1/ Thread on Anchor $ANC
Anchor is a savings platform that leverages liquid staking derivatives to provide a more stable and attractive yield then other lending/borrowing services available in DeFi.
Let’s explore how Anchor's 20% APY is made possible.
Anchor is a savings platform that leverages liquid staking derivatives to provide a more stable and attractive yield then other lending/borrowing services available in DeFi.
Let’s explore how Anchor's 20% APY is made possible.
2/ Anchor can achieve this through leveraging liquid staking derivatives. The only collateral available on Anchor right now is bLuna, bLuna is a liquid form of staked Luna.
bLuna and Luna are pegged 1:1, staking rewards are paid out it in UST to the bLuna holder.
bLuna and Luna are pegged 1:1, staking rewards are paid out it in UST to the bLuna holder.
3/ bLuna is liquid and still accrues staking rewards, increasing capital efficiency substantially as it can now be freely traded and used in Anchor.
Anchor plans to integrate more collateral options with the release of Col-5. Including stETH, bDot, BAtom, and bSol.
Anchor plans to integrate more collateral options with the release of Col-5. Including stETH, bDot, BAtom, and bSol.
4/ Now let’s take a look at how Anchor integrates this into their platform.
Anchor has two main offerings:
1. Earn/Save (deposit UST and earn 20% APY)
2. Borrow (collateralize bLuna & borrow UST)
Anchor has two main offerings:
1. Earn/Save (deposit UST and earn 20% APY)
2. Borrow (collateralize bLuna & borrow UST)
5/ Example
1. Josh deposits $100 of UST earning 20%
2. Chris puts up $300 as collateral in bLuna; in turn, borrows $100 (safe LTV ratio of 33%)
3. The bLuna collateral generates 45 UST through staking (APR of ~15%); this can pay Josh his 20% and Anchor takes the spread.
1. Josh deposits $100 of UST earning 20%
2. Chris puts up $300 as collateral in bLuna; in turn, borrows $100 (safe LTV ratio of 33%)
3. The bLuna collateral generates 45 UST through staking (APR of ~15%); this can pay Josh his 20% and Anchor takes the spread.
6/ Cont.
5. Chris forgoes his staking yield but can borrow liquid UST that he is able to invest elsewhere. Currently, he is also rewarded in $ANC tokens. As Anchor is incentivizing users to borrow against their collateral, bootstrapping liquidity for the protocol.
5. Chris forgoes his staking yield but can borrow liquid UST that he is able to invest elsewhere. Currently, he is also rewarded in $ANC tokens. As Anchor is incentivizing users to borrow against their collateral, bootstrapping liquidity for the protocol.
7/ Now let us look at how Anchor stacks up against its main competitors AAVE & Compound.
By looking at the current lending landscape it becomes clear that Anchor has a dominant value proposition. Below illustrates the 30-day lending average on DAI, USDC, & USDT.
By looking at the current lending landscape it becomes clear that Anchor has a dominant value proposition. Below illustrates the 30-day lending average on DAI, USDC, & USDT.
8/ Anchor’s deposit rate is ~12.7% (2.8x) more attractive than Compound & AAVE. We suspect that a significant amount of capital will shift into Anchor.
Anchor deposits have grown to $243m in just 2 months since launch. Conservatively we forecast the below market dynamic.
Anchor deposits have grown to $243m in just 2 months since launch. Conservatively we forecast the below market dynamic.
9/ Above is forecasting Anchor to grow from $243m to $2bn in borrowing. We believe this can be achieved with no new DeFi inflows and the Columbus-5 integrations.
In reality DeFi money markets have seen explosive growth over the past year $660m-->$39bn today.
In reality DeFi money markets have seen explosive growth over the past year $660m-->$39bn today.
10/ As a result $2bn in deposits could prove to be conservative.
When you factor in the integrations Anchor is looking to do with applications like @nashsocial along side Terra's own insurance protocol Ozone $O3 deposits could scale significantly.
When you factor in the integrations Anchor is looking to do with applications like @nashsocial along side Terra's own insurance protocol Ozone $O3 deposits could scale significantly.
11/ Questions have been raised on the sustainability of Anchors 20% rate and its token emissions.
We will attempt to address these questions and explain what we feel is the long-term fundamental value of the Anchor protocol.
We will attempt to address these questions and explain what we feel is the long-term fundamental value of the Anchor protocol.
12/ 400m ANC tokens have been allocated to bootstrap Anchor’s liquidity. Currently token emissions are near the minimum of 33m/year vs the max of 100m/year.
