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Some relevant background on Anchor, for the uninitiated. When Anchor is in a deficit (it makes less in profit than the interest it pays out), the excess comes from the 'yield reserve' (that Do Kwon altruistically topped up with $500m). This stabilizes the 19.5% rate. (2/11)
When studying Anchor's sustainability responsibly, one would analyze how much of the interest comes from borrowers/staking organically and how much comes from the temporary yield reserve runway. This would indicate how stable the ecosystem is in general. (3/11)
If the total 19.5% APY comes mostly from organic sources, there's less strain on the system as less smart capital will suddenly flee during uncertain times. If the borrowers are real, there's less risk of them suddenly pulling out large amounts of collateral at once. (4/11)
Hypothetically, what if I told you that five of the massive anonymous wallets we know and love comprised 50% of Anchor's bLUNA collateral at one point (out of 25,500) wallets? (5/11)pic.twitter.com/Hpt3EPzfvn
Hypothetically, what if I told you that some of the large borrowers were just letting their money sit in their account accruing millions in interest without actually using it? (6/11)pic.twitter.com/eKLf2WGEmZ
Inflating the Borrow side to make Anchor look more robust than it actually was would bring in an imbalanced amount of capital into the Earn side. The most sinister part is, even the best researchers who understand Anchor's revenue sources cannot 'DYODD' to unconver this. (7/11)
If someone inorganically inflated Borrow: who? Why? What did they stand to gain by pulling billions into the Terra ecosystem under false pretenses? Instead of slow, stable growth, this would move fast and break things, creating a system far more vulnerable to collapse. (8/11)
These wallets are quite old and some were funded with millions of LUNA years ago. I'm still exploring some links, but it doesn't matter if they were TFL employees or early VCs/megawhales. Both are bad. Both would be defrauding retail, if what the data suggests is true. (9/11)
PS. About the 'algorithm' - Terra's primary economic algorithmic promise was that you could always redeem $1 of LUNA by burning 1 UST. That algorithm has now been turned off. The algorithm was a lie. This is not something you can research about and know in advance. (10/11)
PPS. For the techies - here is some in-depth analysis potentially pointing to the fact that in 2021, TFL employees were exacerbating cascading liquidations to pick up cheap LUNA using their privileged liquidation engine. Thoughts? (11/11)https://forum.anchorprotocol.com/t/anchor-protocol-how-the-dev-team-rigged-liquidations/1045 …
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