Suggestion: Short-term Enhancements for Anchor Protocol

I would even be fine with implementing a fee on the ‘Earn’ aspect. (Increase the fee to deposit and withdraw from ‘Earn’)

I don’t have enough information to know if this will affect 3rd party developers (Kash, Alice, Etc.) but I would gladly eat a higher fee to deposit/withdraw.

If we do it on the Earn side, I wouldn’t go over the 0.1% mark and would probably cap it at a certain amount, or maybe make it decrease over time to incentivize longer periods of deposits.

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It seems more feasible to implement it for depositors. If we consider a 20% APY that is ~0.05/day so 0.1% would be recovered in 2 days. It seems like a good deal for everyone.

I think that an ANC burning mechanism should also be implemented if possible. For this I was thinking of implementing a minimum borrowing period (e.g. 15 days). If a user repays the loan in less than the minimum period he will have to give back the ANC tokens received as rewards which will be burned.

5 Likes

I don’t think I like this. It feels like we’re at a point where there is so much market Anchor could capture, and I’d rather not deter it with additional fees. Perhaps a topic to revisit after more collateral types are introduced.

Yes! Decentralization and redundancy for oracles seems incredibly important. Just yes.

Sure. Seems like a good way to simplify it for builders.

bANC please :pray:

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Wrote a short thread in response specifically to #1 here, ser: https://twitter.com/0xUST/status/1460373504587620356?s=20

If Yearn hypothetically deposited $1b which I simulate here:

At 19.5% APY would make $190.5m that year, which translates to a $190,500 instant payout for the yield reserve.

Big Anchor fan, not so much fan of the fee proposed though :slight_smile:

I understand the need to enhance the value accrual mechanisms , but we should be wary of all protocols trying to integrate with Anchor, especially on the borrow side.

0.1% might seem small, but when automated strategies borrow and need to perform multiple adjustments a day related to a target LTV on Anchor, these will add up quite fast and will eventually lead to a reduction of the total borrowed amount in order to minimize the need for adjustments.

Why not setting a flat fixed fee instead ?

Keep in mind we’re soon going to reach a point where it will be more profitable to hold bLuna spot vs providing it as collateral on Anchor (that’s if the borrowing incentives don’t adjust up)

Same feedback on the longer term idea of providing tiered yield favoring ANC stakers: I likely would qualify as a ANC holder but we should not harm the core Anchor value prop (20%ish on your $ deposits)

The rest of the proposed improvements look great and i’d definitely support them in voting
Great work as always

1 Like
  1. additional fee => no. but we can think of redesign of 10% that goes to protocol stakers. we know that yield reserve is the buffer we need for rainy days. So let’s assume that in good days that buffers increases. Why not define that at 100m yield reserve size we increase the 10% to 15%. Then at 150m or 200m level size we again increase the % that goes to stakeholders. With that you control the pace of increase of yield reserve. Same would go in other direction (if yield reserve drops below certain threshold, it goes back)
  2. cool.
  3. cool
  4. cool
  5. cool, but let’s not design in over leveraged positions.
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Thanks @ryanology045 - much appreciated. Comments:

  1. Like many ppl who responded above, I hate the idea of adding a fee unless absolutely necessary. There are many other things that can be done first to improve profitability without hurting any stakeholders - whether depositors or borrowers.
  2. Sounds good, can’t comment on how urgent this is
  3. This doesn’t seem urgent to me, rather a very incremental convenience change. Could the team’s time be better spent doing something else? Maybe I’m missing something.
  4. Looks very simple, let’s do it.
  5. bANC (+ available as collateral) - yes please. Giving better staking yields to voters - disagree. This incentivizes people to spam random votes on matters that many of them wouldn’t bother learning about.

