Redirect portion of borrower incentives to ANC-LP Rewards

Although the ANC-UST LP is better provisioned than what the protocol requires at this point, it is still important to the overall ecosystem. LP rewards are scheduled to end in March, and this cliff event will potentially cause liquidity flight from the ANC ecosystem, causing price volatility to the ANC token.

The borrower incentive pool is well provisioned for, but incentive levels are dependent on the price stability of the ANC token. A crash in ANC price that will certainly come about from an ANC-UST LP rewards cliff event will affect borrower incentives, which will cause a decrease in borrowers which will further affect the UST Interest rate pool. Borrower incentives are meant to incentivise borrowers which in turn, supply value to the UST interest pool, therefore it makes perfect sense to redirect borrower incentives to help stabilise the ANC price which in turn helps its own self.

This proposal is to redirect 1.25% of the 40% allocated borrower incentives to ANC-UST LP rewards for 6 more months of LP rewards at half the current rate. This will stabilise the ANC price by tapering instead of having a full cliff event and reduced ANC token price volatility. Lower LP rewards will help taper off the size of the ANC-UST LP, allowing to to fall to more manageable levels.

Please vote under governance.

This should be further worked out before moving into the voting stage otherwise it will likely suffer the same fate as the disable MIM degenbox. It would likely be heated too as borrowers and LPs are on the same side of the Anchor coin.

I would suggest looking at other lending protocols and how they are managing their cliffs. For example Larix has borrowers stake an equal amount of UST to their rewards and lock up into LP for 90 days to get the full reward benefit. Theres multiple threads like this as well as threads for increasing anchor value they should all be brought together in one thread and the ideas worked out by the community before any changes are brought to vote. I’m working on a thread for this so hopefully expect it in a few days.

There is merit to what you are saying. However I feel that we do not want to get into elements which are too technical and require significant coding to implement, we need to keep in mind the cost of implementation. We have just over a month to apply a fix, having to deploy another smart contract for this might not be in the scope of the dev team. We also do not want to get into designing schemes as we really don’t know what the net effect of all that will be. There are countless debates and suggestions to what we should do to help with the interest yield pool, but none of them are closer to being agreed on and the yield pool is almost empty.

My solution is simple and elegant, half the rate, half the time, LP volume will fall, price will definitely be cushioned to some extent, holding everything else in the wider world constant. We can only make so many assumptions.

We can’t overengineer the solution.