Thread by @IDKHurley

For those not aware, the value of $ANC is crucial to the current operations of @anchor_protocol in terms of it being the main incentive for borrowers through distribution apr.

We think we have a solution, this is gonna be a long one

$ANC 🧵👇

As a quick recap, the $ANC distribution apr is the sole reason to borrow right now.
Borrow apr is over 10% so without a high enough distribution apr, anchor quickly becomes an expensive place to borrow.

The amount of ANC distributed each epoch is currently maxed out as a result of a the utilisation ratio of anchor being below target for a while now.
This is a problem as it means if more UST is borrowed, existing borrowers get there rewards diluted (more expensive to borrow😩)

So in order to incentivise further borrowing, we NEED to increase the value of $ANC to boost this distribution apr.

This is a very cut down explanation for the sake of this thread but you should definitely go and check out our prop on the forums 👇forum.anchorprotocol.com/t/proposal-ter…

Our way of doing this is through tying the value of the ANC token into the earn side of anchor.
This ensures that as the growth in earn continues...borrowers are increasingly incentivised to borrow as it becomes the cheapest/easiest way to benefit from the growth in earn 💰

How?
We propose diverting 25% of the yield from earn to fund $ANC buybacks which are distributed to depositors. This is done until 5% of the value of the deposit in earn is held in $ANC tokens.

*5% to discourage over leveraging on borrow and to avoid liquidity issues on Dexes*

Right now this would equate to over $600m in $ANC buying pressure (higher than the current mktcap of $ANC)
More importantly, it would finally give $ANC some fundamental value. Decreasing sell pressure and increasing buy pressure from outside parties.

And thus...borrowing would rapidly become the best place to acquire $ANC, which would infact cause a mass rush to borrow and may lead to a quick resolution if people understand this fact.

I would like to note some other benefits...

Going back to the distribution apr...these $ANC emissions are only going to last until around march 2025 if they continue to be maxed out.
Our prop, through increasing the value of $ANC, would cause the gap between deposits and borrow to shrink...

...leading to the amount of ANC emissions starting to fall, like we saw in late 2021. The $ANC emissions projected back then would last for an additional 6-8 years. Our prop has the added benefit of improving the core value capture of the token so id expect even greater longevity

Another issue addressed in that of volatility
$ANC price tends to be purely speculative right now.
With our prop a floor is essentially set. As the price falls more $ANC is bought back. Falling prices tend to indicate a downturn, which leads to rising deposit rates in anchor...

...leading to a greater $ value of $ANC bought back at a lower price also. This would prevent this cliff like drops we have seen in the past, raising borrower confidence to hold onto this asset and thus keep the distribution apr steady throughout downturns.

Finally I would like to speak on manipulation
We all saw first hand how easy it was for a fund to buy up a boatload of $ANC in an attempt to force through their own (Awful) gov prop. Luckily we as a community stopped them, good work! 🥳
However...

...Anchor has $17 billion in TVL, all controllable by an asset with a $600m market cap, making it incredibly easy for large accounts to decide the future of Anchor.

This simply has to change and a rising $ANC price driven by improved fundamentals and more efficient systems...

...would improve the security of governance on the platform, which in turn improves the security of Terra as a whole due to Anchor's dominance in the ecosystem.

This is just a rundown and id suggest keeping an eye on the forums and our youtube for deeper insights
#Lunatic 🌖