Savings app taking USDT/USDC/DAI deposits and using Anchor behind the scenes

Got a product idea and would love to get the community’s feedback.

Context & opportunity

At the moment, Anchor gives 20% returns to UST stablecoin depositors, which is fantastic, from what I understand better than any other stablecoin savings product out there.

The thing is, most dollar stablecoin holders use USDT, USDC or DAI, all Ethereum-based. These holders are used to these coins, they trust them and it would be hard to persuade them to jump ship to the Terra ecosystem.

The total mkt cap of these three ERC20 stablecoins is about $55B, 30x+ larger than UST’s $1.7B. If we could find a way to bring some of that $55B into Anchor, it would be incredible for the protocol and ANC & Luna holders.

Product idea

An incredibly simple to use app with a nice UI/UX that:

  • Takes deposits of ERC20 stablecoins a’la BlockFi
  • Converts the ERC20 stablecoin into UST behind the scenes
  • Deposits the converted UST into Anchor earning 20% APY
  • Allows withdrawals any time in the same ERC20 stablecoin

The value proposition for USDT/USDC/DAI holders is that they can make ~20% interest without having to wrap their heads around the Terra/Luna/UST/Anchor ecosystem.

The value prop for Luna and Anchor stakeholders is the potential to bring demand for billions of UST, and billions in deposits into Anchor, immensely growing the value of the product.

Question marks in my head

  1. How to think about insurance? While probably necessary for mainstream adoption, could it be possible to release a v0.1 without? This would de-complicate a proof of concept by a lot.

  2. What is a reasonable business model that covers the costs, including ERC20 <> Terra interactions, team compensation and other admin/legal expenses? A starting idea is to maybe offer 18% savings interest and keep the rest (20% sounds sexier though, wondering if there is any way to make that viable). Anyway, the concept comes first. If there is sufficient interest and the proposal seems solid, happy to model the financials further. Not sure yet how quickly an MVP can be launched and whether funding would be necessary.

Next steps

Please share your thoughts and whether you:

  • see any holes in my reasoning
  • see ways the idea could be improved
  • are aware of any competitive alternative solutions

Last but not least, I’m also a developer, got a decent amount of experience building mobile and web apps and I’ve been running a small software agency in London, UK. If there is a good amount of interest among the community, it might be possible for me to lead the project & development, particularly the UI/UX and frontend layers and the business side. Might need some consultation regarding how to engineer the relevant blockchain integrations.

2 Likes

I think this is a good idea except perhaps make this less ‘behind the scenes’. Afterall, do people really even care what USD stablecoin they are actually holding?

I suppose the biggest concern would be that we are not in control of how effective the other stablecoins are at maintaining their peg especially since large deposits and withdrawals will come when markets are volatile.

When the ETH version of Anchor is released, perhaps users can deposit any USD stablecoin into Anchor and it automatically gets converted (natively or perhaps through Curve.Finance) to UST (may even provide this trade for free given our incentives). The user should be notified that they are depositing in UST and earning UST. This would remove a considerable amount of liability risk.

We could then give the option to withdraw in UST or in their original stable coin (at some additional fee to discourage this and at whatever conversion price at that time).

2 Likes

Thanks a lot for the feedback @ZenDog , here’s how I’d think about your concerns:

do people really even care what USD stablecoin they are actually holding?

Yeah I actually think many do. USDT is relatively well known. Same with USDC, Visa is now using it. Both are available on major exchanges.

Thinking from the perspective of potential mainstream users, UST is new and unknown, promoted by some Korean company. It’s not on major trusted exchanges like Coinbase or Binance. It’d take a lot of cognitive effort to convince someone to trust UST. The value proposition of the app I have in mind would be allowing the users to skip all that and get to the good stuff (20% APY on their favourite stablecoin) in a few minutes.

how effective the other stablecoins are at maintaining their peg

Agreed, though there is lots of social proof and trust placed in them based on their $55b mkt cap. Lots of smart people ensuring they maintain the peg, so I’m not too worried.

