[Proposal] Simple mechanics to improve Anchor sustainability like the real world

*Disclaimer: I hold significant amounts of LUNA, UST, and ANC. I also have an educational background in economics and finance, as well as having worked in the tradfi and Defi space.
Note: All exact numbers below are just for example, its for me to drive a point.

Time lock mechanism
This could be implemented like how real world banks does it, e.g. several duration locks (no lock, 3 month, 1 year), the longer the lock, the higher the deposit rate, e.g. (10%, 15%, 20%, or it could be anchor effective rate + a certain X%), this means that the existing aUST will have 3 versions. The reason behind this is firstly, to prevent a mass exodus of UST funds when yield rate decrease, reward participants that have long-term interests. This also can’t be gamed.

Reward those who participate in borrowings or collateralizing more
Again, very simple identification, e.g. if you borrow 1M or if you collaterize 1M, you are eligible for 1M worth of boosted deposit yield, e.g. 20%, and beyond 1M deposit you get 10%. The reason again is simple, it can’t be gamed, and because deposits are funded by borrowings, then we should reward those who drain anchor less, to the borrowers, it acts as a risk transfer mechanism where the volatility of luna’s yield is transfer into a stable yield.

Setting long-term consumer expectation and determine deposit elasticity
Many have argued that 20% is a must as a marketing tool, however without solid data points, there is simply no way of knowing this. Consumers may be just as likely to deposit into anchor even if its 19% (given that it is already better than many on the market) and you could save 1% of subsidy every year. It is best that the anchor rate can be adjusted in smaller basis points just to find out exact how likely are consumers to add or remove deposits, and using these data points, determine a sensible deposit rate, and also a sensible rate over time as more deposits come in

Just some simple ideas of mine, let me know what does everyone think of this, and hope that refinement of these ideas by the community will come, e.g. determining on the numbers, durations and other details

2 Likes

It’s not clear in your suggestion if you’re talking about locking UST or aUST, if you lock aUST then there’s no need for further versions of it, but it would make it far less interesting because you’d lose capital efficiency.

If you’re talking about locking UST and getting a different aUST (based on the period) to represent that, it would be near impossible to implement that as CW20 token (one that could be traded), you could probably do it as a CW720 (NFT) but then you’d lose the fungibility aspect and would also make it far less capital efficient, meaning it couldn’t be used in liquidity pools or as a collateral.

4 Likes

Please see recent poll 18 that failed. This has similar complications and probably won’t pass.

1 Like