When Anchor was recapitalised last year, it was estimated that the funds would last a year, and now they’re nearly gone. In the meantime, the only development is that bEth was added as a collateral asset, despite IBC being supported for months, which I understood was the last major milestone before more bAssets could be rapidly onboarded.
Additionally, when the reserve was last topped up, there was a large inflow of UST into Anchor which made it even more unsustainable because of the large safety net. I suspect that adding another $450m would do the same and whatever growth predictions won’t matter. Yes, it will be good for UST’s and Luna’s market cap in the short term, and obviously make attention-grabbing headlines, but this is not sustainable in the long run. It’s easier to fix the problem while it’s small, not when there’s many billions of potential outflow from Anchor due to the reserve running out in another few months’ time.
I propose that funds be disbursed based on milestones, in terms of new bAssets being supported.
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$50m should be initially added to the reserve to support current balances.
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$50m after that for each added bAsset, which is held in reserve and not disbursed until needed. This lets Anchor have a chance to be self-sustaining and to see the effects of more added collateral types, and it allows LFG to use the funds in other ways if it is not needed anymore.
Do not let Anchor recapitalisations become Terra’s version of Ethereum’s ETH 2.0 difficulty bomb. Just like the difficulty bomb is delayed every time it gets near, Anchor should not just have money added every time there is a bear market causing large drops in collateral. Let this new recapitalisation be a carrot for the rapid development of Anchor, not a golden bandaid.
I would also like to note that I wrote similar thoughts the last time Anchor had a crisis.