Raise bLUNA LTV to 80%

We clearly need to make borrowing more attractive for users. I think the interest rate has NOT been the major driver, but more so fear of liquidation.

Ideally we would give traders automatic risk management tools (stop losses, more collateral options, integration of Kujira tools into Anchor so that users outstanding bids for liquidations count towards their collateral), but all of this requires BUIDLing which can take time.

In the absence of these tools, raising the LTV % is the easiest way to mitigate users risk of liquidation. If we want to make sure we aren’t encouraging degen behavior, we could have make it so that you can only initiate leverage at up to 60%, but liquidations begin at 80%.

Thoughts?

5 Likes

The reason for not having yet a 80% LTV is not a lack of willingness but rather ensuring the safety and reliability of the protocol.

It’s not as easy as ABC and the biggest risks, as far as im concerned, are risks for high oracle spread data as well as they speed at which this data is recieved.

If you look at this post: [Proposal] Increasing the capital efficiency on Anchor
you can see that there had to be mathematical proof that the protocol was not exposing itself (and thus it users) to any additional risk.

We should probably expect this limit to be increased over time, but there is still work to be done.

I’m just a beginner so somebody better prepared may be able to give a more in depth explanation.

4 Likes

I wonder if specific projects could be whitelisted for higher LTV rates. For instance, Nexus actively manages it’s LTV. Nexus is still operating in safe mode, but after enough time and review in optimal mode, it may be a safe way to increase borrowing.

the concern would be, if Anchor don’t offer it, it provides opportunity for competitor’s to service that part of the market.

Perhaps you could price loans based on LTV brackets. ranging from 15% - 25% for higher risk takers. compensates the protocol and therefore investors, for the increased risk.

1 Like

I like this idea. If any shortfalls would need to be paid from reserve, why not charge people from 60-80% LTV a higher interest rate to compensate for the risk added to the reserve. This seems like a win/win.

2 Likes

It’s certainly possible. We just have to be sure that Astro brings enough liquidity to bluna and ideally by that time there will be Lighthouse liquidation protocol open to the public as well so we have more liquidation diversification to be safe.

1 Like

Raising the LTV would impact the interest rate paid to depositors on anchor earn. They would have to majorly restructure the protocol for that to be feasible imo.

exactly,

we are in a free market and in a cross-chain world anchor is the least competative money market. other Centralized and Decentralized options are far more competetive than anchor,

take larix protocol on solona, they pretty much do exactly the same thing as anchor but are far more progressed. They have LP’s as deposit options, they have staked asset options far greater than anchor, they have 80% LTV, they have negative 50%+ interest rates.

Anchor is going to be dead with competitors like that at the pace this protocol is going.

I’ve seen other protocols like spectrum on terra move much faster than anchor on delivering from community feedback, some not so simple options implemented with speed as well. It really is do-or-die. There is little transparency from developers to the community as well. I have little idea where to find what it is the dev team is working on atm or what their intentions are. Where to provide feedback other than here, and how we as a community can assist in accelerating our interests other than governance voting.

Can we offer Incentives for Astro bLuna LP or even potentially use it as a collateral?

1 Like

Also, we dont need to offer a borrowing LTV of 80%, we can offer a liquidation risk LTV of 80% and keep the borrowing LTV limited to what it is now.

4 Likes

You said the same thing and with different words. I dont know which part of jeopardizing protocol integrity was not understood.

You cant just do something out of whim and pretend everything to be right without even looking at how things work. Raising the LTV currently puts at risk the protocol.

IF you are convinced it does not put the protocol at risk, or have a proposal on how to solve those problems, then make a proposal on here and simply wait for the feedback of the community

1 Like

Bitn8’s comment was pretty much spot on what you were looking for. with enough bluna liquidity and lighthouse protocol it’s a feasible reality. Which goes with your comment of it being an eventuality.

Even if the proposal is passed, it’s not like it must be rolled out right away. bluna will get the liquidity sooner than later and I can see lighthouse following suit. Passing a gov proposal on it you could say would be a formality but it does lay out the community’s intention.

I don’t think it is as hard as your thinking to crunch some new risk calculations to see if we can do it. Oracle spread is the least of our worries atm since the Oracle had price failures that are still not addressed so I’m not even going to touch that as it’s a heated topic. I DO think in general however we should improve the Oracle and perhaps insure it’s data and possible failings.

If we can get this passed or a modification of this then I’ll have a lot more confidence in the governance’s ability to adapt.

Here is another thought. If someone’s LTV crosses 60%, they get a ‘margin call’ meaning they have 10 minutes to deposit funds to pay off their loan before they get liquidated. If it crosses 80% the liquidation happens immediately. This should prevent fear of wicks (encouraging more borrowing) but is still not encouraging high levels of debt.

2 Likes

@mel_man this seems to be a proposal to increase the overall use and health (borrowing rate) of Anchor.

While raising the LTV is one solution, I am curious how cross-chain discussions of Anchor will fit into this plan. How do we stay competitive within the Terra ecosystem - - but also the greater DeFi world?

A more general question - how would this LTV increase affect the protocol’s revenue?

This idea is interesting below:

Whitelisting certain protocols or addresses for expanded use of Anchor seems to incentivize more responsible behavior and mirrors mechanisms being created by Aave Arc (institutional platform).

How could this model fit into Anchor? Are there enough users such as Nexus to make this build worth it?

I think there’s a pretty good general consensus about the risks involved while at the same time needing to be more competitive with the LTV. Going cross-chain Anchor will have to compete with Comp and AAVE. Also raising the LTV helps the financials of the protocol.

This would add complexity to the protocol and probably not going to gain consensus.

1 Like

I think it’s time. Prop Raise LTV to 80% to be competitive with AAVE. And, we need to do everything we can to get borrowing better. This is another bullet.

Will need some data to model this to be sure.

Let’s go. Thoughts?

5 Likes

Let’s do it! Flipside will flash bounty this to our community to provide data for modeling.

Standby for results soon. Excited to help support this.

2 Likes

I think there will be a risk of liquidation illiquidity. In case of massive liquidations some liquidations could be left unfilled as there would be not enough bids…

Wasnt this the very reason why it wasnt increased past 60% last time?

If this is the risk that has to be mitigated, I propose that in case of unfilled liquidations anchor enters the game using the yield reserve funds to liquidate remaining debts at a low %, say 1-3%.

Eventually with flashloans (and doing proper math obviously) I speculate the LTV could be increased beyond 80%

What do you people think?

1 Like

There are 4.01B that are not lend out, what did Anchor do to those 4.01B UST?

Increasing LTV limits would give current borrowers more breathing room and allow additional borrowing for those who may want it.

There will always be users who max out LTV, but this would give those who prefer 30-50% LTVs a bit more breathing room and help them sleep at night.

Seems like good progress that could be made relatively quickly to help with the borrow side.

3 Likes