When the ETH version of Anchor is released

You mean a clone of Anchor? Is there actually one in the works? Would it be from TerraLabs or some other team?

perhaps users can deposit any USD stablecoin into Anchor and it automatically gets converted

Absolutely, that’s the idea of the app. It would take care of USDT/USDC → UST conversion for the users, it would feel as if they’re making 20% on USDT/USDC without extra steps.

natively or perhaps through Curve.Finance

Yeah Curve is a good option, but just checked and the swap fees are horrible ($110) and IMO may kill the idea. An alternative in my mind is to use KuCoin and their API, they have USDT/UST and USDC/UST pairs. I know a CEX dependency would suck but in the short term it might be necessary? The ETH chain transaction fees should then remain under $15-20, something people are already used to when transferring on and off CEX’s.

Later on we could build up a liquidity pool much like Curve’s 3pool+UST and find a way to avoid giant fees, but perhaps this would not be required for a proof of concept.

The user should be notified that they are depositing in UST and earning UST.

Yes, totally, there would have to be full transparency regarding the technologies used under the hood.

Ideally this will come when more layer 2 solutions start to pop up. I see this happening in the form of a luna shuttle running these stablecoins i.e Ldai, Lusdc, etc and could be expanded to Adai Ausdc when atom and sol join the b assets here.

USDT is not backed (a scam), USDC is centralized, DAI is pretty cool, but UST is better and we should help users understand why this is.

https://docs.anchorprotocol.com/developers-ethereum/ethanchor

1 Like

Coincidentally we were drawing plans to expand EthAnchor - a gateway for depositing ERC20 wrapped UST tokens to Anchor - to support non-UST stablecoins with a fee attached on their yield. You can check out the EthAnchor documentation here. Once we spin out the relevant smart contracts, integrating with them should be a simple task.

Happy to share the documentations once they’re ready.

4 Likes

This would be an exciting effort to see built out - we have an initiative called EthAnchor that we had planned to work on, but we have not yet started - if you are game, would be preferrable for us to see this built out as a community led initiative.

Let us know if this is something you would like to pick up.

Hi @dokwon @ryanology045! We are working on a similar but more expansive idea: to provide access to Anchor savings to all users outside of the Terra ecosystem (crypto and non-crypto).
Firstly, we plan to implement it for Ethereum-based stable coins (USDT, USDC, Dai), then to expand it to fiat currencies such as EUR, GBP, and USD, with a debit card coming too to easily use your interest for purchases and payments.

We applied with this idea to Delphi-Terra hackathon and it is gaining popularity:

We are a team of 5 with devs experienced in Rust and Solidity. Could we work with you on EthAnchor/take it over - whatever is easier for you?

2 Likes

Oh cool

Please build it so we don’t have to

Amazing project!

Thank you for this and for the feedback! Really appreciate this coming from you. Yes, we will happily build it!

Could we catch up with the Anchor team on this? Who is the best for us to get in touch with?

Hi @Staker, excited to see this is getting built!

We’re happy to share thoughts and ideas on Orion/EthAnchor. Can you drop me a telegram message at @ryanology045 ?

Sounds great! Writing to you now

Hi all, thank you so much for the feedback & new ideas! Here’s a progress update from my side.

  1. The project now has a name: Stablegains and a landing page: stablegains.com. I’m thinking of the Stablegains <> Anchor relationship similarly to the Chai <> TerraKRT one: build on top of the tech package and deliver the value in a simple format, one that no-coiners wouldn’t be scared by.

  2. I found that the 20% rate might be too high to effectively promote with no-coiners. Most people I showed it to found it ludicrous and became immediately defensive. That is why for now I’m defaulting to 15%, also to get a margin for building a sustainable business and reinvest into marketing and growth of our Anchor-powered product.

  3. Everyone of course still kept raising questions about the 15%, so I wrote this article as a more accessible intro.

  4. I was happy to receive a good amount of interest in joining & helping build the project among some smart people I know, both on the engineering as well as BD/marketing sides. If this were to grow as a business, getting great talent on board should be possible. It is such a cool innovation that smart people would want to help make it happen.

Next, I’ll be promoting the LP and doing customer development. Feedback is very welcome. If anyone likes the page & product idea, and is willing to share - please do! And sign up for the waitlist!

