i think that idea would be a great initiative, would make it easier to track actual gains from looping.
My point being was just that you could see people could take advantage of having 3 protocols with aUST as collateral and deposit into UST where it benefits them and aUST where it benefits them and thus keeping the borrowing interest rates low on all protocols and put pressure on the UST peg -
not claiming to be right just seeing the wors-case scenario infront of me - but i like your idea of releasing an app and i think its a great initiative ser.
us having different views is what makes governance great though so i hope no hard feelings, as i said this is not aimed to be negative towards you, and I like a lot of your other posts
I think aUST is problematic for the following reasons:
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It is a derivated from a Token which you can lend and borrow. This on its own is fine but in combination with the other reasons it becomes a problem. The main issue is that it lowers the risk to basicly 0 when used with the token it is derived from.
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The value accrual of aUST does not benefit the borrower. When borrowing derivated token, often the borrower has some gain from it. You get fees from protocols or you can lock it up to farm staking returns, etc. But with aUST and the way it is designed there will be absolutely not borrowing demand. On the other hand the lender of aUST gives up 0 opportunity cost, he can still earn the 20% on his collateral.
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The subsidy of ANC earn. Even with the potential loop strategies that could be created, sooner or later the market would solve the problem. With increasing interest on UST on mars and a drained ANC yield reserve the numbers would make up and balance out the loop strategy against others. The problem here is that ANC-earn is used to draw non-Terra users to terra and with a earn rate > 20% it wouldnt be that attractive anymore.
Soultions might be:
- Do not allow to borrow a token against a derivated token and vice versa (probably hard to implement)
- redirect the aUST-gains to the borrower, not the lender (hard to implement)
- just implement aUST and wait until yield reserve is drained for everything to balance out
- donāt implement aUST (although someone else might do it in future)
@mivex39441 has more or less answered concerns of your reasons.
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Risk is not 0, aside from technical risks, the price of other assets could change and cause your liquidation, even UST de-pegs sometimes, and who says only derived token will be used for borrowing, look at how many people use it on mirror protocol, the reason why people like to use aUST, is that it is insurance against borrowing interest rate.
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as @mivex39441 said, people wonāt need to borrow it, people would use it as collateral.
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as @mivex39441 said if you look at edge, looping doesnāt work on markets like edge and mars, only on markets that have static interest, that is Kashi markets like abracadabra. ANC-earn is used by more than half of projects on terra. And there is far more on terra than just Anchor-Earn, to draw new users. MIrror for stock exposure without any KYC, Prism is in my opinion most revolutionary protocol, and people who are in crypto come here bcs things just done better, DAOās have higher quality over other networks, and you donāt have 1 original and 20 forks, like on AVAX, BSC and FTM.
My take on your solutions:
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This is good solution it prevents looping, and I think it is not hard to implement, but what is point of it currently there are only two assets, UST and LUNA. But I still agree with it.
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This would just be negative interest for the depositor, and positive interest for the borrower.
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I agree with this to, anarchy is a good thing. You have to die, in order to be reborn.
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I disagree with this.
I donā want to go too deep into offtopic here, but I think you underestimate the role of ANC earn. Terraās selling point is a stablecoin which you can use in its dAPPs. Currently 11/15 UST are locked in ANC earn. If ANC earn failes to deliver this can be a big problem for the UST adoption, since now two thirds of all UST are now ānot neededā. Of course the real effect can only be assumed, but TFL putting 500m in the yield reserve leads me to believe that they came to a similar conclusion. Also the hesitation of Delphi Labs to enable the loop-strategy on Mars, even though it would mostly be a problem for the other ANC depositors solidifies this thought. Imo they want to protect the 20% to not hurt the terra ecosystem while itās still growing.
I would also prefer solution 1, but it has some technical implications that are hard to solve. Do you want to forbid borrowing of UST if someone already used aUST as collateral? Do you want to have distinct pairs of collateral and borrowed token? This comes at a cost for the user since a shared collateral pool might prevent liquidations. Also users may work around this and use other stablecoins, which are not UST-derivates and thus would not be forbidden or create a loop in combination with another lending platform.
Obviously all of this is only relevant if you add more tokens to mars, but I guess that is only a matter of time.
what if just adding aUST as collateral but you cannot borrow any UST with it? Something like mirror, am i saying something bad? If it is bad nevermind
I agree with you on first part.
On second. If you deposit Luna you get your borrow limit and it applies for all assets, but if you put aUST you get new borrow limit that increases everywhere except UST.
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Donāt see all the problems you have.
Adding aUST would increase the the amount of UST borrowed from the protocol immensely, thus increasing the revenue of Mars protocol immensely, which should be the top priority.
So what if it drains Anchorās yield reserve? Thatās a problem for Anchor, not Mars. Doing what is best for Mars should be the priority.
Problem is basically not that it wouldnāt be good for Mars, the issue is that it could be a UST problem and thus the ecosystem, which in turn would affect Mars as wellā¦
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The thing is if UST depends on anchor, then this is not a decentralized system at all. And as @skyvell said this would be great for Mars, especially to bootstrap us.
good idea. This will create a lot of liquidity in the red bank.
They are axing aust fungibility in favor of saust on Anchor.
Also Iām a stakeholder of Anchor so right off the bat Iām voting no to this, its a conflict of my interests.
With that being said, if UST rate goes above 5% on mars I will move my collaterals back to Anchor. So while you would be acuiring aUST in the bank you will be losing Luna since borrowers will go to the most competetive protocol for borrowing UST, and that is Anchor (at 10.46% as we speak).
You need to look at the money market and what will improve its health, not just rampant degenerate nonsense. There is no advantage to aUST on mars apart from dividing the community and arbing the Anchor earn rate. Which of course is not even going to last another 2 months so what exactly is your objective with the proposal.
Mars is doing fine and growing organically without aUST. We could just create our own aUST if desired. Fund our own yield reserve as well cause why not? Iām sure if we applied for funding from LFG they would give us some like they did with Anchor.
Also some other notes: I found out about mars from the airdrop, my own skin in the game is the airdrop (never sold it lol). Apart from that Iām a frequent borrower.
Yeti finance is already enabling aust and other mim level strategies, it serves no purpose here.
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