[aUST] MIP6 aUST Collateral Onboarding Application

  1. Who is the interested party for this collateral application?

@yieldtheory

  1. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

Anchor protocol is an open and permissionless savings protocol that offers a low volatile yield of ~20% APY on UST (Terra Stable coin pegged to USD). Simply, users deposit UST into Anchor on the Terra Blockchain and receive aUST – a token that is redeemable for the initial deposit + accrued interest. Therefore, interest collection is done just by holding onto aUST.

Why aUST as collateral? Well, currently users can bridge aUST through terra bridge and receive an ERC-20 version of the token on Ethereum. aUST can then be used as collateral on maker to generate DAI, be sold for UST to leverage their interest earning position in anchor.

e.g., UST → Anchor → aUST → Bridge → Deposit into Maker get Dai → Sell for UST → Bridge → Anchor → repeat.

  1. Provide a brief history of the project.

Since 2020, Anchor Protocol has provided a fully decentralized fixed income instrument through diversified staking yields, money markets and the ANC token incentives and governance. Since its launch it has accrued 5.7 billion UST in TVL, of which ~3.7 billion is collateral such as LUNA and ETH and ~2 billion is UST deposits. Additionally, Anchor’s development team has made it exceptionally easy for other projects to leverage the deposit functionality of Anchor through JavaScript SDKs.

  1. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

Whitepaper: https://anchorprotocol.com/docs/anchor-v1.1.pdf

Docs: https://docs.anchorprotocol.com/

Git: Anchor Protocol · GitHub

Website: Anchor

List of all Terra Blockchain Smart Contracts:

Contract address for aUST on ETH:

0xa8De3e3c934e2A1BB08B010104CcaBBD4D6293ab

Contract address for UST on ETH:

0xa47c8bf37f92aBed4A126BDA807A7b7498661acD

  1. Link any available audits of the project. Both procedural and smart contract focused audits.

Anchor smart contracts: https://anchorprotocol.com/docs/Audit%20Report%20-%20Anchor%20Protocol%20[20210308].pdf

EthAnchor Audit:

  1. Link to any active communities relating to your project.

Anchor Gov: https://forum.anchorprotocol.com/

Anchor Discord: Anchor Protocol

  1. How is the applying collateral type currently used?

Currently, the main use case of aUST is on Mirror Finance as collateral to borrow or short mAssets (assets that mirror the price of real-world assets such as stocks etc.). aUST is still widely underutilized and with their recent expansion to aUST on Ethereum I expect protocols to start allowing it as collateral (e.g., abracadabra will be soon)

  1. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

Currently, there is no explicit claim for full legal responsibility of the collateral (my findings), however they make a very big effort towards the security of the protocol with multiple audits, bug bounty programs, and additionally, users are able to purchase smart contract and UST peg insurance through a range of insurance protocols (i.e., Nexus Mutual, InsurAce, Bridge Mutual and Unslashed). Furthermore, the company resides in South Korea and lists Do Kwon and Daniel Shin as their only two employees (Anchor Protocol - Employees, Board Members, Advisors & Alumni)

  1. Where does exchange for the asset occur?

Exchange for the aUST occurs on Anchor protocol itself. However, UST is widely available on multiple blockchains.

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Some things to consider:

You are giving as collateral the wrapped token, not the main token that would be the UST, don’t you think it would be better to list it, mostly for security reasons. Keepers at the time of a settlement process would be talking about other blockchain networks which would be a bit complicated, cumbersome and would make the process a bit more expensive because of the issue of bridges.

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I wouldn’t consider it a wrapped token in that sense, the only wrapping occurs when it comes from Terra’s blockchain and is wrapped into ERC-20. It is an interest-bearing token, much like all the other interest-bearing tokens already in the ecosystem. Adding UST as collateral defeats the purpose of this proposal. aUST is an interest-bearing asset (~20% APY), therefore, if used as collateral it will allow users to leverage this yield as I discussed in my proposal. Furthermore, Anchor actually has a smart contract set up on ETH which allows you to send UST and receive aUST without having to leave the ETH network.

Thank you for explaining that part, now if it will accrue in a contract that automatically on the Ethereum mainnet allows me to switch fromUST to UST the final token, it seems appropriate.

I said Wrapped because that’s how I see it in Uniswap with the attached photo. And the aUST was what I meant by evuento, as Aave tokens are also envuentos aDAI, aUSDT, aETH, they are guarantees that are there.

So if I understand, by having my aUST token set as collateral I am automatically participating in a 20% return?

Which allows me over time to increase the collateralisation ratio of my DAI?

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Yes this is correct, aUST accrues value when held and can then be swapped back for UST + interest earned. As you can imagine leveraging this position could result in some serious APY!

This will be very interesting to see this go through. I am always looking for ways to leverage my aUST.