How Neptune Finance Can Help Solve Anchor’s Problem

NOTE: Anchor Protocol is no longer live following the depeg of UST in May 2022. Adaptations are being made to accommodate this change.

Anchor is currently blowing through UST in its reserve fund and only has a few months of runway left. Anchor can only maintain its 19.5% APY on deposits if more loans are taken out on Anchor Borrow, or more donations are funneled to Anchor’s Yield Reserve Fund. A detailed explanation of this problem can be found in our last article, Can Anchor Maintain Its 19.5% Interest Rate?

Now that we have done the calculations in our previous post, we know Anchor needs borrowers, and fast. But why is there such a shortage of borrowers when users are being paid to borrow?

Well, with borrowing comes liquidation risk. And thanks to the events of the mid may market crash of 2021, many prospective borrowers are afraid their positions will be liquidated if they do not constantly rebalance their collateral in times of heightened volatility.

How do we address this problem?

We’re building an automated system that mitigates against liquidations through constant rebalancing; a user can benefit from the added value leverage brings without the added headache of monitoring and rebalancing manually.

This is where Neptune Finance comes in.

Our team at Neptune has conceptualised a plan to do the following:

1. Attract bAssets to Anchor to take out UST loans (which are much needed by Anchor)
2. Deploy the UST loans to a series of automated investment strategies
3. Mitigate against liquidation by automatically rebalancing collateral values
4. Swap reward tokens to the original bAsset to redeposit and earn compounding interest

We do this through Neptune Vaults. These are our automated investment strategies run by smart contracts. The vaults are designed to provide users a series of investment strategy options that solve Anchor’s reserve drain problem while also driving more value back to the user through high APY vault options.

Our product is well into development and we are excited to share what we have coming up next. If you would like to support Neptune on this quest, you can participate by delegating Luna to our validator. All delegators who delegate before our airdrop snapshot date will be rewarded with shares of $NEPT based on the time spent delegating and the amount of Luna delegated. To calculate your airdrop share, check out Calculate Your $NEPT Airdrop Shares. If you’re new to Terra or you’re unsure how to delegate, check out How To Delegate To The Neptune Validator.

If you’d like to follow along as Neptune develops its vaults, you’re welcome to join our Discord, follow our Twitter, and subscribe to our newsletter from our website.