[Proposal] Whitelisting cLuna as a Collateral in Anchor

Mechanism
1

Proposal

Whitelist cLUNA from Prism Protocol as an accepted collateral for Anchor Protocol. Similar to bLUNA, the staking yield from yLUNA can be directed to Anchor Protocol to increase the protocol revenue and to supplement the yield reserve of Anchor Protocol. This creates an alternative LUNA liquid staked derivative to be utilised as a collateral on Anchor.

The proposed max LTV is 60%.

Background

Prism Protocol is a Terra native derivatives protocol that allows users to refract digital assets into two distinct parts: a yield component & principle component. This allows users to access the utility of its individual parts separately. Since Prism’s launch on the 1st February 2022, it has surpassed over $500mil TVL with over 6mil LUNA locked.

Motivation

With the Earn deposits outpacing the Borrow demand, there is a pressing need for more collaterals to be accepted as collateral within Anchor. Liquid staked derivatives (LSDs) like bLUNA, bSOL, bATOM redirects the staking yield to Anchor to supplement its Earn interest. Auto-compounded LSDs like LunaX & stLUNA will not direct its staking yields to Anchor as the yield is auto-compounded back into the token.

The current staking APR yield for bLUNA is 6.67% whereas the staking APR yield from cLUNA is 7.54% (yLUNA Staking Base APR / (Price of yLUNA + pLUNA)). cLUNA has a higher staking yield from bLUNA since Prism Protocol’s validators are limited to a 5% commission charge on staking rewards versus an average commission of 8.5% on staking rewards from bLUNA’s validators. Additionally, genesis airdrops and ongoing airdrops for cLUNA can be claimed and directed back to Anchor to further increase its yield.

An additional benefit for having cLUNA as a whitelisted collateral is the increased utility of Prism assets. At anytime, the borrower can withdraw his or her cLUNA collateral from Anchor, and immediately refract it to participate in the yLUNA farm, staking or to be LPed. The increased utility allows cLUNA to be a rather flexible asset to the borrower while translating greater yield to Anchor.

Benefits for Anchor Protocol:

  1. Similar to bLuna, yLuna yield is directed to Anchor, albeit at a much higher APR rate + airdrops. Staking yield for cLUNA is 7.54% APR whereas bLuna yields 6.67% APR.
  2. Increasing diversity of validators and decentralising voting power of delegated LUNA.
  3. Increasing the number of accepted collaterals that will contribute to the yield reserve of the protocols rather than depending on auto-compounded LSD assets in the future.

Benefits for Anchor Borrowers:

  1. Provides an alternative collateral to borrow UST on Anchor
  2. cLUNA allows the borrowers more flexibility on how they manage their LTV positions while maintaining their ability to withdraw, refract, and participate immediately in various opportunities for pLUNA and yLUNA across the Terra ecosystem.

On a general note, currently all voting on staked LUNA delegation is managed by Lido, which does not have governance native to Terra. Users of bLUNA are not able to vote on Terra Governance Proposals whereas with Prism Protocol, pLUNA enables proxy governance and controls how the underlying LUNA votes, this decentralises the voting of LUNA staked with Prism.

Since cLUNA will be a new collateral to Anchor Protocol, I propose to have its max LTV set initially at 60%.

At present, the LP pool in Prismswap has over $7.44mil TVL, and should the proposal on Astroport to incentivise Astroport cLUNA-LUNA LP with ASTRO emissions is passed, the stableswap pool in Astroport will see approximately $17mil in TVL. (assuming ASTRO = $3.45)

CW20 cLUNA Token (Terra native): terra13zaagrrrxj47qjwczsczujlvnnntde7fdt0mau

5 Likes
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I am convinced there will be every letter of LUNA soon - aLUNA, bLUNA, cLUNA, dLUNA…

We welcome this proposal and the diversity it will add to collateral on Anchor.

Seems the benefits are greater yield and “proxy” governance via pLUNA which sounds like metagovernance. By doing so, you are incentivizing user to buy more of your product suite and incur fees.

I would note that this proposal will benefit pLUNA and cLUNA equally - as will its pools on Astroport and Prism and the underlying protocol.

FWIW - 99.6% of the PRISM-cLUNA pool comes from one single address and LP.

Please see below - the top address provides liquidity 3 distinct times:

Screen Shot 2022-05-03 at 12.12.29 PM
Screen Shot 2022-05-03 at 12.12.29 PM1280Ă—244 21.5 KB

2 Likes
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Hey thanks for the data, Fig. I do agree that listing cLuna will benefit the Prism holders, however, it does translate better yield to Anchor too.

I have proposed an incentivisation plan on Astroport to bring more liquidity to the cLuna-Luna LP pair for a deeper stableswap pool. Having a deep pool will allow liquidators of Anchor collateral to experience lower slippages when they decide to swap out from cLuna to Luna. As for the addresses on LP, I can’t be for certain, but if I remembered it correctly, Prism seeded their LPs for cLuna-Prism and the other pools. Once the Astroport LP is incentivised, I believe most of the swaps will go through a stableswap cLuna-Luna LP instead. This actually discourages swaps via cLuna-Prism due to the higher slippage.

1 Like
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Wouldn’t listing yLUNA make more sense? yLUNA is a derivative which hasn’t something similar yet. Use your yield to borrow and still be able to use pLuna in DeFi or other applications.

5

As we get more Lunas, it might be useful to group derivatives under the names and logos of the base staked asset in the Anchor UI.

Imagine a simple Luna folder/dropdown grouping all Luna derivatives, potentially showing more info about each option and how to acquire it.

Also many people seeing wasAVAX are probably confused wtf it is and how to get it. If it was in an AVAX folder with the AVAX logo, it sounds a lot more familiar and encouraging - they can map it with what they saw on exchanges and coinmarketcap.

@bitn8 - have you guys considered this UI improvement?

Anyway, getting back on topic, the more quality collateral becomes available the better, so I support the proposal.

2 Likes
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Hey @NewDawn , it’s a fair point, and Hurley asked me this in Twitter too. I’ve initially thought about listing yLUNA as a collateral, but I favoured cLUNA over yLUNA due to the price stability vs LUNA rather than having an asset that fluctuates greatly against LUNA. If you’ve noticed, most if not all of the assets that Anchor has listed are derivatives of L1, which also shows that they tend to favour L1 derivatives.

Not only that, Prismswap yLUNA-PRISM & Astroport yLUNA-LUNA are both constant product pools, which will cause a high slippage should liquidators exit their positions for profit. This might deter liquidators due to the high slippage of the pools. I have recently raised a proposal to incentivise the cLUNA-LUNA stableswap pool on Astroport. This will help deepen the LP of the stableswap pool allowing liquidators to exit their position with lower slippage.

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Hey Kamil, that’s actually a good idea, having the UI demonstrating the methods to acquire those collaterals will be awesome.

1 Like