Anchor Semi-Dynamic Earn Rate Goes Live
The Anchor proposal for a semi-dynamic Anchor earn rate has gone Live and as we explore the proposal it doesn't actually change much nor will it have an impact all that greatly. There are a few changes coming which will impact earning as many may have noticed due to the reserves running low the reserve rate will drop to 18% APY a 1.5% drop from the 19.5% APY rate of yesterday.
The proposal maps out that as long as the accumulated funds continue to decline the APY will continue to drop to the new floor APY % of 15%. From there once it starts to increase in revenue from trades we will see 1.5% increases all the way back up to 20% APY. But this would require significant amount of funds coming into Anchor protocol.
Terra Form Labs to the Rescue
While the reduction in APY may lead many to thinking this is it for Anchor as many of us who have been around for quite some time know that the main focus of Decentralised Finance (De-Fi) is Liquidity Pool farming. Typically once the liquidity pool dries up people are off to the next farm to secure funds from.
But what we have seen previously from TerraForm Labs is they typically restock the reserve with funds that will last quite some time. If you're wondering or worried that this is "unsustainable" I recently touched on why it isn't in a previous post People need to stop freaking out about Anchor yield reserves, they're most likely not going to run out..
In summary, TerraForm Labs is still the largest bag holder of Luna tokens and in my Luna Pulse Check article we take a deep dive into how many wallets and how many holders there are. Current snapshot indicates there aren't many Luna holders and if you're thinking that's great, I'm worried about UST. Then you need to remember that UST is Luna because they are a pegged algorithmic stable coin. The more UST there is, the less Luna there is.
So the chances are we will see TerraForm Labs restock the reserve to full capacity and the APY will quickly rise back up to the 20% APY mark. What these new changes may cause is a more spacing out of how often these restock events take place buying TerraForm Labs more time to work and drive UST and Luna adoption until they no longer have to restock Anchor.
By then, Anchor may not even be needed.
No more Anchor airdrops
When Anchor launched to incentivise people buying Luna they allocated a weekly airdrop to everyone to bought and staked Luna which in my opinion was a great idea because it meant more people would want to own Luna to Anchor's native token ANC.
It also provides some good APY 10% for governance and close to 30% for providing liquidity although it once surpassed Pancake swap APY which is what drew in a lot of De-Fi hunters. Once Pancake Swap lowered their APY it wasn't too long until Anchor did the same.
In an attempt to prevent Luna holders selling Anc airdrops a recent proposal passed that put an end to the two year Anc airdrops and now the only way you can earn Anc is through borrowing and lending on Anchor protocol.
Same Same but Different
The Anchor changes are becoming quite concerning because the slight changes don't really change much except where people will move their tokens around. Where it was once profitable to stake Luna tokens to help validate the network this is fast becoming not really worth it.
To receive the Anc drops you just need to unstake your Luna and swap it into bLuna then borrow UST against it and deposit the UST for the Anchor APY and then you will also receive more UST and ANC tokens.
holding bLuna is the same as staking Luna in your wallet except you wont earn Luna or other stable coins or the growing number of cancelled airdrops. You will receive the whole APY minus airdrops in the form of UST.
Because bluna is still validated Luna and depositing loaned amounts into Anchor will earn you more APY than simply staking or holding bLuna. So the overall issue is not addressed.
However, people writing the proposals need to be aware that it is Anchor that has been growing Luna and without it, it is just another blockchain and people will most likely look elsewhere for higher APY. Because that's the De-Fi game.
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