I also want to bring up the proposers bias towards a ve model, not saying that they are presenting in bad faith, but their protocol benefits from increased ve usage in the ecosystem.
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Hey everyone we just wanted to clear up questions about the Retrograde team. Our core team consists of people with backgrounds in tradfi and big-tech. We have no affiliation with Terra Form Labs or Delphi Digital. We have a lot of respect for these teams and are big fans of Terraâs vision.
Weâre remaining pseudo-anon because we want the focus of Retrograde to be the community not its founders, this a feature and not a bug of defi as it allows for open contribution from anyone based on merit. Weâre excited to help drive efficient governance on Terra.
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I think maybe some middle ground we can find is lowering the lock period on curve model. Locking for 4 years with a 20% discount rate takes a huge hit to the net present value of the Anchor token, making anyone with a fiance mind highly dependent on getting the staking rate. Shorter max lock periods, such as a max of 1 year can mitigate this. Comparted the platypus model, it ensures that early adopters donât have an unfair advantage either which could stagnate needed change.
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There will be no veANC âwarsâ as borrowers compete for subsidies. I will make my case and propose an alternative.
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Why do people borrow? Leverage and shorting. That is it (ignoring tax minimizer borrowers). These are both short-term plays. Borrowers are not incentivized to add on secondary coin risk to their already risky plays. Let alone, add on LONG TERM lock risk to their short-term risky plays.
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There will be no âwarâ. Anchor borrow is not competitive with other non-incentivized money markets. Look at Aave, with normal market demand, borrow APY is 0.54% right now. Upcoming bAssets like Sol and Atom also have cheap borrowing elsewhere.
The only market that Anchor does not compete with is Luna, as there arenât other places to borrow it/short it. All veANC votes will go towards bLuna as it is the only asset that canât already be cheaply borrowed elsewhere. Therefore there will be no âwarâ driving up price of veANC.
Aave creating Luna borrow pools are an existential crisis to Anchor when it comes to competing for customers (borrowers). -
70% of borrowing comes form 39 borrowers. 25% of this comes from one Anchor subsidizer wallet. So that leaves 38 wallets with 50% of all borrowing demand to battle out for veANC votes. Have you analyzed these wallets? Do they hold ANC? Are they long-term holders of ANC already and thus are they reasonably expected to want to lock up their veANC?
Why does this work for Curve? LP providers are LONG TERM holders of liquidity. It is reasonable to expect long-term holders to willingly lock CRV for years to boost their LONG TERM APY. The Key is finding users whose long term interests align with locking veANC for years.
Who are these users? Earners. Full stop. I know you are worried about the âcompostability of aUSTâ (@josedelphi @bitn8 ). So I have thought long and hard about how veANC to boost earn APY can be done quickly and easily, here is a possible solution:
- You/We build a new staking contract.
- aUST holders stake/lock 1 veANC for every 100aUST (for example).
- Overseer contract distributes 20% APY to depositors normally. It deposits an extra 2% APY into the veANC:aUST staking contract. Result is aUST earns 20%, but staked aUST earns 22%.
- Bonus: veANC:aUST contract emits baUST token (boosted aUST) which represents 22% boosted form. The 3 protocols that accept aUST as collateral can easily just add baUST as collateral which is not a big deal.
This uses the same long term lock veANC proposed by @atari. I would lock veANC for 1 year since I run a business and am likely to need funds <1 year. Others will lock for 4 years, since this UST is their retirement plan and they want to lock it forever.
Pros:
- Earners have the greatest incentive for the LONG TERM sustainability of Anchor. They also are long term users âdeposit it and forget itâ of Anchor protocol. This will beautifully align rainy day funds, retirement funds, fast money fund users all over the world with Anchor Protocolâs ANC.
- All the retail apps that profit by giving their customers 10% APY and keeping 10% profit are super aligned with long-term interest of ANC. They will likely buy ANC in order to increase their companyâs revenue by 2% via baUST.
- Add to the above list other apps that depend on Anchor earn, such as Nexus and Kujira. They will likely also buy ANC to boost their earnings.
Cons: No âwarâ.
Finally: Borrowers are hard to come by. Earners are cheap. It does not make sense to make Borrowers jump through ANY hoops and take on EXTRA risk to pay us interest money. Earners are cheap, we literally have 200% too much of them (33% utilization rate right now on our market). It makes sense to give them 22% APY if the lock some ANC.
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Looks good, Feedback
- I did not see anything where fees generated would be used to burn Anchor. A mechanism to burn Anchor would be great
- 1 to 2 years sounds better. 4 Years is too long. Thanks
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I think that is a great change! With more sTokens inflow, Terra and Anc Protocol will make a bright Defi future.
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A burning anc mechanism and fees generator ?
Sound dope
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This proposal seems primarily to enhance the ability of large ANC-holders to consolidate and amplify their voting power, as opposed to doing anything to make the protocol more sustainable. Namely, the key problem with Anchor right now is the lack of borrow demand relative to Anchor earn deposits. I would support revising the proposal to also dynamically scale Anchor Earn rewards based on how much veANC one locks up.
