[Proposal] Staked aUST

Don’t be quick to judge. Detailed specifications have not been released yet, and it is a structure that only works with ve-Tokenomics.

There is no need to judge that all NFTs are messy. Bond-type NFTs have different characteristics and depend on implementation.

I think it’s more efficient to understand and discuss the code than to discuss things that won’t be implemented.


Thanks! Is there a design spec somewhere there? I’m not that good at reading code (I can, but it’s easy to miss something critical without knowing the design spec and what to look for), and presumably the code is implementing a well documented design spec.

I agree with it could get a bit messy in that scenario of recurrent deposits and multiple NFTs, the UI could facilitate that and the protocol could offer a way to merge locked deposits into a weighted averaged rate of all the deposits.

Aside from that all your other criticism isn’t really valid, NFTs can also be non-transferable (they’re just another token, much like saUST would be, just not fungible), although it should be transferable and it’s a non issue, unless someone makes a borrowing platform against those NFTs, and then maybe it could be looped again. But even your saUST could be looped, a debt based stable (such as MIM) could accept your UST, lock it up on the protocol level, give you your other stable which in turn you can swap for UST, and lock again… looping galore, yaaay. You’re not killing the issue just because it’s not transferable, even the MIM degenbox didn’t work with aUST but rather UST, the protocol only needs to control the deposit to liquidate, if it can be insta-swaped back to UST it can be looped, so in a way the NFT is better for your end goal because it’s time locked.

And even if Anchor allows for unlocking before term at a cost, which is a reasonable thing to do, I doubt anyone would attempt to loop it at a protocol level… because it would be looping the cost.

I must be missing something here.

How I understand it, the flow would be: user deposits UST, and then exchanges it, at the current rate, to aUST (lower rate, transferable) or saUST. If user elects aUST, nothing changes - all as now (this is important, so nothing built on top of Anchor breaks). If user elects saUST for higher yield, the saUST cannot be transferred out of the user’s wallet. So, you can’t exchange it for something else and then for UST and loop it. That is, you cannot take out a loan using saUST or otherwise exchange it out of Anchor, as it is non-transferable and is locked to the user’s specific wallet (to transfer need to first exchange back to UST or to aUST in Anchor).

Now, I can see how at the protocol level someone like abracadabra, who commingles all their user deposits in one big shared wallet (I presume), could still offer looping, but then instead of taking out aUST and exchanging it for MIM and then for UST, they’d just print MIM from thin air. It’d be a lot more risky then, for both the operator and users, and they’d be printing MIM even more out of thin air, basically just on an IOU from the saUST, looped only ‘on paper’ (in theory) but not in practice. In other words, a blatantly obvious ponzi scheme. That would be a very, very fragile house of cards, ready to fall at any time. And I doubt that market would support a stable value for the [un]stable such as MIM then.

Yea that’s not the actual picture, I’ll do my best to explain it, MIM already allows user to deposit UST into a contract, not a wallet, for the chain it makes no difference. MIM is a debt based stable, they need collateral to mint MIM, and they won’t ever be “thin air” unless the protocol defaults which hasn’t happened as far as I am aware. So they only need one thing, some collateral with deep enough liquidity and a way to liquidate said collateral should the need arise.

Now let’s look at your suggestion, UST into saUST (non-transferable sure), but easily switched back into UST whenever the user wants, so MIM as a protocol has everything it needs.

  • User deposits UST
  • Bridge to Terra to the contract address
  • Contract swaps to saUST
  • Abracadabra mints new MIMs, backed by the saUST
    • An oracle will keep the Abracadabra protocol aware of the current value of the saUST in USD so they can adjust the risk level for every user

Say a depeg happens, oracle reports that and user is flagged for liquidation, some liquidator bot comes in and bids on the liquidation, pays the MIM debt for the user and the protocol swaps the saUST back into UST, bridges to whatever chain is being used, and the liquidator gets the UST.

That is what happens with aUST and what will happen with saUST, nothing changes. What actually stops looping is either high enough fees that looping creates increased costs OR time locks that makes the liquidation processes extremely risky.

