1/ Anchor public announcement #2:
Anchor will target 20% fixed APR.
This is by far the highest stablecoin yield in the market.
71
491
1,234
Conversation
2/ Wait, but how is this possible?
First, recall that Anchor lets you borrow stablecoins against your stake.
Instead of charging explicit borrowing rates, the system passes on your staking rewards to lenders.
1
9
134
3/ … With Luna staking yield at 12% p.a. and LTV at 50%, this means that the system is able to generate at least 24% staking revenue on deposits – more than enough to cover the 20%.
Replying to
4/ A concrete example: imagine Anchor has two participants, Bob the borrower and Luke the lender.
Bob locks up $220 worth of bLuna, and borrows 100 $UST . The system makes 26.4% p.a. – Luke is happy capturing the 20, and the system is happy taking the 6.4.
5
5
121
5/ Why 20%? Why fixed?
In order for Anchor to be widely adopted, it needs to offer a dependable yield. 20% fixed is a far superior UX compared to 18 ~ 30% fluctuating.
4
5
155
6/ $ANC governance will set Anchor’s target yield – it can theoretically be set to any number.
If staking reward > target yield, the excess funds are reserved.
If rewards < target yield, reserves are used – and ANC incentives increase rapidly to increase borrowing demand
1
4
107
7/ The ANC token emission algorithm to calibrate borrowing demand is inspired by the AIMD algorithm that forms the centerpiece of TCP –
Rewards hike quickly to stimulate demand when it is lacking, and slowly lower over time to return to equilibrium.
5
7
110
8/ I’m around in telegram for the next few hours to answer questions!
t.me/TerraLunaChat
Next announcement in 24 hours: how you can participate in $ANC distribution.
8
9
147
But what happens if Luna price drops by half? Isn't it dependant on price holding at the current level?
5
2
16
Is 12% returns on Luna staking based on Luna or USDT?
And if it's 12% on Luna, what if Luna price drops by 50 percent? (hope it doesn't 😁)
1
Replying to
OK so it's basically all dependent on the Luna price appreciating more than the inflation caused by the yields. If it doesn't, and Luna tanks, no one is going to be happy losing their principal to generate 12%.