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I also expect this to exacerbate the âborrower demandâ issue â right now the net APR is pretty stable, if we switch to veANC and let whales swing the rewards around you could have the net APR swinging back and forth. At that point Iâm closing out my positions as I donât have time to keep check if the net APR is -2% (good) or -17% (bad) this week.
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Summarising the discussion so far: it seems to me most people agree that veANC is a good idea, and most of the debate is about whether to provide âboostiesâ on the borrow side or the earn side. Retrogradeâs proposal preferred borrow-side incentives whereas Arca/Polychainâs proposal and Pedroâs proposal prioritise earn-side incentives (albeit with different implementations)
Instead of choosing between borrow side and earn side incentives, why not have both and let the governors decide? The simple design would be to have gauges for aUST as well as all collateral assets (bLUNA, bETH), allowing veANC holders to vote on where they think ANC incentives should go. This has a few advantages:
- Preserves aUST composability since yield would be paid in ANC on top of base earn rate
- Preserves simplicity as earn depositors still earn 20% and donât need to interact with veANC if they donât want to
- Allows boosted rewards for depositors that have skin in the game, achieving the incentive alignment objectives highlighted by @josh_rosenthal and @Matt_Hepler of Arca
- DAOs like Retrograde would still look to accumulate ANC in order to maximise earn rate for users and minimize borrow costs for borrowers
- Doesnât dictate whether incentives should go to earn or borrow side but instead allows governors to decide based on the needs of the protocol at the time
Thoughts?
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I havenât really engaged in this topic as I believed to be unable to have a proper discussion around it, but the more I read and listen regarding this the more Iâm against it, it complicates the already difficult to justify part of the protocol, borrowing.
Today in the AMA @josedelphi asked what everyone thought regarding the impact this would have in borrowing attractiveness, a question that has been proposed by a few other people too. Everyone went on to give their answer but I heard no actual answer⌠only people beating around the topic. This has left me fairly concerned, while I can understand why Retrograde wouldnât think about it, their own protocol needs this mechanism on Anchor so they can use it, Iâve only today come to realize the conflict of interest they have. I truly hope this is a concern within the Anchor team, because as much as we discuss here, in the end if the team proposes/endorses a change we all know itâs gonna pass⌠regardless of ongoing discussions on the forum.
Itâs my opinion that this proposal revolves around the premise that borrowers will need veANC to vote on their own collateral for higher incentives while ignoring the obvious and free choice (in price and time) of simply choosing another protocol.
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Its great we are finally looking at utility of ANC. As i understand the main issue with anchor right now is the unbalance of depositor versus borrower. I see new proposal trying to reduce the earn rate of depositor which will downgrqde the quality of the attractiveness of depositing on anchor. what if we use a system that owning ANC, staking / locking would earn you lower fees for borrowing? What we should focus on is increasing borrower, not peanilizing depositors. So why not use the ANC token for that.
Ideas:
- Holding ANC give you a rebate on borrowing rate (like a VIP membership)
- Providing Liquidity for ANC increase that VIP level and in turn reduce your borrowing cost.
Turning around basically that VeANC does not give you increase reward but reduce your cost of borrowing
Make borrowing attractive and competitive.
I am in full support of this proposal! Long-term stakers should be rewarded, especially for locking up protocol-native tokens. Especially for a protocol that is one of the main reasons for how much Terra has grown and expanded.
I also believe that Anchor Earn depositors should have to lock up $ANC > $veANC in order to receive the full 20% APY, and should receive 10-15% (still better than any TradFi savings solution) unless they choose to stake governance.
I canât wait to vote on this proposal on Anchor!
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Of ways that use the earn side, I think this makes the most sense. There are a lot of other proposals up right now that miss the simplicity found in this interation.
As mentioned, I think this can be brought up again after the borrowing side and semi-stable algo rates are implemented.
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Do we have an update on what is next for this proposal? AMA discussion? Vote?
Good idea.
However, Anchor Protocolâs current revenue is difficult to pay interest to depositors, and Yield Reserve covers huge costs. In short, it is in the red.
I donât think veANC can encourage $ANC holding or locking when there is literally no revenue from the protocol.
It also makes borrowers take more risks. It doesnât sound interesting to them.
Itâs a good suggestion, but itâs meaningless at the present stage.
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I hate to say but 19.5% is already unsustainable, we all know that.
Whatever you propose, please consider that protocol integrity and sustainability is more important than sticking to close 20% APYs by all means. ANC will inherently gain most of its value long-term if the underlying Anchor project stays self-sustainable.
I donât support another pyramid scheme, where you have to pay big bucks in order to earn bigger bucks in an ever-inflating token. Do this one smart. And donât rush it.
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Does this solve the recursive parasitism problem?
@bitn8 when we poll this proposal?
Thinking that will come in the coming weeks.
bETH LTV 75% next. then probably after that.