LUNA Black Swan
Terra Bites introduced LUNA Black Swan: Terra’s Do Kwon Gives AMA on & Anchor Action Plan.
LUNA reached a low of $3.99 on May 23 before rebounding, sitting at $6.47 as of this article. Congestion brought the Anchor Protocol site to a halt for short periods of time, making it difficult for people to cover their positions.
The Anchor website wasn’t alone. Coinbase, Binance, Kraken, Gemini, and more experienced downtime, as well.
Ethereum DeFi became so congested that gas fees made it economically unviable for many people to save their positions.
🔹Anchor Liquidation Action Plan
The main piece of the AMA was an action plan for improvements to Anchor Protocol.
Liquidations are essential for Anchor Protocol to fulfil its core mission: to provide stable, attractive yield on stablecoin deposits.
However, the 30% discount on liquidations which was intended as a starting point has generally been the final discount. Bidders have no competition. And whales can acquire large amounts of bLUNA at a discount and make significant profits without much of a balancing mechanism.
🔹The team’s action plan for Anchor is to:
- reduce the bLUNA<>LUNA pool, making it impractical to use the liquidation strategy at such a large scale
- reduce premiums in general and force liquidators to bid for the premium they want to get the liquidation at
- work with the community to integrate auto-repaying loans
- work with infrastructure-focused node operators to add nodes for increased stability on Anchor Protocol
- add liquidation history/transaction history view to Anchor, displaying cost of liquidation and other stats
- ensure that the lowest liquidation premium will always win the bid
- release a mobile webapp deep linked to Terra Station mobile app, scheduled to ship Wednesday, allow Anchor positions to be managed on the go. (In addition, Terra Station app updates coming soon enable Anchor Deposit and introduce mAsset swaps)
- consider removing the Instant Burn option so that liquidators have to take on beta risk. The largest problem revealed in the liquidation system design was that arbitrators were all bidding 30% for liquidation, so they were incentivized to sell LUNA at a discount. $300 million in LUNA was market sold. Making liquidators bid for collateral will tighten the discount.
- continue collecting data. The community asked whether the deposit interest rate on Anchor should be decreased, so that the Anchor reserve is larger and/or lasts longer. But, as Do responded, yield is set by governance. Do thinks any proposal should be informed by trend lines based on utilization over time and advises more data collection.
- add bUSD, USDT, USDC to Anchor Protocol, within a estimated time of a month.
- add Lido Finance’s stETH and stSOL soon after. Collateral can be added for multiple assets to a single position, meaning a single loan can be taken out against multiple kinds of collateral.
What is Terra?
Terra is a public, proof-of-stake blockchain network built using Tendermint consensus and the Cosmos SDK. Terra’s suite of stablecoins is collateralized by the network’s native token, LUNA, which captures the value of economic activity on the network and is used in governance and staking.
📰 INFO:
https://medium.com/@terra-bites/luna-black-swan-do-kwon-ama-on-what-weve-learned-anchor-action-plan-9d3abdacaf02