I see what you mean. But then abracadabra basically mints new MIM backed by saUST - which is locked to wallet and can’t be sent to contract or elsewhere, and that saUST itself is backed by UST already deposited. So it is actually from thin air.
User depots 1000. Loops 900. All of a sudden there’s 1900 MIM minted, but only 1000 of it is backed by collateral, the 900 extra is imaginary.

Basically that’s the way it works now. I’ve been under the impression that not being able to move or send to some contract (or elsewhere) the saUST, as they can do with aUST, will break that abusive practice (as it will be literally impossible to execute any transactions for this bridging, the link of committing collateral to MIM will be broken by saUST - it will only function with lower-yielding aUST), while have minimal to no impact on real users and legitimate applications built on top of Anchor. Only if they change to mint MIM out of thin air, using the same UST and its derived saUST, that cannot be committed to a contract or moved (i.e. can’t be interacted with), simply because of it’s there (that is, just in their own ledger, but with no corresponding saUST action on the Terra/Anchor side). That will be an even bigger leap of faith that those who put real money into it will have to take then.

Time locks do address this better, yes. But, complicated to guarantee rate for the time lock, and it adds a whole extra layer of management, or more complex code logic (i.e., more that can go wrong), on top of Anchor current functionality. And fees are just…well, no one likes to be nickel and dimed. Right now the biggest reason against DeFi is the high fees and being nickel and dimed for everything, unlike with traditional banking where the user usually doesn’t pay any fees (well, not directly, as it’s baked into the whole service). Fees would be a turn-off for a lot of legitimate users and break certain app functionality (e.g. if UST in Anchor is to be used for an APY yielding ‘checking’ account type of service), removing real-world use cases. Plus, if abracadabra can just mint MIMs without interacting with saUST (as you seemed to imply they would, as saUST would be non-movable/non-commitable to any contract), well then they can just do the whole process imaginary anyway and bypass the fees, by printing MIM out of thin air with the looping done in their own ledger, but not on the blockchain.

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Again it’s not out of thin air, you deposit 1000 UST, they mint 900 MIM, the looping mechanism then swaps those 900 MIM for ± 900 UST (on a liquidity pool that is able to pair MIM and UST, like the 3Pool on Curve), they then deposit those 900 UST and mint 810 MIM, rinse and repeat… in the end all the MIM will not only be backed by an equal amount of UST, it will in fact be higher than the amount of minted MIM by about 10% (assuming that’s their collateral requirements).

Every MIM is backed, just like DAI, it’s never out of thin air, in fact that’s the argument most use again UST, the fact that it has no collateral backing it. Abracadabra does not need to move the saUST, they only need to hold it and be able to liquidate it, simple as that, they don’t invest it and take on risk, they keep it and make money on fees.

It’s the same with Mirror for example, it’s a debt backed mirrored assets platform, people will still be able to mint with a “saUST” and trade the asset for UST, and loop… Fees and time locks, that’s your biggest hope to stop it imo.

I agree that fees would be a big turn off, but fees on a time locked version of it? I say it would be fine for most, when you enter the time lock you’d be signing a contract that says you don’t mind being unable to move your capital for X amount of time, want out? Pay a fee, the fee could be a forfeit of the yield and not taken out of the initial capital. But if we make the time-locks tradeable (the NFT I mentioned) then users could avoid fees by trading with other users. Biggest risk this opens is someone making a platform to borrow against the NFT, but that’s easier said than done… would require tremendous amount of capital upfront to be significant.

But having a locked rate for a period, and multiple rates required to be taken into account, I agree it could get tricky and even expensive for the protocol to compute, I was discussing what I feel was the best case scenario from a usability prespective, it may take a few steps before we can get there no doubt.

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Couldn’t the looper bypass the withdrawal fees by doing the same thing you said they’d do with saUST? That is, just hold aUST on Anchor and don’t transact with it on Terra at all when looping, simply record that aUST as committed collateral in their own internal ledger.

