Where is the Anchor team? Why are they not involved here?
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I have a hard time understanding why borrowers have to be rewarded. Think about TradFi - does the bank pay you rewards if you borrow some money?
The borrower is not a liquidity provider. If you are pulling something out then it is your collateral. This does not affect anyone else (protocol) but just you.
Borrowers go away if they can borrow cheaper somewhere else. Anchor’s juicy 20% interest rate seems to be unsustainable. Otherwise, there wouldn’t be a need to inject a 70mil extra liquidity.
Hi Deepscreener,
Clearly it’s unsustainable because Anchor is attracting more depositors than borrowers.
“I have a hard time understanding why borrowers have to be rewarded. Think about TradFi -
does the bank pay you rewards if you borrow some money?”
Anchor functions by staking the collateral provided by borrowers (multiples of the amount borrowed) to earn a return and uses that return to pay depositors (that’s how it gets to 20%). If the borrowers go away, Anchor won’t be able to pay 20% to depositors. Traditional finance doesn’t work like that as banks don’t take your house from you and rent it out during the time you have your mortgage.
“The borrower is not a liquidity provider. If you are pulling something out then it is your collateral. This does not affect anyone else (protocol) but just you.”
I think you need to re-read how Anchor produces the 20% it pays to depositors.
“Borrowers go away if they can borrow cheaper somewhere else. Anchor’s juicy 20% interest
rate seems to be unsustainable. Otherwise, there wouldn’t be a need to inject a 70mil extra
liquidity.”
It is unsustainable which is why we are trying to change it. Though it would appear that no one wants to ensure the long term success of the protocol and is content to just collect 20% for as long as they can.
I guess we just have to submit proposal.
I think all ANC besides in someone’s wallet should be counted.
Also need a way to limit secondary protocols governance overpowering since they will most likely have the most ANC. I am not to clear on the mechanisms of governance. So this may or may not be an issue.
How about starting off at 12% for no ANC, and then for every 2.5% of your portfolio that is ANC, you get a 2% boost in interest? This could cap off at 10% ANC. Here’s what it would look like.
| ANC Token Holdings | UST Interest |
|---|---|
| 0 - 2.5% | 12% |
| 2.5 - 5% | 14% |
| 5 - 7.5% | 16% |
| 7.5 - 10% | 18% |
| 10%+ | 20% |
This way we still provide a fully liquid return of 12% to new depositors, who could then try out slowly buying more ANC. If we make investors have to fill a whole 5% of their Earn portfolio with ANC just to get a 2% returns bump, I feel like this proposal will fail. I think this scale is a good balance between the 10% you originally proposed for the bottom limit, and the more recent proposal of 15% for the bottom limit.
By offering the first “ANC holding” tier at 2.5%, we can let new depositors try out holding ANC to get a slight Earn bump. This allows new depositors to take a slow and steady laddered approach to try the varying interest rates that can be climbed up or down easily dependent on volatility in the ANC market. It also gives an easy to remember 5-tiered scale for investors based on their risk tolerance.
Additionally, I wanted to mention that the gated yield concept has my support. It allows pure depositors (those that area not borrowing as well) to contribute in some way to the protocol. Currently, depositors can take advantages of the free interest without really risking anything. The depositor issue is a free rider problem. Gated yield allows those free riders to increase the value of the ANC via holding it, which increases the value of borrowing, which is basically as beneficial as borrowing itself. If they just want to purely deposit and not hold ANC, they can do so as well, but they will get only 2-5% more APY than centralized competitors because they’re not contributing to the money market of Anchor. This alone should also help fix the discrepancy between depositors and borrowers, as borrowing confidence will definitely increase.
5 Likes
Great idea, let’s put a proposal together!
I have not read the white paper but here is how i interpret Anchor’s revenue model:
Income: Borrow Interest(~13% paid in UST) + Staking bonded collateral(~12% paid in bonded collateral)
Expense: Deposit Interest (~20% paid in UST)
Obviously the Income needs to be on a larger notional pool of capital.
The sustainability of Anchor’s 20% deposit rate is most dependent on the staking of collateral, and to some extent borrower’s interest income. It does not really depend directly on the ANC token value. As a borrower myself, I am participating primarily because i am bullish on the long term prospects of Luna and willing to HODL it via staking it as collateral and then borrowing against it to earn the 100% APR paid in ANC on amount borrowed as well as either using the borrowed amount to buy more Luna or redeposit to earn the 20% interest. ANC value may be sustained if there is some buy back mechanism using the revenue generated by the protocol.
