Protocol Owned Liquidity - Solve all of ANC's problems at once

Not to seem like I’m getting on the POL hype train (actually…no that’s exactly what I’m doing), but I think this is an opportunity to solve both ANC’s inflation issue and ANC’s “who will borrow in a bear market” issue at the same time.

Right now, ANC is issuing inflationary rewards for the ANC-UST LP. It’d be straightforward, following the examples of other protocols, to instead issue ANC bonds at sub market prices with a vesting schedule of X in exchange for ANC-UST LP tokens. If this is done, eventually the inflationary rewards could stop, and the ANC protocol itself would be able to benefit from its own trading volume.

This seems like low hanging fruit to me. But we can go a step farther.

We can issue ANC bonds in exchange for bLuna. ANC could then stake that bLuna on its own behalf, earning staking rewards without needing to pay out ANC incentives, or dole out UST in a loan. This bLuna naturally would be staked in perpetuity, not just securing the network, but also supplying Anchor with reliable income, even in a bear market.

Protocol-owned liquidity is a welcomed invention in the defi space. That said, it does have some bear market concerns for me, mainly the protocol is long unhedged crypto beta which would compound even worse in a bear market.

Ideally, ANC-UST rewards will not be needed with more exchange and dex listings. IMO that is a more stable route to go down.

Current models of OHM and TIME work because they are using those discounted LPs to make markets and generate fees from that. They are also minting the token by backing the LP. It’s an interesting concept but would take huge dev resources to re-engineer anchor for a market-making structure when it’s more of a lending savings protocol. It also has a tremendous velocity which is something anchor needs to lower.

Do just suggested on Twitter that anc-ust rewards end once we get cex listing or two, so I think that’s the route that would be taken.

I really don’t believe adding POL to anchor would be the best idea, POL has inflation embedded into the whole system, rebasing is supposed to keep up with it but overly discounted bounds make dilution of holders a reality.

I’ve suggested this on another thread but I do believe that we need to incentivize over collateralized loans, the borrower has peace of mind and anchor gets extra yield, we stop paying incentives on borrowing alone but incentivize safe borrowers. Liquidations isn’t a feature that the protocol wants to be used, afaik, so this wouldn’t clash to hard with anything already being done.

What do you mean over collateralized loans? Aren’t they all overcollateralized?

They are yes, but some are under healthier LTV than others, Anchor suggests 45% as a safe level, I say we reward those maintain under 40% at a scale, the lower the LTV the more rewards are payed out (taking into account the amount of bLuna provided too).

Those loans are providing more staking rewards to the protocol than others playing it more degen style, liquidations pose a risk to the protocol (when no capital is available to liquidate ofc), so why not reward a safer approach and turn that into a selling point to deposit your bLuna.

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That’s interesting. I think then though you’d be punishing protocols like Nexus, which can safely maintain a high LTV.

I think being able to set up an auto repayment is the better answer to avoiding liquidations.

Anchor needs to worry about it’s own token emission and not about other protocols, Nexus can adjust the vault to maximize rewards vs Anchor Earn potential of the capital, if so they choose, and they will launch other strategies and stop being so reliant on Anchor token emissions.

Auto repayment is better no doubt, but I was discussing regarding token inflation and how one could tackle that, while promoting healthy behavior.