1/ May this bring enlightenment:
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So many pleb takes on @anchor_protocol may have to do a 
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2/ First, what makes Anchor different? It aims to solve two problems:
- Existing money market yields on stablecoins were too volatile for most people to use (hard to reason about savings return)
- Collateral is staked and yield bearing, thereby more cap efficient
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3/ Centerpiece of solving both problems is the yield reserve - if the effective money market rate is higher than the anchor rate (usually util rate > 55%), the yield reserve operates at a surplus, if not at a deficit
YR is continually funded by collaterals' staking returns
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4/ Recently as leverage started to wind down from crypto markets, deposits have gone up a lot and borrowing down
The yield reserve has been running at a deficit to maintain the deposit yield.
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5/ This has led a lot of people to worry: reddit.com/r/terraluna/co
Potential reasons why:
1) YR should always operate at a surplus - it should never be used
2) YR depletion will have disastrous consequences
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6/ I don't understand the first reason - YR was created to be used precisely in situations like this. Can't get upset about a mechanism fulfilling its existential purpose.
As to the second, if YR depletes Anchor will just operate like a regular money market ...
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7/ ... and with staking returns + ANC borrowing incentives it will still offer a rate of 15-16%.
If we were to get to this hypothetical situation, Anchor will *still* offer the highest ra return on stablecoins. By far.
It will be fine.
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8/ Narrowing the gap in between deposits and borrows is an important challenge, and more than anything has been driven by the slowness of adding more staking collateral.
It's not so much that leverage demand is going down, there is barely any luna left that can be locked
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9/ When we started anchor we took the strategy of:
1) building bespoke staking derivatives for Anchor
2) creating liquidity for said derivative
3) forcing users to bridge said collateral to the Terra chain from others to borrow and deposit
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10/ Too slow.
We are making changes in the next iteration of the protocol to be more flexible in the types of staking derivates that can be used (integration speed uponly)
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1/ I’m not a threadorrrrrr, but let’s talk about Anchor’s foreign policy and what it means for the citizens of ally nation chains.
Nb: this directly affects the yield reserve, which I’m told has the undivided attention of 5.5 gigabrains
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11/ We are also taking anchor to users on other chains instead of forcing bridging (e.g. most avalanche users want to borrow natively instead of having to bridge and set up new key management structures etc)
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12/ Goal is to drop luna dominance in anchor collateral under 40% by growing adoption of other assets - should grow utilization rate.
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13/ But in the meanwhile, I am resolved to find ways of subsidizing the yield reserve.
Anchor is still in the growth phase, and maintaining the most attractive yield in DeFi stable will strengthen that growth & build up moats.
twitter.com/stablekwon/sta
Stay tuned.
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Don’t wanna get another DM about the @anchor_protocol yield reserve. What do you want?
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14/ P.S. I've also been getting lots of DMs to comment more often on various takes on Anchor and Terra
It's not that I don't want to - just that if I did I would be spending all my time responding to random threads, and would prevent me from doing my day job
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