In my opinion, long term sustainability primarily lies with the amount of collateral bonded and that depends on attractiveness of HODLing the collateral and using the borrowed amount to re-invest in opportunities within the Luna ecosystem eg. SPECTRUM, PYLON.
So, I was going to come here to post about this, but you did already. I learned about the protocol and moved some of my stablecoins to earn the interest. Then I thought I would try the ANC-UST liquidity pool to earn the 90% with some of my funds. I knew the risk of impermanent loss, etc. but I thought the bull market would continue and earning 90% was worth it. Anyways, here we are a few months later, and ANC is the worst investment I have made in crypto. Now the LP is earning 40% and ANC has dropped about 65% since I bought.
I will admit I probably got greedy and did not fully understand the ANC project when I invested. So what do you all think? Should I cut my losses from the LP? Exchange all my ANC and do something else with it? Or is there any optimism that it could turn around and I can recoup my losses while continuing to earn the interest?
I support this proposal.
not sure if possible to add this, just trying to anticipate problems further down the road:
Also need a way to limit secondary protocols governance overpowering since they will most likely have the most ANC. I am not too clear on the mechanisms of governance. So this may or may not be an issue.
I am in the same boat hopefully this proposal will change that investment around. I will hold my ANC-UST LP if this proposal is passed.
That sound like this would create good buy pressure, i support this idea
I only had a small position in ANC-UST LP but dumped the whole thing to buy Luna yesterday. I personally wouldn’t hold any ANC until some new support mechanism is agreed upon. It’s basically gone from $2 → $1.77 in the past few weeks and will likely fall further a vote can be passed to stabilize the currency. I personally voted with my feet and sold, so I would be a hypocrite if I didn’t advise you to do the same.
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I’m in the same boat as you. I’m primarily bullish Luna and use Anchor to leverage that bet. And you are correct that theoretically value of ANC does not have a direct influence on Anchor’s revenue. Unfortunately, we don’t live in a theoretical world and in practice, the continuous collapse in ANC price will affect the confidence, sentiment and actions of various actors within the ANC ecosystem. Here are the direct negative impacts of ANC’s price collapse that I can see:
- ANC-UST liquidity providers are abandoning the protocol @bpmccaff recently commented on whether he should pull out of the liquidity pool and I have to imagine he’s not the only one thinking of doing this (I have already pulled out).
- The continued collapse in the ANC price could cause both borrowers and lenders to leave as they might feel that their collateral is not safe within the Anchor protocol.
- Fear of a collapse of the Anchor protocol could cause more widespread selling of Luna as I’m sure some Luna holders have bonded it just to earn ANC rewards.
While I agree with your assertion that the long term sustainability lies with the amount of collateral bonded and that depends on attractiveness of HODLing the collateral. I think you might be underestimating the psychological impact and it’s effect on the “attractiveness of HODLing that collateral” should ANC go to 0.
Any thoughts or differences of opinion would be greatly appreciated.
Best Regards,
bM
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To summarize, this proposal is pretty much
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@bradp1234 ’s yield chart above
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And all ANC counts towards the % whether in LP Tokens, staked, or wallet.
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While I do agree some kind of ANC ownership interest incentive will help support ANC price, I think the longer term tokenomics of ANC is sound. ANC is sort of like equity in a bank where interest income is distributed to token holders via the ANC buy-backs and re-distribution to borrowers via rewards.
Current poor price action will likely continue as we are still in the year 1(217%) and 2(58%) high inflation phase of ANC token minting. Hopefully AuM grows much faster than the inflation as other protocols get plugged into Anchor. I think ANC is a hold at some point. In year 3 and 4 the inflation will fall 17% and 14% respectively before ANC supply stopped growing.
Hi all, here’s a different idea I’m thinking about to increase ANC’s value: Increase ANC value by whitelisting it as borrowing collateral.
Your feedback about anything I’m missing would be great.
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I think those who have sold $ANC will regret it in the long run. I can’t see Do allowing this to collapse something will be put in place to stop this. Already staking has increased to 9% although still not enough but it’s a start.
I suggest you keep hold and weather the storm. I think things will change for ANC just need patience at least that’s what I’m doing Do is heavily invested in Anchor so I can’t see it failing anytime soon.
For something to be put in place it has to be done here… through governance and voting. And the few suggestions I see aren’t coming from Do. It would be great if Do could chime in and give his thoughts though…