On priorities, here are some things that I didn’t see mentioned in the OP, which to me seem impactful/beneficial and could perhaps be worked on first (maybe I’m missing some key flaws):

  • Self-repaying loan - automatically use ANC rewards that are accruing to either pay down the loan or be added to collateral (maybe as bANC). This increases user peace of mind during the loan (they won’t be coming in regularly just to dump ANC and keep the LTV stable)
  • Net 0% APR time-locked loan - if people commit to a loan for some minimum period of time (say 3+ months) we can explore guaranteeing 0% APR. I’m not fully sure if this is possible tokenomics-wise, but if yes this would be a massive marketing win (Celsius offer 1% loans with strings attached, this is radically better - 0% sounds really sexy).
  • Add a bunch of new bAssets so that borrowing can be promoted directly to hodlers of each.
  • Otherwise simplify borrowing UX - enable it directly on other chains, abstract away the bAsset swap steps. Then promote it much more heavily. Even if only sustainable for a period of time, imagine how much awareness all of that can create.
  • Redirect rewards like ANC LP incentives (liquidity no longer needs bootstrapping) and weekly Luna staker airdrops (people don’t need to be reminded about Anchor) to more productive uses. Right now there’s ~90m ANC that could be more helpful when added to borrower incentives.

Meta comment: I’m not a fan of some ideas suggested, in some cases because of desirability, in others because of the degree of priority (if they’re expected to take a full 2 - 3 months). However, your understanding of Anchor is way better than mine and probably anyone else’s.

I’d love to see a sheet with cost/benefit estimates for all of the ideas mentioned here and other longer term ones, to understand what made you pick these to start with. The other day I was discussing this with @bitn8 , I’d be happy to help put something like this together.

3 Likes

I like your suggestions Kamil but I wonder if the self-repaying loan isn’t just automating the dumping process, if rewards are still payed out and sold on the market to repay, then the dumping won’t stop.
See my suggestion above for a dynamic APR on the loan, without paying rewards the protocol would adjust the APR (Borrow APR - Incentives APR = Dynamic APR), and in periods of negative APR the rewards would still be payed out.

I also like the idea of a time-locked loan and maybe there we could add the proposed fee for those wanting to pay early.

Agree with almost all except the 1st point.

Would love to see “Earn” include other Terra Stablecoins instead.

Are you a product manager or something? That was a great perspective.

I also like most of the ideas that @Kamil proposed, with some comments:

  • Self-repaying loan or dynamic APR should be an optional thing that borrowers can choose. We can see how it will work once implemented and see what is the right direction we should go.
  • I think this kind of “active” asset management is more appropriate to be covered by another ANC dependent dApp, i.e. Nexus protocol.
  • New bAssets: Let’s go for it!!
  • I personally prefer not to do any harm on LUNA itself, which is a root of ANC protocol. Maybe it would be a better idea to run a validator node of ANC protocol which utilize some portion of validator fees (3% of 5%) for additional airdrop similar to ORION protocol?

One additional suggestion is let ANC protocol have its own liquidity pool of bLuna-Luna and other bAsset related pools.

Item 1. A 0.1% fee does not appear onerous and shouldn’t discourage borrowing. I’m in favor of making the yield reserve more sustainable.
Item 2. This change is a must; all in for more decentralization.
Items 3 and 4. Both make good sense.

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I like this idea and also believe onboarding bAssets at a quicker pace would be more beneficial vs. a potential large release in January/February.

Seems that bANC and bAssets in general are the low hanging fruit and could be implemented at a much quicker pace vs. discussions that need to take place for ideas 1-4.

bETH was launched over 3 months ago, I think it’s time to diversify the collateral and leverage IBC and Wormhole since Ryan stated previously that there is now an optimized/more seamless path towards integrating bAssets.

Why wait another 3 months, let’s diversify the collateral and leverage the power of Terra’s cross-chain capability and start discussing the wide variety of potential bAssets!

2 Likes

@ryanology045 thanks for outlining these priorities.

A new Oracle contract seems like a no-brainer to me:

Chainlink and Band paired with other data oracles would greatly benefit the community.

I am struggling with the idea of the “flat % fee on UST repays”. Seems to deter frequent borrowing and repaying, creating a healthy balance on each side.

Redeemers make more sense to me; it seems to promote added liquidity on the Anchor protocol.

What are other ways to capitalize on the increase in user activity? Tiered supplying rates which at the lowest level includes a fee and incentivizes larger unit sizes?