Unless I am missing something obvious, the same “workaround” exits for either staked aUST or withdrawal fees. (Though I still think that the lack of transparency it’s bring may finally make their house of cards fall.)

As much as I personally don’t like it, time locked is likely the most bulletproof solution here (and it also has the side benefit of adding to UST stability). But, staked aUST also has a high chance of working, and it’s much lower hanging fruit and makes sense to pursue first. IMO at least.

Hey guys, don’t guess before dev, they are planning with ve-ANC tokenomics for ve-aUST.

so can’t looping anybody because need to lock the ANC.

I agree with your point of view. However, the development team should bear in mind that the terra ecosystem build on flywheel of mirror and anchor. The high premium of mAsset shows that the panic investor exits from terra now. The mirror protocol is trying to deal with high premium with rising mir token distribution but in vein imo because of saust proposal. Moreover, Justin Sun is building Usdd to vampire attack the anchor investor. The dev team need to hurry up to minimize high premium to defend the Usdd vampire attack. If it don’t done before usdd, terra will get spiral death soon.

They can’t bypass withdrawal fees because if the user wants their money back they need to unwind the position, so withdraw saUST pay the fee, get UST and swap to MIM, pay down the debt, withdraw saUST, pay fees again… looping is like leverage on gains and fees, the more you loop the more you’d pay.

It’s not guessing, some healthy discussion regarding potential mechanism for the future of Anchor, the devs may choose to ignore it or be inspired by it

I think this actually exposes the greater system risk of the US dollar and that is the debt backing cannot be stopped.

even if there was no aust mim could just literally offer leverage for deposits, mint their stable and do it, thats effectively what theyre doing. That’s effectively what the big banks are doing and central banks and government garbage honestly can all go suck it. But this is literally what they do, and it cant be stopped as long as you can mint your own stable and people are willing to believe it can trade at par for any other stable. This is what’s teather’s doing, USDC, USD, CAD, JPY, and they just loop it over millions of times so they can live free while the rest of us eat depreciating value. Only now when they are unable to sustain falling prices from technological innovation and leeching value off the working labor does it become a worldwide economic problem. Just a bunch of IOU slips we pretend is something else.

Another way of looking at that is think of Anchor like a king central bank, it sets the cap rate (20%) for the entire industry, other major banks overnight transact on it to maintain their own maximum capital efficiency, its just in this case anchor doesnt mint currency out of thin air it actually collects it from borrowers, well unless LFG decides to mint some out of Luna, which is not equivalent to minting out of thin air (there is a cost-opportunity arb mechanism built into the currencies). Now in our case these non-central banks are minting their own currency as a central bank would and using that to exchange for the non debt based stable to hold as collateral.

So the question is which bank defaults first, Anchor or the funny money banks? Well Anchor being the head of the ponzi is able to cut them whenever it feels like doing so, infact thats what we have been doing, enacting looser monetary policy through the governance with the rate reduction, improving capital control measures with the soon to be announced jump prop (that I don’t know anything about but am hoping they got something good), and expanding the real yield base with xanchor. The stables anchor interacts with (UST exclusively) are supported by a code-is-law algorithmic policy that includes 2 capital assets to control price (Luna and BTC). This factors out much of the pricing done by market participants as it’s rather cut and dry accounting. You could model this under all scenarios and figure out if / when it would collapse as there are set parameters and liquidity so you would just be modeling transactions. Now nobody seems to have done this, either because it doesnt support their viewpoint, it’s too cost intensive, or its unecessary. I fall into the believe that it’s uneccesary and the other two viewpoints and fight it out. I think while short term market fluctuations are inevitable code is law translates to price on the charts so UST would maintain it’s peg, Luna would be a price, anchor could be dead or alive in water, and terra ecosystem will continue chugging along since it’s a blockchain and the world doesnt run on price. What get’s interesting is the funny banks like mim and yeti.

