This protocol needs to come to terms with reality

Why would we have such a low APY? The current sustainable APY sits a around 14% .
I think that the question we should be asking though is how to get anchor to offer a better service than those platforms though… Those platforms are centralized with their own risks, plus they filter a lot of users by requiring things like KYC or not allowing certain countries to access their platform

The incentive to come over here would be that anchor could still be providing one of the best stable, sustainable & predictable APYs of all DeFi. I dont know of any platform that has been able to offer such a consistent long term 19.5% (or 14% if it eventually gets lowered) deposit APY like anchor has been able to pull off for the past months…

I dont see how lowering the apr to 14% would cut off growth if it is stil a GREAT apy. In my eyes filling the yield reserve without a clear short to medium <term roadmap for anchor would be simply postponing the unsustainability problem. I dont really see how going cross chain would suddenly make a 19.5% sustainable…

I dont really understand how your proposals of a full reserve banking would really solve anchors unsustainability. Plus you would still have leveraged depositors sucking out your precious deposit APY thus forcing it to go down one way or another. As i have said numerous times, Defi unlike centralized platforms or traditional finance is borderless, this makes having exclusive & sustainable offers much more challenging if not impossible long term

I wouldn’t really get concerned. Let’s not forget that those stakeholders are investors who have their money at risk of deprecation. So they still have quite a lot of motivation to take action. Actually the larger their stake in the protocol the larger their incentive will be.

This is certainly an idea worth considering.

The one thing to consider is the dev work that would go into this because it would require a different aUST, say EaUST mechanism that wouldn’t be directly fungible with current aUST. Since it’s crosschain, that might not really be as big of an issue but does have some back-end parameters that would need to be figured out.

Don’t we have a chain bridge to ethereum? As far as I’m concerned people bridge UST and aUST through bridges… if this is the case you would have to change all ETH aUST to EaUST, thats impossible

The important thing, IMO, is to ensure that off-Terra Anchor is fully separate from on-chain Terra Anchor, so a hack, vulnerability exploit, etc. on off-Terra Anchor does not infect or have ability to in any shape or form impact the main Terra Anchor and its depositors and borrowers.

Obviously going cross-chain is a very high risk proposition: so many more points of risk and exposure. The only way to manage it well is to ensure that the off-chain Anchors are fully separate and not inter-connected with on-chain Terra Anchor, to avoid one such less secure chain instance hack or bug impacting the whole.

Easy. Simply disallow gaming and abuse, exploits that yield more than the published APY. Confiscate if not all then part of the ToS abusers’ funds. Reward those who report wallets that are engaging in such abuse (small portion of the slashing). Confiscated funds from abusers go into the yield APY reserve fund (majority of the slashing). Incentivize community to be vigilant for abusers and the results will be there, have no doubt. Instead of parasites leeching off the honest depositors, have a clear ToS that abusers forfeit if not all then part of their funds, and there’s likely to be significant replenishing of the yield reserve fund.

More here.

We need to come to reality that allowing intentional abuse, parasites leeching off the honest depositors, is not sustainable and will be the end of Anchor. Action needs to be taken soon to stop that.

If Anchor wants to truly stay defi we cannot have censorship related solutions. Satoshi didn’t stop double spending by banning errant users but found a way through clever design.

If we censor then we are no different from CEX or tradfi imo

That proposal is ridiculous and the level of regulation proposed is not only impossible and costly to achieve but mainly absurd.

Bitcoin has multiple levels of design built into the protocol to prevent abuse. Specifically in relation to spam and double spends. The variables they use have been amended over the years and can change again.

We don’t need to go around banning or censoring anything, we just need robust policies in place.

Anchor and TFL have facilitated the degen box with ETHAnchor. If it is causing imbalance (which it clearly is) then just lower the APY or disable it.

I don’t understand why UST is being delivered back into EARN from outside the Terra Ecosystem at all.

Does anyone have the stats on how much UST has been / is being delivered into EARN from off chain?

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Except that it’s proven to work for centuries and the only reason the whole Internet works is because of numerous measures in place to stop abuse. Being ignorant of how the world works and living in a make believe land rarely works out well… without basic sanity controls (most definitely best addressed through code, to the extent so feasible) the whole Internet wouldn’t exist, and no blockchain would have been invented.

Very true. All we really need is to avoid double deposit. That’s it. No taking aUST and putting it through some sort of complicated money laundering / leveraging / “magic” process and making more UST for deposit.

