I think the reasons why Anchor needs Nexus are less technical and more marketing related.
Anchor has an enormous share of the TVL of the Terra ecosystem. This is problematic for the brand of the whole blockchain: Terra/Luna is currently a one-trick pony from a marketing perspective.
Anchor has been unable to do anything about their sustainability gap for far too long. There needs to be a momentous course correction that shows to the wider crypto audience that there’s more to Terra/Luna than just Do Kwon topping up Anchor’s reserves.
Nexus has a proven track record of algorithmic LTV management and yield generation, and with the launch of EthNexus it will also be a standout player in bringing new investments into the ecosystem. You’ve done already done the legwork.
Nexus is already doing what I’m proposing here – using Anchor deposits to generate yield for asset holders with one-click strategies, while improving Anchor sustainability. The issue is that the underlying bAsset scheme is completely underpowered.
A strategic partnership with Anchor would be the kind of cornerstone announcement that would launch the whole ecosystem to the next level. It would showcase a community that’s truly implementing 3,3 strategies together, and introduce a compelling new narrative to spark the imagination of crypto investors everywhere. Anchor’s mass appeal and adoption number combined with a protocol that has a proven track record in the game would make for powerful headlines.
"BREAKING: 60% APY for ETH and sustainable 20% APY for UST – Anchor/Nexus is the new power couple driving Terra/Luna to new heights"
Once we get Do Kwon excited about this partnership, off to the moon we go, baby!
This is a thoughtfully crafted proposal that imho fits very nicely with Terra’s vision, Anchor 's current challenges and Nexus’s ambition. In other words the missing component to make Anchor Earn sustainable at 20% APY long term powering the whole ecosystem to a whole new dimension.
Thank you very much @pebakesa for putting this on the table and @Pippellia for always considering inputs from the community.
Anchor Borrows vs Deposits are highly unbalanced and while Borrowing adoption will increase overtime so does the adoption for more Deposits due to UST increasing popularity and already increased cross-chain liquidity, hence Anchor will most likely not be able to resolve its solvency challenges this way alone.
This LP strategy that leverages Anchor Earn illiquid capital if not by Nexus, will definitely be explored by Anchor and/or other protocols at some point because it does not make any sense to hold ~$19 Billions doing nothing and exacerbating the fear of protocol un-sustainability at the same time.
Two question for you :
1- In your scenario, would it be up to Anchor to automatically match the Nexus LP Vault with unused aUST ? Or did you envision an OPT-IN button to Participate in Liquidity Provision similar to the Participate in Liquidation button on the current Borrow Page?
2- If automated by Anchor, what happens if Anchorist depositor decide to use its aUST as collateral on Mirror protocol for instance or bid its aUST in Kujira for liquidation participation purposes?
Nexians are now used to fluctuating APR when entering in Nexus vaults as they value the LTV management and liquidation protection services provided, so assuming that @Pippellia ’s points are addressed 1)withstand a bank run 2) easy to determine the risks, then I believe this should be put forward in Nexus priority list and discussed further with the Anchor team/community.
In theory, the deposits should automatically be used to generate yield according to the predefined ruleset – just as they are loaned out to borrowers today. In practice, the transition would have to be very carefully managed to avoid upsetting depositors; the strategy very clearly and openly vetted, audited and discussed by the community before setting up the governance poll.
I will certainly be much easier to build stand-alone LPMM products that people can independently opt into: a strategic partnership with Anchor would be quite the can of worms. Nevertheless I think teaming up would not only prove to be a lucrative venture, but that it is also the responsibility of Nexus, as a part of the Terra community, to do what it can to help make the ecosystem sustainable. Anchor becoming unmoored would unmake all that Nexus has built here, so there is a stark imperative to take action when there’s opportunity to do so.
I don’t see why that would be a problem any more than it is now, but perhaps I’m missing something. Could you explain your thinking further?