Thread by @AgilePatryk

1️⃣ Loan safeguard mechanisms
2️⃣ More dApps building on Borrow
3️⃣ Popular (and automated?) strategies that build on Borrow
4⃣ Higher LTV limit

/1

https://twitter.com/stablekwon/status/1485874118029635589

1️⃣ Loan safeguard mechanisms

Not my idea (original tweet from @doktor_make linked), but something @anchor_protocol team could implement on their own:

Users deposit UST / LPs / etc. to be treated as emergency reserve when LTV exceeds a given limit.

https://twitter.com/doktor_make/status/1485355646228836353?s=20

/2

This emergency reserve could be used to either pay down the loan, e.g. $LUNA - $UST LP could be broken down and UST used for repayment. $Or aUST.

Or it could increase the collateral, e.g. $bLUNA - $LUNA could be broken down, converted to $bLUNA entirely and provided to ⚓.

/3

2️⃣ More dApps building on Borrow

@orion_money
@alice_finance
@angelprotocol
@tiiik_money
@TeamKujira
@LoTerra_LOTA
@glowyield
@capapult
@TerraFloki
@loop_finance
@kashdefi
@WhiteWhaleTerra
@ApolloDAO
@StarTerra_io
@SuberraProtocol
@MIM_Spell

(+ a few more I surely missed)

/4

All of the above protocols have something in common.

They all use Anchor Earn or plan to launch a feature that builds on it.

Let's do the same list for protocols utilizing Anchor Borrow:

@NexusProtocol (live)
@neptune_finance (not yet live)

See the difference?

/5

Quite obviously, we need more dApps that build on Borrow side.

I am not quite sure why do we have such an imbalance - my guess is:

"It is much easier to just deposit to Earn than to build loan protection mechanism to leverage Borrow responsibly."

/6

3️⃣ Popular (and automated?) strategies that build on Borrow

I am not aware of too many strategies that capitalize on borrowed funds. @Shigeo808 is forging the path for the others having described his 2021 and 2022 strategy pretty well, with tweets, spaces and Discord. 👍

/7

We need more though... and automated, ideally.

Some safeguards (@NexusProtocol-style or mentioned in 1️⃣) that protect people would help too.

It is much better to choose when your position will automatically be closed (with LTV<60%) than have your collateral liquidated.

/8

4⃣ Higher LTV limit

Gov poll #4:
Increase bLuna `Max_ltv` from 50% to 60% to enable users to borrow 20% more while maintaining the same liquidation risk. This change would increase the overall capital efficiency on Anchor and would ensure Anchor’s sustainability long-term.

/9

That was in July 2021, someone crunched numbers on:

* what is the max 1min price drop of $LUNA
* what is the max premium on liquidation

Based on that, 60% LTV limit was voted as safe even in case of 26% 1min drop and 15% premium.

A few things have changed since then.

/10

Liquidity of $LUNA has grown (comparing **max** daily volume in July to **min** daily volume in Dec)

Binance: max ~$128m ➡ min ~$200m
KuCoin: max ~$43m ➡ min ~$142m
TerraSwap: max ~$8.6m ➡ min ~$11.2m

/11

@TeamKujira provided us (retail investors) with access to liquidation queues, driving the premiums down quite a bit.

It is very rare that the buckets above 8% get filled... and the max bucket premium used (to date, on Orca) was 12%.

/12

Not trying to say we *must* increase LTV, but IMO the conditions have changed enough to take another look at possibly increasing the limit to 65% / 70% / 75% / 80% / whatever.

/13

One thing is sure though - even if Do / TFL kindly splash extra $UST on the yield reserve, that is only going to buy us some time.

With $300m added, we might gain extra 6 months.

We need to do something or we will end up having the same conversation in July...

/14-end