That’s it. Just like every crypto has provisions against double spend, Anchor needs a core (code if feasible) provision against double deposits (that can’t be gamed, fooled or otherwise bypassed).

I would think that the source of UST being deposited can be traced, even cross chain. That by itself won’t do it, but that may be a start and part of the solution.

then just lower the APY or disable it.

The solutions in my mind are more in line with the “no free lunch” approach. I agree with APY lowering, but in a tradeoff like manner rather than blanket approach.

Anchor is being taken for a ride because there is so much “free lunch” given out. What kind of investment gives you:

1. Immediate liquidity (no lock ups)
2. Better than equity returns
3. No price risks
4. Minimal cost (monetary or time wise)
5. (can't think of any others lol)

Something HAS to give. You can’t give free lunch like that forever because it WILL be unsustainable (seen in declining yield reserves). IMO Anchor should remove or nerf some of the factors above.

If you want to avoid any changes to depositor side, Anchor must do something about the borrowers DRASTICALLY.

Following the principles of finance, people should be compensated for taking risks (or some penalty). No free lunches allowed.

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I would say it is more like a “royal all you can eat banquet” for all.

There are far too many rent seekers in Anchor. I include the vast majority of those who park their stable expecting 19.5% and offer nothing back in return.

Significant changes need to happen, but it doesn’t necessarily mean the 19.5% has to go. It just means people have to offer value back (Time Locks or holding ANC tokens) to be rewarded.

The basic level instant access savings rate should be closer to 10%.

ETHAnchor deposits should be shut down. If people want access to EARN, they can bring their UST over and become acquainted with the Terra Ecosystem.

I include the vast majority of those who park their stable expecting 19.5% and offer nothing back in return.

Yes I am guilty of this as well. Humans are inherently greedy (nothing wrong, just human nature) and would always want receive more than they give. Any time we talk about giving back (not in a charitable sense but making tradeoffs or sacrifices) there will be push backs and it is expected. This classical tragedy of the common goods stuff.

It just means people have to offer value back
Agreed, there’s where all the brainstorming is about. I see it as a see-saw: you retain 19.5% but give up something in return. Or retain the current perks of Anchor but with a lower APY. The only way to have perks while having a high APY is the hardest as big changes are needed.

My controversial opinion is that if you sum up what we have discussed, Anchor should not pander to depositors so easily because the response will ALWAYS be negative (due to human nature). Depositors are elastic and sensitive. Imagine a not so distant future where the Reserve is exhausted, depositors would just leave without a care in a world leaving Anchor to crumble.

People, abracadabra isn’t the issue here. It’s just making the unsustainability problem more evident and happen sooner than expected.

The market forces will always trend towards equilibrium…

Adding unnecessarily complex steps to try and keep an unsustainable apy high is absurd and

Anchor roadmap should expect to have a really large divergence of deposit/borrowers ratio this making de deposit apy smaller. Thats how it is.

Want to make depositors apys higher? Make borrowing cheaper, safer, less cumbersome and stop filling borrowers pockets with almost useless tokens the bast majority don’t even care to hold.

We also have to realise that the markets dictate the rates. Nobody wants to borrow in a bear market no matter how attractive you make it.

Right now all my yields across my various farms and LP’s are down. Before the bear market (late November) Anchor was running at a surplus with 25-30% rates, increasing reserves and an abundance of borrowers.

I agree rates are too high and need tapering right now. We definitely need to be more responsive to changes in borrower / depositor demand and market conditions.

APY’s should be set on a month by month basis and perhaps even automated.

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There are 4.01B UST not lend out, Anchor should put this fund to bLuna to generate interest.

bLUNA takes 21 days minimum to unbond which make it highly illiquid.

4.01B UST not lend out and just idling, how about put this fund in UST and USDT or UST BUSD liquidity pool to get income? This could bring in a lot of fees.

That amount sits unused because borrowing is currently expensive. If the borrow aprs were more attractive people would borrow and we would see a very high utilization rate.

If you look at aave for example you will find that interests are so competitive that 80 of the deposits have been utilized by borrowers.

I dont know exactly what the anchor roadmap actually is. Using idle ust in other ways could be a potential path to explore but it would mean changing anchor’s entire proposition as far as I’m concerned. And borrowing is how anchor currently brings money to the table, so it wouldnt be a good idea