So your minting this new non code-is-law stable that is basically backed by whatevers in the basket, you rely on free market to manage the price of the coin (after all if someone borrowed a dollar they would pay back a dollar), however, you’ve opened yourself up to money market risk, ontop of liquidity risk (you have to have pools of liquidity that are solvent enough to support this money market) more complexity risks, hacking risks, and risks introduced by the collateral itself. So your MIM or yeti stable has all of the UST risks compounded by those other risks. Meanwhile everything on the terra side is just the UST and smart contract risks. Ontop of that you have to pay out an extremely high yield just to continue to fuel growth, and as soon as you run out of growth on your debt stable it becomes a flywheel like the great depression, whereas Terra will grow organically with or without Anchor and the algorithmic stable design will maintain a sound dollar market around a basket of cryptos, which have honestly proven over their decade plus of existence (look at doge anyone) that free capital markets trumps goverened markets.

Maybe we should stop touching USD altogether apart from shorting it. the truth is the currency itself is unable to sustain 20% yield and depreciates 99.99999% of it’s value every 100 years. Thats where the problem is for depositors, your holding onto a trash currency (no offense to depositors but to the manufacturers of said dollar). M2 USD supply is still spilling over from 2008 forget about 2020 so your really holding onto the biggest of bombs. Bond market is saying exactly that and has been for decades.

With that being said UST adoption is going to continue to grow and so will Luna’s principal value by auxilary. Terra’s a great commercial blockchain and we’re just beggining to see it’s potential. Looks like most other blockchains are wanting to adopt a similar stable <-> chainToken pair strategy so it only speaks to its success. And Anchor’s got ve and x in the pipeline and already has easy ramp on and off solutions so buy it while it’s cheap. I couldnt tell you how many VC’s I know who are interested in developing tokens on Terra with real commercial business use just because of access to the genius invention that is UST and Dokwo.

is USD good for commerce? Yes, you can buy anything in the world with it. Is it good for holding for 20% APY? no.

The bypassing mechanism you talk about is what I called “wrapping saUST” on the proposal. There are many examples of other protocols doing this, such as Convex’s cvxCRV, which is a liquid version of Curve’s “locked” veCRV.

That is the reason why I proposed the whitelisting of contracts. This way, only non-contract addresses and parter projects will be able to get the full yield. There are still workarounds, but they would need a trusted custodian account to do the looping / wrapping (e.g.: Binance holding saUST on a wallet and minting a token that can be redeemed 1:1 to UST, yields close to Anchor deposit rates and has liquidity on BSC/Binance exchange).

I know this whitelisting solution has many downsides, mainly because of complexities in implementation / governance, but as others have pointed out in this discussion, alternative solutions involve UX trade-offs that would make anchor less attractive to depositors (i.e.: extra fees and/or time locks).

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Stopping contracts from depositing is undercutting Anchor’s true potential as a reserve por protocols, we don’t want Anchor to serve the end-user in the long term, it’s a mess and unscalable due to ease of use of blockchains and so many different regulatory bodies in each country, you want neobank apps and other protocols to do that for us, and we should aim to act analogous to a central bank.

We want to be the go to for protocols that seek both capital and yield, we just need to tune things until it truly becomes self-sustained.

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We need to denominate in something that people are familiar with, if it was easy to switch people’s mind BTC and Sats would be closer to be the standard by now but it’s not. Until we’re reaching full adoption you need to use the most common fiat denomination, and that’s USD right now. SDT would have been a worthy candidate to replace it, but got no traction.

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Was there any real effort in using SDT though? (Such as for Anchor instead of UST. I know there was the max of 1 SDR “stability fee” or what not, that was not long ago abolished.)

IMHO the basis “currency” should have been SDT. UST is too US-centric. That’s just a portion, and not that big even, of the global market, and makes the fiat value tied entirely to the monetary policy of just one country.

USD is the global reserve currency for now, to say it’s a small part it’s to undermine it’s role in the global economy. As an European myself I too would prefer something else, not controlled by a government I can’t vote on, but undermining it’s position won’t do us any favours.

I don’t see us moving from a fiat denominated market anytime soon, it’s familiar and users need that familiarity.