Would it be possible for Anchor protocol to add other terra stable coins such as EUT?
I believe it’s not hard to implement since it will be the same line of code, but this way we could incentivize people outside the US to start depositing their currency and make Anchor more like a global bank.
To make it easier, borrowing could still be in UST, but we can just add a swap tab to convert UST to for example EUT and deposit the EUT instead.
This would also create new swaps in the protocol which result in more fees for Terra in general.
What do you guys think?
I like the idea. It will also allow people to offset their FX exposure or just save in their native currency.
This year has been favorable for the US Dollar, but the year before it was extremely volatile.
If people can save in a selection of USD, EUR, JPY, GBP and perhaps CHF they would be able to offset most FX risk against their base currency.
This might also add some much needed volume for these stables.
Yeah think this has great potential as well. This has been brought up before, the real thing we need to do is look for strategies to generate EUT, AUT etc. demand outside Anchor so there are actual use cases for the borrowed stablecoins. Or alternatively, more of FX play that swaps to UST with a hedging mechanism to pay rewards back in the preferred stablecoins.
Well as of today we still don’t have significant amount of use cases for UST as well. This could also drive foreign developers to create domestic apps even though some are already in progress (ie. capapult).
The main point of the proposal is so that people can offset their fx exposure (like @narco78 said) while adding blockchain activity.
@bitn8 I believe it would be difficult if we use a hedging mechanism to pay rewards in preferred stablecoins since the end user might ‘think’ that they are not getting the written APY due to various reason such as fx rate and swap fees. I believe it’s better to let the end user swap for themselves so they are aware of the fees that are accrued.
I think the main issue/reason this doesn’t exist is that you don’t currently have enough borrowers who want to borrow in EUT. You would need EUT deposits to be balanced out by EUT borrows otherwise the protocol would be taking on the exchange rate risk (which wouldn’t be good for Anchor).
@fred thanks for bringing this idea up.
More diverse support of different stables encourages wider use (globally) of the Anchor protocol.
I would be curious to see the demographics of current users - is it heavily US dominated? If so, it may explain the preference towards $UST.
I will mirror Hank-O’s comment:
It seems the lack of EUT support on Anchor currently is the lack of user interest.
How do we encourage distributed use of other Terra stables, such as EUT or KRT? Is this something best brought to the Terra forum for liquidity mining and bootstrapping, across multiple protocols?
Demand by the wider Terra ecosystem seems to be the biggest impediment here.
@Hank-O and @fig as I said on my first post, borrowing side will still be UST.
I am just talking on the deposit side as it will also increase swaps on the ecosystem making it more active.
Active ecosystem will accrue more fees for stakers and by giving an option to deposit other currencies I hope we can lessen the dependency on US backed currency as a whole.
If you are saying that it is just a front end that immediately swaps EUT for UST on deposit, that could certainly be done, but that is also something anyone can just do for themselves. However, the earnings rate wouldn’t necessarily be 19.5% when you withdraw back to EUT one year later because the exchange rate may have changed.
The point is that you can’t offload currency risk into Anchor. And if deposits are in one currency and loans are in another and you are using one set of interest rates across the platform, that’s effectively what you would be doing.
With the recently announced Vertex Protocol this could probably become a reality, Anchor could receive in whatever currency the user wanted and instead of keeping everything in one currency (currently UST), Anchor could maintain a basket of several currencies, monetize that on Vertex Protocol and the yield from the collateral, adding to that the yield from the deposits and would also probably require a dynamically adjusted basket of currencies, could probably maintain an healthy ratio to keep providing the 19.5% in any currency.
Is there a way to poll Anchor users and / or the wider Terra community on which additional stables they want to use? Would be good to know what needs to be prioritised?
No, I’m saying to add another deposit pool of other stablecoins. we let the users swap their borrowed UST to their designated currency. there will not be any currency risk since that will be absorbed by the end user.
-so the borrowing structure will still be the same
-add a swap tab to swap borrowed UST to other stablecoins (lets use EUT as an example)
—user swaps their own stablecoin, meaning they accrue the swap fees
-user can choose to deposit EUT instead of UST on a different deposit pool
—this will solve people who does not want US currency risk while giving the whole terra ecosystem revenue
Sorry if it’s not clear, but I don’t think you are getting what I mean.
I do believe this proposal is very simple though, could be done on anchor itself making us a real global bank.
We get what you mean, but that would require create a new pool that would require it’s own set of borrowers and no one wants to borrow EUT because it has barely any use cases. If you want to swap EUT to UST and deposit that as UST, then just do that right now, go to Terra Station and swap, but you won’t be getting 19.5% when you swap back, could be less could be more. If you swap to UST, you take on the currency risk, if the protocol offers 19.5% on other currencies then it’s the protocol taking that risk.
No… people can borrow UST same like what it is now. I agree with you no one would borrow EUT that’s why I don’t suggest to change the borrowing side.
Maybe a step by step example would be easier to understand.
- Put in Luna for bLuna
- Borrow UST with that bLuna as collateral
- Get UST
- Deposit UST for 19.5% apy
What I’m proposing: (bear in mind you can still do the old method)
- Put in Luna for bLuna
- Borrow UST with that bLuna as collateral
- Get UST
4a. Deposit UST for 19.5 apy
4b. Swap UST for other currency of choice, let’s say EUT
5b. Deposit EUT for 19.5 apy
This way people who does not want currency risk of USD (since UST is pegged to USD) can deposit in other currencies.
But you need borrowing to make the 19.5% APY happen, UST borrowers won’t be feeding yields for other stables, that would be the protocol taking on the currency risk for you, and that’s unsustainable. The only way for the protocol to not incur the risk is for it to keep the yield in EUT aswell, but borrowers are feeding the UST pool.
One way to do this is separated deposit and borrow pools, but as we agreed there’s no demand, another way could be what I explained in my previous answer, but the building blocks for that don’t exist yet.
Understood your concern. What if we hedge by giving other stable coins less apy? Would that work
Admins can insert polls in most discourse forums.
This is something that we could poll in here or the Terra forum.
You’d need to really hedge, giving less APY is making a bet that the difference would be enough to cover the gap, and there’s no guarantee that it will, and if you promise X APY and don’t deliver, faith on the platform is lost…
If that so, what do you guys suggest to bring other stablecoins to Anchor?
I would hope that Anchor can be the banking hub in the future.
Because if everything is in UST, and for some reason USD crashes, luna prices would shoot up making borrowers able to borrow a lot more UST and if lenders take their money out of Anchor, Anchor would be illiquid. Wouldn’t that cause problems?
Let’s be real if USD fails, we’ll have far bigger issues than an illiquid Anchor, but sure theorically that could happen if no one liquidated.
We’ll need a forex market to make this happen, this should allow Anchor to hedge the deposits in several currencies, Vertex Protocol was recently made public and should allow for this.