Time-locked staking aUST for extra yield

There is a proposal already up to enable staked aUST (saUST) [Proposal] Staked aUST

The basic premise of that proposal is that saUST gives higher yield than regular aUST, while giving up aUST composability - so this would mitigate some of the degenbox strategies.

I would like to discuss a variant of this, where saUST can be time-locked for extended periods (probably 6/12/18 months as possibilities).

This would solve two issues - firstly we would pay out considerably less on the Earn side overall (as probably most would not lock their aUST) making the protocol more sustainable.

Second, this locked aUST would make the entire ecosystem more resistant to a bank run/death spiral scenario on $UST, as multiple billions of dollars would be locked in Anchor and not able to be removed quickly. Even if only 10% of the Earn side got locked, that is $1.2B of $UST!

As for how much yield aUST and saUST should have, and how long the timelock should be, I’m not sure on these and would be open to community feedback.

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I love this, but since we’re in defi, what if the ‘degen’ protocols just modify their contract to approve saUST making saUST liquid and we have the same problem again?

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This is a question worth considering

Definitely one of the leading ideas in my mind, however probably with only 1-timeframe lock for simplicity.

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Please consider making the locked position either tokenized or an NFT so that a secondary market can open up. This would be like bond trading and could be very interesting and create new financial primitives, especially for very long lock periods!

already consider the NFT

Why this feels more like a measure to insure no bank run on UST rather than helping to fix Anchor?
Perhaps they know the BTC backing won’t be ready soon and ANC is the main breaking point for UST which holds 70% of the current supply.

It’s a smart way to lock lot’s of the funds (UST) in case there’s a crash, de-peg or just a general massive UST withdrawal. I would support this.

Just to be clear I have no affiliation with TFL or Anchor. There is no ulterior motive to this proposal other than what it says on face value - improve the long-term health of both Anchor and $UST.

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I agree with this proposal but would go one step further: require a minimum 30 day time lock to earn any interest on aUST with higher rates for longer lock periods. This at the very minimum would have softened the current bank run.

This will equate to a term CD that rewards loyalty and as opposed to a saving account where some flee at the first sign of trouble, at the cost of other more loyal depositors and endangering the entire Terra ecosystem.

These ‘CDs’ shall earn higher interest than the existing ‘saving accounts’ and with protection on its principle and interest earned (details below).

There shall be a penalty on early withdraws on these term CDs, forceiting interest earned and nulling all protection on its principle in the event like today.

At the end of the term, the CD holders should be made whole on both principle and interest regardless of market conditions. In the event of a UST depeg like today, the CD holders, upon maturity of their CDs, should be paid back in full in another stable coin such as USDT or USDC that is still pegged or in USD.

The fund in the CD accounts should be backed by real assets whose value stay relatively stable and un-correlated to UST or the crypto markets.

The total size of the deposits in CDs should be kept under the size of the assets available to back the CDs up. Once that size is reached, the gate shall be closed for the term and no more CDs can be opened for the period. This can make these CDs a much coveted product among savers, and over time, as the size of the term deposits grow, a fortress upon which to build a larger circulation of UST and which softens the blows from future attacks/attempts to depeg UST.

In the long-term prospective, creating demand for UST is key.

I think the issue is, in case of a bank run, majority of the “CD” holders will eat the penalty and still cash out. It would have to be locked in hard, with no way out before the term is up, for it to materially reduce the chance of a bank run. But on the flip side, there may be few brave souls willing to take such a “risk” after the recent (and still ongoing) debacle.

Agreed. That’s why the double and triple gaurantuee on the safety of principle and interest of the CD is so important.

In the event of a depegging of UST like this, the principle and interest shall be paid in full in another stable coin pegged to USD or in USD. People’d take a lower yield if they have to, but this gaurantee is absolutely necessary.