Thread by @yuenmun

1. Thread

Soon we will be able to collateralize $aUST to borrow $MIM on @MIM_Spell. Will this rekt @anchor_protocol yield/inflate $LUNA?

Thanks to @Route2FI & @danielesesta who first shared this upcoming alpha

2.
Probably nothing
This is #NFA. What you read below may or may not be accurate as I am a noob. But I tried to learn more out of curiosity. As usual #DYOR

3.
How it works? Generally,
Deposit $UST into @anchor_protocol get $aUST
Collateralize $aUST to LTV of your choosing and borrow $MIM on @MIM_Spell
Swap $MIM to $UST
Repeat step 1 to 3 above up to a maximum of 10x.

4.
Will this cause an unexpected surge in @anchor_protocol's Deposit pool? Can the 20% interest yield or yield reserve's runway be affected?

5.
Let's look at $yvUSDC, an interest yielding stablecoin currently on #ETH network. If this can be taken as reference, there could be only 54M worth of $aUST to be allocated for $MIM borrowing via @MIM_Spell

6.
By looking at current @anchor_protocol deposit as of 21 Oct, at 54M $MIM borrowed, which subsequently be swapped to $UST to be deposited to @anchor_protocol , there will only increase the deposit pool by 0.05%!

Yes the sky is likely not falling

7.
While some may have concern on magically creating new $UST supply by leveraging collateral, let's look at how much $UST can be "created".

8.
LTV: 80%
Leverage: 10 loops (refer thread #2)
By depositing 100$UST worth, user can expect to get around 4x of $UST. This is not 10x!

9.
As long as LTV and allowable #MIM to be borrowed using aUST remains controlled, the downside risk of creating money is limited. Or else we are no different than central bank printing FIAT without basis.

10.
As a community, we need to drive $UST usage. With more $UST in the system with controlled leverage, Terra's protocols will get more usage/adoption.

This benefits the whole Terra network if done correctly. Community needs to closely monitor the leverage so we dont get rekted

11.
I am excited on the following protocols who will be in Terra to make this alpha even safer.
@NexusProtocol : Manage LTV and liquidation
@WhiteWhaleTerra : Manage $MIM $UST peg
@NexusMutual : Insurance for Smart contract
@UnslashedF : Insurance for UST Peg

12.
Let me know if there is any holes on my view above. Happy to look deeper. But this is a gamechanger for me
Shameless Slide: shorturl.at/cfmAX

#IBC #MIM $LUNA #UST

Link to slide (Fixed): 1drv.ms/b/s!AhADu4xvFn…

On thread#6, the increase in Anchor deposit is 3%, not 0.05%.
Sorry I am drunk.