Anchor towards a cross chain future and positions itself for deployment on different mainnets.

Sounds like all good things:

Excited to see this progress.

I’m all for more collateral types but I believe it would be important for the proposal to mention how much this new collateral yields in staking, that will also help explain why it’s being proposed at 70% LTV.

  • How much does sAVAX yield?
  • Why 70% LTV?
1 Like

yes yes yes, this is exciting.

staked Avax yields around 10% APR so similar to bLuna

1 Like

Was supposed to be 60%. Thanks for catching that. That is based on not having enough data.

3 Likes

On board with this. Would be a great addition to bring the $AVAX users over to the Terra ecosystem. Yield sits around 10% apr for staked $AVAX.

1 Like

Thank you for stating that and thanks @Switzcrypto for the same, @bitn8 can we add the expected staking yield on the proposal? I believe this is an important to state for future proposals of new collateral types as it directly correlates to the expected cash flow it brings to the protocol.

While I am for diversifying the assets that Anchor is generating revenue from, this will continue to drain the treasury. sAVAX yields about 7%, which means the LTV would need to be about 35% for the addition to be accretive for Anchor.

That being said, I think we should add sAVAX with the same LTV as current assets, and fix the broader treasury issues in a separate AIP.

Current Anchor Borrow APR is 13.1%, sAVAX earns 7.2%. That is 7.2% of all of their deposited collateral. If their LTV was the average on Anchor right now (~48.7%), then that gives Anchor an overall gain of 13.6% and a 9.7% loss for their position, making it a net positive for the protocol.

gain = 6.4% APR from the borrowed UST (13.1%x48.7%) plus 7.2% from collateral
loss = 20% earn rate on their 48.7% borrowed UST amount, assuming they put all of it in Earn

I’m excited to support this!

1 Like

Great proposal! I think you can mitigate the bridge risk by using another bridge, which uses a totally different safety mechanism to secure the transactions. Have you heard of MAP Protocol?

Definitely in full support of this.

This feels like a natural step towards making the Anchor yield reserves sustainable + unlocks more capital efficiency for native AVAX users.

2 Likes

MAP Protocol has a safety bridge.https://bridge.maplabs.io/#/home they will soon support AVAX. Maybe this is a good choice