What Anchor Needs

With MIM Degen loop, we’ve seen before that massive leverage on aUST yield can lead to massive unwinds which often lead to cascading liquidations on anchor. In which case, the primary problem remains demand for Anchor loans for anything except pure speculation on the price of LUNA and crypto-native assets. The inherent volatility in BTC makes it a difficult tool at times to use, where LFG may be forced to buy high and sell low. Presumably, this is one of the reasons UST went off-peg to such an extreme degree in Curve, as shorters were playing on the liqudiation+BTC sell cascade.
For anchor to sustainability float, it needs to be a net-improvement on business. It needs exogenous demand for loans: i.e. as consumer credit, mortgage loans, basically all the traditional functions of a bank. To make this leap, it seems increasingly evident that Terra needs to make this eventual leap by incentivizing neo-banks to build on chain. Imagine for instance if Kash or Kado were the ones holding bLUNA as collateral on-chain and making USD loans to consumers (however, this kind of seems unlikely in the US, might be more similar to Eurodollar). This gives the cash flow to refloat UST throughout all times. Prob needs some form of lower interest rates and fixed-duration loans.


I agree, crypto collaterals are highly correlated and we should be exploring more stable options,

Lp mortgages are a good start, LP tokens are far more stable during major price movement and provide liquid yield for the protocol.

Isolated lending would reduce the contagion as well.

Flash loans at this point should be mandatory purely for assisting borrower repayment and should be fully automated.

Contract based lending provides the consumer credit analogue in a more safe and sustainable fashion.

Lastly we should pursue regulatory compliance in at least SOME jurisdictions, if anything, because that compliance is actually good and necessary to maintain trust. Even if we want to ignore it most users are consumers under some regulatory body and as such look to that as trust in the system. Last thing we need is people sue and regulators ban anchor triggering another bank run for a different reason. If it’s known to be legal in at least some area people will find comfort in that than if it’s illegal in all areas.

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For the most part, I agree on LP collateral and Isolated lending. (note: 4-CRV LP token would be excellent collateral). But I think contract-based lending would do much of the same. If, for instance, Mars was lending to Apollo or Spectrum, odds are is that they would simply increase exposure to more crypto-native assets. We still need to make the jump to real assets, as that is the only way to get your hands on real fiat. Anchor prob plays more of a role as a floating, non-national Central Bank where commercial lenders post collateral (fixed anchor debt -bonds) or other assets. The power of DeFi would be an innovation on the current financial system, where scarcity of dollars, etc can often lead to cataclysmic events globally. We could potentially offer a very elastic supply of currency to paper over the massive fluctuations globally: see Jeff Snider on this point.