Now, regarding EthAnchor

@dokwon, thanks for the idea (& for dropping by!). It makes a lot of sense for the ecosystem and there’s a good chance we’d have built a variant of it as part of Stablegains anyway.

@Staker, thanks for joining the conversation!

Initially I was unsure if as part of Stablegains EthAnchor would have been decoupled & reusable for others, which is what EthAnchor should be from the community’s POV.

However, as @staker is interested in managing this, is there an opportunity for me to support you, maybe help with testing? If you’re up for a chat, my telegram is kamilryszkowski. I was also thinking that EthAnchor might also be a great proposal for the Anchor Community Fund. I don’t see why it wouldn’t get support from the entire community.

Speaking of the Community Fund, I was also wondering if it’s sensible for apps such as Stablegains and similar ones to apply for funding. There are a few apps in different stages of development, including Stablegains, @staker’s Orion and e.g. Kash or Saturn.

In the case of Stablegains at least, funding would be a game changer. It would mean that a few team members and I could focus on it full time 10x’ing our odds of success for the benefit of the entire Anchor ecosystem.

From the Anchor community’s POV, the more shots we take (assuming we don’t bet on unreasonable proposals and on people with irrelevant backgrounds), the more likely it is that we will get massive adoption for Anchor, considering how big the global market is. Coding prototypes is fun & straightforward but commercializing them everywhere will be a long journey.

Considering the docs say “Projects that are value additive to Anchor and/or improve user experience are eligible for community grant funding” I am thinking of submitting a proposal shortly. Any feedback as to whether this is desirable & what the community would like to see in there - please let me know!

Sounds good @Kamil! I think the more successful projects are built for Terra - the better!
Let’s keep in touch. We’re going now through Delphi-Terra hackathon - will update you on our progress.

1 Like

Just saw this thread and it is exactly what I wanted to do as well. Great to see it already happening! There is no on-ramp solution for UST yet, right? Let’s say an API supporting a transparent EUR → UST swap, for instance?

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So excited to see this coming so fast. Behind on this build. Excited to see more!

1 Like

Re EUR on-ramp, across DeFi I am aware of Saturn | Tethys - Liquidity Pool Powered Fiat Gateway, which hasn’t launched yet, and then there are centralized tools like https://www.moonpay.com/.

Cool that you were thinking about building something similar! If you’re open to possibly working together, message me on Telegram @kamilryszkowski.

1 Like

Love it!

I have an idea that may help with the backend swap mechanism:

Problems:
First, please consider two current problems: 1) Anchor may have times of less-than-ideal economic efficiency when UST utilization ratio is low. How is the extra UST benefiting Anchor and not just sitting there? and 2) External mechanisms of swapping other USD stablecoins into UST both relies on that external service and can incur service fees and unpredictable receipt amount due to slippage.

The Idea:
Create a new Lend/Borrow pool that allows users to borrow UST when providing other USD stablecoins (such as USDT, USDC, DAI, etc) as collateral at a 1:1 ratio. (This occurs under the hood)
Borrowing the UST incurs perhaps ~2% interest, depending on natural supply/demand/trust in the provided collateral (e.g., FEI has shown to be unstable, so that would have a high interest rate if it were offered). That interest would go to depositors.
Anchor could be providing the UST with its unutilized UST deposits. Or, Anchor could allocate some of its UST deposits to this regardless of its fluctuating utilization ratios. It would be in Anchor’s best interest to help fund this to open more users to Anchor.

Benefits:
Users choosing to deposit non-UST stablecoins would instead earn ~18% APY, but also learn that UST could earn them even more (20%), and consider demanding UST directly (good for Terra ecosystem and LUNA).

Anchor could reach another revenue stream (that 2% interest), by utilizing some (not all) of its deposited UST. It could also help keep their utilization ratio high.

Orion Money does not need to rely on external swapping services, doesn’t need to worry about swap fees, and doesn’t have to risk slippage issues.

Cons:
I’m not sure that other USD stablecoins would be valuable to the UST depositor.

However, if those other USD stablecoins show to be desireable, then Anchor and/or Orion could also consider extending Anchor’s lending service to the other USD stablecoins. And as we all know, more borrowing is the best thing for Anchor’s long-term sustainability.