I’m 100% against emergency protocol changes. It suggests that

  1. the team is unable to do its due diligence and proper testing of its code prior to release
  2. corners will be cut because it’s an emergency
  3. emergencies will/could cause other emergencies the emergency was supposed to fix

If you need an emergency vote on something you aren’t doing something right the first time. Why? I would rather you address the inadequacies of your existing system than rush fixes in that would be built on or amplify those inadequacies.

I don’t see it improving the protocol and it could lead to sloppiness and overall detrimental to the project.

I have around $20k on the platform, mostly in the ANC-UST LP Pool. My 2 USTcents:

  1. I hate the idea of an emergency protocol. The system should be designed to be antifragile enough to not need an emergency protocol. If an emergency protocol is required, it suggests to me that the system is running uncomfortably hot, and there’s an underlying misalignment of risks and rewards.

  2. I don’t understand why the ANC-UST LP incentives are so high right now (it was 40% for a while, now it’s 100%+). What was the logic of taking LP rewards from 40% to 105%? It doesn’t seem very “algorithmic,” and I liked the stability of your APY’s as opposed to Sushiswap and other platforms where the APY is pretty much a meaningless marketing gimmick. Don’t get me wrong, I love the fact that I am getting so much more issuance without the price dropping, but what was the purpose?

  3. As someone with a ton of tradfi experience and a modicum of crypto experience, I find the accumulation of different fees / rewards/ high issuance / buyback rate / etc. circular and confusing. You guys have a much better UI than most protocols. As we go from 2% global crypto to 20% crypto adoption, a comprehensible system in all aspects is really important to win market share. I feel like the accumulation of different fees, buybacks, etc. is adding complexity much faster than it’s adding utility, tho I don’t have a very good understanding of how all the parts of the system work.

  4. Where, exactly, is the ANC-UST Pool? Is it inside your Web app? Is it on a generic Terra station (since I can’t swap into ANC tokens on Anchor, it seems like I can only claim rewards or make UST deposits in the webapp.

  5. In the 100-105% ANC-USD LP APY, what is the split between distribution APY and fee APY? What was it when yields were at 40%? Did the transaction fee structure change?

  6. I think a lot of newer crypto users feel really gouged by fees, and your low fees are a precious competitive advantage. I’m against raising fees for things like buybacks, it is basically mortgaging a precious competitive advantage so that we can all enjoy a slightly higher ANC buyback; it’s short-termism. We should prioritize a low-friction, clean UX – they stay here partly for the low fees, and low fees incentivize lots of virtuous economic activity that isn’t viable at higher fee levels. Fees are like a drug, the marginal impact always feels low, but they are a very bad long-term substitute for genuine innovation and competitiveness.

Thanks.

Hi 4lex, I think I can add some comments to your question :slight_smile:

  1. I think the emergency protocol is a system to prepare any unexpected circumstance just in case, not to make people feel good. Why would you feel bad about preparing precaution measures ? I believe this is part of building antifragile protocol

  2. 125m of ANC-UST liquidity was withdrawn by big whale, lowering the total LP pool size which increased the LP incentives for remaining liquidity providers

  3. You provide liquidity to DEX, which is TerraSwap rn.

  4. APY you see from LP comes from inflationary incentives (= distribtuion) afaik. You can check trading fee and volume on Coinhall - Realtime price charts for the Terra blockchain

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Anchor definitely has to de-incentivize ANC-UST LP and allocate this emission to incentivize borrowers.
And please, stop air-dropping anc to luna stakers. Why anchor should incentive luna stakers? they’re not collateral providers. Anchor has to incentive collateral providers at most.

btw, I like the idea of making self-repaying loan.

We can use bANC as collateral and take

  1. staking yields from ANC, 2. distribution APR - to increase the collateral value, and lower the LTV at the same time.

And I’d like to hear devs thoughts on accepting LP as collateral ? I think this is what Mars protocol is doing, but why can’t anchor natively support this to increase reserve ?

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I just submitted this proposal about lowering the ANC voting deposit. Currently, Anchor has a higher deposit for submitting an onchain governance poll of 1000 ANC than both Mirror and Terra itself. Would love your thoughts @ryanology045.