UST, Anchor & Terra eco updates
written by @speicherx
Recent market volatility has been significant, with Bitcoin reaching to sub 30’s and most alt-coins falling more than >60% in prices. Earlier this week, Luna Foundation Guard (LFG) announced that a $1.5 billion worth of Bitcoin secured through an OTC trade was added to the UST reserves.
As of 09/05/2022, LFG holds 80.39k Bitcoins worth $2.65 billion USD, 1.69m LUNA worth $102.86 million USD, and 1.97m AVAX worth $95.55 million USD. If you are wondering how the BTC and AVAX work in the UST reserves as third-party assets, do give my previous article a read:
If you have been lurking on Twitter, you’d have seen or heard a lot of noise about the apparent UST de-peg, flow of money exiting the market, and details regarding $2 billion worth of Anchor withdrawals.
Here’s the flow of events from what I understand:
- Terraform Labs removed $150m from Curve to deploy into 4pool in preparation for the next week
- A few minutes later, a fresh account bridged $84m UST to Ethereum (before TFL removed liquidity)
- The address terra1yl8l5dzz4jhnzzh6jxq6pdezd2z4qgmgrdt82k dumped $84m UST on Curve and then 108m UST on Binance
- Terraform Labs had to step in and remove 100m UST to lessen the imbalance
This caused a minor de-peg (~1%) which led to the onslaught of Crypto Twitter FUD on how UST as an algostable is destined to fail.
An excellent identification from /larry0x also revealed that the account is also a base account & not a multisig that manages over $200m of assets. Allegations quickly spurred up on how this was likely a coordinated attack by a few bad actors.
Anchor Withdrawals did not necessarily mean it was a capital flight caused by Fear, Doubt & Uncertainty.
Thanks to /pedroexplore1, he did a deep dive on the statistics to help us understand better.
His research showed that only ~12% of all Anchor unique users withdrew their UST out. Above is the full $2.7B that left Anchor.
As quoted:
75% of both net Withdrawals and net deposits came from ~1% of the wallets in each group. All with >$1M in net volume.
Withdrawals: 292 or 12% of wallets.
Deposits: 41 or 0.5% of wallets.
Retail withdrawals were only $200M, deposits were $45M.
He also noted that some of the wallets highlighted with big withdrawals have also brought UST back and deposited into Anchor!
This shows that UST was still treated as a safe haven, and most did not actually falter with market conditions. This could also be attributed to users wanting to avoid high LTVs and risks of liquidation by paying off their loans.
It would also be good to note that demand for UST is still growing at a gradual, healthy rate. Zoom out.
In response to these events…
Do Kwon & the community quickly stepped in to fan the fires and cleared up any untrue accusations concerning personal benefit.
LFG also announced the following measure:
- Loan $750 million worth of BTC to OTC trading firms
- Loan $750 million UST to accumulate BTC as market conditions stabilize
What does this mean?
Just like what the original idea with the UST reserves was proposed, this capital will be allocated to a professional market maker such that UST will be bought if less than peg and BTC will be purchased if more than the peg.
As the on-chain bitcoin reserve system is not live yet (but they are currently a few weeks away from a test net launch developed by Astroport team), this measure was set up as a discretionary approach.
As conditions stabilize, the loan will be redeemed into BTC to increase its holdings in the LFG wallet.
So what’s up with Anchor Protocol?
It seems like the reality of Anchor Wars will begin very quickly, as Prop 26 passes in light to replace the current voting tokenomics model from ANC to veANC.
This means that users will be incentivized to lock up their ANC tokens to get boosted governance power of up to 2.5x, creating value accrual. A ‘decay’ interval will be integrated, meaning that the veANC will be converted to non-voting ANC as it unlocks. Users will then need to re-lock again if they want to gain voting rights and the boosts.
The corresponding veANC parameters discussed above are also subjected to Anchor governance! If the community does not like these…
Minimum lock-up period: 1 week
Maximum lock-up period: 4 years
Decay/unlock interval: 1 week
Max voting boost: 2.5x
You can always come up with a proposal and shift it around!
This means that staked ANC will no longer have voting rights but will still accrue staking yields.
Also, Anchor Protocol also announced…
bSOL as a new collateral type asset recently.
This adds to the list of bAssets that users can adopt if they want to borrow on the protocol, alongside sAVAX & bETH.
Does Kwon also tweeted to look out for Anchor Forums next week that may be relevant to current concerns of sustainable UST yield?
This would be a favorable option; as it was previously discussed that using locked ANC tokens as a way to gain higher yields led to the following problems:
- Gamification of whales
- Barrier of entry — deterring newcomers, particularly web2 natives
- Technical difficulties for protocols that built on Anchor as a base layer
Leader of the Astrowars: Retrograde
If you have heard of the ‘Astrowars’, you’d have seen popular mentions like ApolloDAO, Orion, Spectrum, Retrograde, and Reactor. While some have pivoted and chosen their own techniques, Retrograde is currently taking winning strides as they conclude Phase 2 today.
This is ~60% of all DAO-owned ASTRO tokens!
If you need a brief read-up on how the mechanism behind Curve/Convex wars of which inspired this concept, you can refer to my previous article here:
NexPRISM Lockdrop: $4.68m deposited!
Another potential war?
From my understanding, a quick summary seems like pledging nexPRISM maximizes yields for a larger user base with imbalanced holdings of yLUNA or xPRISM (either or).
Besides Nexus creating an extra revenue option for scalable protocol growth and native buyback, users will be able to earn nexPRISM and Psi when they commit their xPRISM into an LP at optimal yield through the Nexus treasuries. Following such, Nexus will also provide farmed AMPS for the yLUNA vault and offer boosted PRISM incentives.
That’s all for this week!
Feel free to add the TeFi calendar into your Google Calendar here: https://www.speicherx.com/tefi-calendar
Feel free to join any of the Terra community groups I have created:
Singaporeans: https://t.me/sglunatics
Australians: https://t.me/australianlunatics
International (Chinese): https://t.me/terrachinesegroup
NFT: https://t.me/nftsinterra
