Vincent Profile picture
Oct 22, 2021 14 tweets 9 min read Read on X
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 Image
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 Image
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. Image
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? Image
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 Image
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 Image
7.
While some may have concern on magically creating new $UST supply by leveraging collateral, let's look at how much $UST can be "created". Image
8.
LTV: 80%
Leverage: 10 loops (refer thread #2)
By depositing 100$UST worth, user can expect to get around 4x of $UST. This is not 10x! Image
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. Image
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 Image
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 Image
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.

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More from @yuenmun

Apr 28, 2022
What is $FRAX by @fraxfinance

How does $FRAX helps $UST & $ LUNA with Curve 4Pool?

A Thread🧵

Non-financial advice and based on my own interpretation
Frax is a partially collateralized, partially algo stablecoins. It has features from both USDT/USDC and UST.
The majority of us still prefer stablecoins backed by “hard” assets hence the 4Pool provides access for UST to swap against, especially during the UST contraction period.
Why do we need a new stablecoin backed by another stablecoin? Capital efficiency
Read 9 tweets

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