Emissions are expected to increase but they will likely last 7-8 years according to Aaysuh Gupta from TFL.
Emissions are expected to increase but they will likely last 7-8 years according to Aaysuh Gupta from TFL.
13/ In 7-8 years rates in DeFi will have compressed across all platforms.
The fundamental value behind Anchor is not the high APY’s rather, the technology and marketplace that allows one to substantially increase the capital efficiency of previously locked assets.
The fundamental value behind Anchor is not the high APY’s rather, the technology and marketplace that allows one to substantially increase the capital efficiency of previously locked assets.
14/ Anchor allows you to borrow against previously locked up capital, this market provides value in itself.
Having the ability to keep price exposure to the respective PoS tokens, while borrowing UST against them; provides users liquidity without triggering taxable dispositions.
Having the ability to keep price exposure to the respective PoS tokens, while borrowing UST against them; provides users liquidity without triggering taxable dispositions.
15/ Given Anchor is a new project, it will take time to find the optimal balance between the deposit APR, borrow APR and ANC token emissions.
Anchor is generating cashflows off the spread between the borrow and deposit APR, this cashflow is currently going to the yield reserve.
Anchor is generating cashflows off the spread between the borrow and deposit APR, this cashflow is currently going to the yield reserve.
16/ This gives Anchor flexibility to uphold the 20% Anchor rate for as long as its feasible.
ANC token holders can vote to lower the rate, the spread or use the yield reserve to subsidize the rate.
The Anchor rate is developing into the reference interest rate for all of DeFi.
ANC token holders can vote to lower the rate, the spread or use the yield reserve to subsidize the rate.
The Anchor rate is developing into the reference interest rate for all of DeFi.
17/ Over time the Anchor rate will move directionally with the staking rewards on Luna and other major PoS tokens that are integrated with Anchor (stETH, bDot, bAtom, bSol).
We are not expecting Anchor to be the best rate in DeFi, rather a stable and predictable benchmark.
We are not expecting Anchor to be the best rate in DeFi, rather a stable and predictable benchmark.
18/ A current headwind for Anchor is the collateral required to facilitate these loans. At a minimum (with current LTV rules) Anchor needs $2 in collateral for every $1 deposited.
Right now ~43m bLuna is being used as collateral on Anchor, representing ~13% of all staked Luna.
Right now ~43m bLuna is being used as collateral on Anchor, representing ~13% of all staked Luna.
19/ We would expect this ~43m bLuna to grow. But even 100% of Luna representing ~$6.6b the maximum this collateral could support is ~$3.3b in loans.
This is where it gets exciting with Columbus 5 and cross chain integrations.
This is where it gets exciting with Columbus 5 and cross chain integrations.
20/ Terra and Lido have indicated that they plan to add assets stETH, bDot, bAtom and bSol to Anchor after Columbus-5.
This significantly increases Anchors total addressable market (TAM), with the addition of these new assets it will allow Anchors UST deposits to scale.
This significantly increases Anchors total addressable market (TAM), with the addition of these new assets it will allow Anchors UST deposits to scale.
21/ In @d0h0k1 latest AMA he mentioned that after Col-5 Anchor will be able to accept other stable coins such as USDT, USDC, BUSD and DAI.
Users will be able to deposit these new stable coins into Anchor while in the background they are swapped for UST and earn the Anchor rate.
Users will be able to deposit these new stable coins into Anchor while in the background they are swapped for UST and earn the Anchor rate.
22/ With the addition of these major PoS tokens being added to Anchor, the rate will converge to a blended average of all staking rewards.
In turn, giving Anchor the opportunity to become a standardized reference rate for all DeFi lending.
In turn, giving Anchor the opportunity to become a standardized reference rate for all DeFi lending.
23/ This blended average Anchor rate is not determined by the demand for leverage rather the block rewards and fee accrual that dominant L1's produce.
This could be the benchmark in which all other DeFi rates are measured and begin shaping cryptos independent economic landscape.
This could be the benchmark in which all other DeFi rates are measured and begin shaping cryptos independent economic landscape.
24/ Summary: After Columbus 5 Anchor has real potential to become the reference interest rate for all DeFi.
Anchor provides significant value to PoS token holders by unlocking capital and earning more with their assets.
All driving significant demand for UST and burning Luna.
Anchor provides significant value to PoS token holders by unlocking capital and earning more with their assets.
All driving significant demand for UST and burning Luna.
END/
Thank you for reading and follow for more TeFi and DeFi content.
*Not Financial Advice, DYOR*
Thank you for reading and follow for more TeFi and DeFi content.
*Not Financial Advice, DYOR*
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