I was reading the Yield Reserve top up post from July and noticed Ryan mention the potential for making productive use of idle UST in Anchor.
We currently have over 5 Billion UST and approx 1.3 Billion (Degen box) which we know is completely stationary in Earn.
Are we able to put this to productive use to help support the Yield Reserve? It’s worth taking a look at Yearn or Origin Protocol how they use various low risk strategies for their token holders to produce a safe and consistent yield.
They have a team (DAO) that is continuously managing their yield strategy through various lending platforms (Compound / Aave) and LP (Curve / Convex) including liquidity mining reward tokens.
I’m not an expert in this area, but I am sure there is something that can be done to help supplement the yield reserves, specifically using static UST deposits. Perhaps even within the Terra ecosystem to avoid rotating that UST into other stables.
This post is just to spark ideas from those with far more yield farming knowledge, at scale than I have.
If we implement this right now, we probably wouldn’t even need to start looking at yield diversification for a while. It would immediately dig us out of this hole we’re in.
The advantage of the timelock means we can safely rotate these funds into strategies as deposits become locked in.
A combination of improved borrowing + yield diversification will make Anchor much more sustainable.
A large amount of time locked UST can also help buffer risks in the event of black swan flash depegging event - Locked UST means it’s unable to panic for the exits, with less pressure on LUNA.
Do you think time locks will really help at this stage? Isn’t the issue that deposits are massively outstripping borrow demand?
I mean, right now I personally wouldn’t lock into 30 or 90 because of the current state, but I know for a lot of people the “set it and forget it” part was a huge reason people moved to Anchor in the first place. I don’t see a lock-in necessarily deterring more deposits… happy to be wrong (sincerely!)
Yes, it will help address this issue. For sure it will drive out some deposits due to the instant side APY being lower. That’s probably a good thing right now.
It will not cause a panic as people will be quite happy to take the 30/90 options if they can retain their 19.5% APY.
The degenbox guys and others will need to adapt their strategy to accommodate the new time lock so they will have to eat the lower APY until they find a workaround.
It is probably the cleanest solution we have right now. It would need to be communicated carefully but I still think we should find a way to top up yield reserve to buy some time.
Fair points. I agree with all this. Yes, probably the easiest solution without heavily diluting ANC or rocking the boat. I posted a couple other more broad options here.
I think another alternative might be to put a hard cap on deposits and deposits per address. Might ruffle some feathers and could be circumvented by spanning across multiple addresses to eat up much of the delta between current deposits and cap. Which also seemed fairly clean to me. I could see some churn from it, but probably less than dropping APY and it might be the kind of churn we want (huge whales).
Another alternative might be to cap deposit velocity per address in order to gate it more (ie. only X amount per 24 hours, based on block time).
Honestly just spitballing at this point. IMHO this is very quickly becoming a pants on fire problem…
Anyway, the other post is probably a better place to hash that out in order to keep this on topic. Would be keen to hear opinions on whether it’s really feasible to put locked capital to work.
Related to that… Anchor could be an AMM liquidity provider on existing DEXs and have those fees flow back to ANC holders. Similar to Curve/Yearn. Then it would give ANC actual value.
All good points. At this stage all we can do is fire out ideas and trust the Anchor team can get things back on track.
I know they’re working heavily on the borrow side, but there are things than can be done on deposits as well.
Any action taken will probably take a few months to have any impact. I would like to see a Yield Reserve top up to calm the situation and buy time for the team.
I agree with locks as a mechanism because it gives anchor team more flexibility to invest the reserves into productive assets. They could invest the money into a MIM/UST liquidity pool for example, and they should be able to borrow some MIM to fund the position which would minimize the negative impact to peg.
What is the strategy behind giving any cross chain platform direct access to Earn? Surely it makes sense to bring all UST organically into Earn via Terra only?
Anchor is effectively the gateway to the entire Terra Ecosystem. Do we really want more rent seekers sucking yield from another chains?
We have already seen the destructive impact of the degenbox and it’s pretty clear we need to nip that in the bud. Even stuff that isn’t generally leveraged like Orion Money. It’s just more rent seeking that bleeds Anchor dry.
It is very clear that we are never going to be short of depositors, as long as we maintain yields.
We are still very early in DeFi and not much has been built across ecosystems (e.g. bATOM, bANC, bMINE, bKUJI, bWHALE, thorSynths as potential targets). The current TAM for building out borrowing services for yield bearing assets is massive and also hugely profitable. Therefore i think pursuing this is going to be great for the moment.
With this short term period of high yields, we can boost the adoption of UST, offer high borrowing yield, establish partnerships (remember the early vision of integrating web 2.0 apps like Qoo10), and build the Terra brand. By then we would have captured significant mindshare of regular users, and (hopefully) built integrations to many user-facing apps, Anchor would be the de-facto place to go to to access users.
Hopefully, Anchor will be able to add value to other crypto protocols, and ANC would be much more valuable. With that, there will be much more design space for how to sustain the deposit yields.
