Anchor is an excellent product but definitely needs an update given the current market conditions and the challenges identified after go-live.
I would add certain features for boosting the value of ANC token by implementing several use cases for it. There are currently very few use cases for ANC token and several users came up with different ideas.
People currently identify Anchor with hi-yield UST deposits but it is more than this. The most appropriate upgrade would be leveraging the earn APY with the amount of ANC tokens staked at governance. But I am sure there are other use cases for the ANC token in order to boost its value and make borrowing attractive.
To start off, the key issue of Anchor is the demand imbalance between borrows and deposits. The upcoming features addresses this in two ways:
Algorithmic adjustment of long-term Anchor rates - gradually lowers deposit yield to a sustainable level
bAsset vaults & the liquidation queue - increases borrow demand
Combining 1 and 2 would let Anchor to find a better equilibrium state with the current borrow and deposit demand.
Going over some of the other questions…
An algorithm that targets a certain yield reserve level will be more fitting (this “reserve level” should be set as some % of total deposit size though). UST in the yield reserve are basically left unutilized (not used for yield generation) - it would make sense to only keep the minimum amount required to sustain deposits for an X amount of time.
The target audience for bAsset vaults won’t be speculative yield-farmers, but instead be long-term holders of Luna and ETH that wishes to earn extra yield. A market fit can be found as there aren’t much ways to earn yield on Luna/ETH. ETH on Compound earns 0.24% APY and on Aave 0.03%. bETH vaults with Anchor can provide yields that are magnitudes higher.
But imo boosting borrow demand via bAsset vaults would be considered as a short term measure. Crypto lending markets are highly susceptible to market cycles and have difficulties in scaling. That’s why in the long run, Anchor would have to seek to diversify its yield sources.
The basic structure here would be to have bAsset-minting smart contracts on other blockchains (e.g. Ethereum, Solana) and transfer over the resulting bAssets to Terra via a token bridge such as Shuttle or Wormhole.
The degree of secureness is something that governance should decide on, but I foresee review structures to be set as similar cases on other protocols are better studied. My opinion would be to conservatively deploy capital to fundamental DeFi primitives that have have delta neutrality.
Consolidation as in R&D efforts for Anchor to achieve better scalability and sustainability.