[Release] Kallisto Finance Anchor Liquidation Vaults

:wave: Hello Anchor Community! :wave:

Kallisto launches as the first Liquidation Vault for the Anchor Protocol. The objective of Kallisto is to provide Terra Liquidity Providers with the easiest and most painless way to acquire the highest possible yield and the largest bLuna accumulation from the Anchor Liquidation queue. The Kallisto team would like to introduce ourselves to the Anchor community and offer the Kallisto vaults as a valuable addition to the community. Kallisto liquidity ensures that Luna and bLuna will maintain its peg and liquidation spreads will continue to narrow, encouraging more borrowing on the Anchor protocol. In the next few paragraphs, we outline the top three reasons we think the Anchor Community and greater Terra community should explore Kallisto, today. We also give a special nod to the talented team at Kujira that has brought immense innovation to the Anchor Liquidations order book.

Easy Anchor Liquidation Bidding

Terra Liquidity Providers seeking to participate in the Anchor Liquidation Queue must place bids into the single-asset, order book smart contract. This bid submission effort requires liquidity providers to engage in a painful struggle to determine in which of the premium tiers they should place their liquidity and for how long should they wait. Furthermore, liquidators need to actively monitor the status of their liquidation bids and manage their acquired assets post liquidation. Given the episodic nature of debt liquidations on Anchor, timing liquidations with liquidity placement is a painful exercise. Leaders such as Kujira now offer Liquidity Providers aUST bids that will collect yield while their orders wait for liquidations. However, that means that their liquidity is locked into a premium bid and unable to move quickly if liquidations suddenly cascade.

Kallisto introduces itself as an active Anchor Protocol Collateral Liquidation Vault. Kallisto bids are submitted and removed dynamically from the Anchor Liquidation queue. Signals from Kallisto’s Luna Price Volatility Oracle, are delivered to the Kallisto Cosmwasm contract which uses logic to determine where bids should be submitted or removed to optimize the largest bid position to collect the highest discount of liquidated bLuna collateral. Kallisto’s monitoring of the liquidation queue and delivering of sophisticated strategies means that liquidity providers capture a larger share of the vault’s alpha with just a deposit of UST.

No Fees until 25% APR Performance

Kallisto charges no withdrawal fees, servicing fees, or performance fees for liquidity providers unless the Kallisto vault successfully achieves a hurdle rate of over 25% APY on its performance for capturing liquidated collateral. The Kallisto team’s goal is to drive alpha into the Kallisto vaults with a high watermark that makes it easier to attract liquidity provider UST. Kallisto does not yet have a token as an incentive for the Kallisto team to further craft new alpha-generating strategies from its liquidation oracle and UST vault liquidity. The Kallisto team is excited to have the opportunity to build on its initial vault for bLuna liquidations while keeping the cost of the vault extremely attractive for liquidity providers of all sizes.

Preserve The bLuna / Luna Peg

Kallisto’s Liquidation Vaults aim to be a contributing member of the Anchor community. The vaults will not put sell pressure on bLuna price by immediately converting liquidated collateral back to UST. The Kallisto team believes in the longevity of the Anchor Protocol and Luna token. As such, Kallisto’s first Anchor Liquidation vault will hold bLuna assets for various bonding durations before liquidating the asset into UST. Sales from bLuna to Luna and UST will be optimized to maximize bLuna yields as well as to minimize the possible negative price impact on the bLuna / Luna peg.

Come Join the Kallisto Community

We introduce Kallisto to the Anchor community as a way to ensure healthy and growing borrowing and lending on the anchor protocol as well as responsible stewardship of bLuna assets and the Luna peg. We also introduce Kallisto as the new method for Terra Liquidity Providers to continue to increase participation in the Anchor Liquidation Queue contracts but with an easier interface and a new Volatility Oracle to manage bid submission optimizations that are not usually available to individual investors.

Kallisto’s smart contracts are not audited and currently undergoing active development. However, community members are welcome to test our Liquidations Vaults at https://kallisto.finance/. We invite the community to come to Kallisto’s Telegram channel community https://t.me/kallistofinance.

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Great to see this product. Will surely take a look seems great.

This is a really well-thought-out and structured product. I’m curious how you plan to maintain the 25% if your product is successful bids tighten to under 2%? Wouldn’t it make sense to not target a % return and calc this based on a dynamic APY and take x% fee from that return that is paid?

Also, do you plan to expand this to sAVAX and all other collateral types?

Well done!

Thank you. The APY is indeed hardcoded and will be changed to a live APY in the near future as we switch to realtime reporting. To get that current number, we ran a backtest using simulated liquidation events on Anchor for a one-year period, estimated trading costs and fees, and ran optimization to fine-tune strategy parameters. Going forward, we are monitoring and computing the returns of our vault’s live performance. Once the runtime is sufficiently long, we will immediately update this number.

The vault doesn’t charge any fees at the moment, but we’re planning to charge a fee based on actual performance as long as performance is above a set minimum threshold from our backtest model.

We are excited! There will be additional vaults coming soon and we are working with amazing teams including Terra and Kujira for new launches. Check out our events page Kallisto for upcoming events.