The “Anti-Harpoon Protocol” — Nexus Protocol
Luna hodlers will remember May of 2021 very clearly. A series of unfortunate events set in motion a cascade of liquidations within Terra’s Anchor Protocol that crumpled the prices of all Terra assets including the core digital asset of the Terra ecosystem, Luna.
While in the aftermath of this event a number of infrastructure improvements have been put in place by TFL to ensure history does not repeat itself, we believe there is even more work to be done to better optimize borrowing yield opportunities on Terra. Nexus will ensure users across the Terra ecosystem can take full advantage of potential yield opportunities driven from borrowing activity without running the risk of possible liquidation.
Harpoon and other liquidation projects will still be utilized by borrowers who want to do risky things with their borrowed funds (such as using borrowed funds as collateral for leverage on centralized exchanges).
Anchor Protocol — 49/50% LTV safe management
Anchor protocol is built on a sophisticated borrowing & depositing mechanism which incentivizes users to borrow against yield bearing deposited collateral to fund a highly competitive stable interest rate of 20%. Users of Anchor currently need to keep a close eye over their LTV collateral value to ensure they do not become liquidated. Furthermore, the ANC rewards that users earn from borrowed funds need to be manually harvested on a frequent basis to either earn extra yield in Anchor’s governance section, or sold to pursue other yield opportunities.
These steps add complexity and manual touch points for users of Anchor protocol. For these reasons, many users end up borrowing a sub optimal level of UST against their Anchor collateral. Through the use of several strategies, Nexus aims to allow users to borrow up to 49% of their collateral value with minimal risk of liquidation (Anchor protocol limits borrowers to a 50% LTV ratio at the time of writing).
Nexus will provide value to Anchor Protocol by:
i) Promoting Anchor Borrow, which is the engine of the protocol (Anchor Borrow is where most of ANC token value accrual occurs).
ii) Providing a simple way for users of new forms of collateral (like bETH) to get the most out of Anchor Protocol while being new to the ecosystem.
Mirror Protocol — 40%+ Delta Neutral Yield
If users wish to take full advantage of the delta neutral yield opportunities which are possible using Mirror Protocol, they can use the following strategy:
1. Use part of their UST to deposit into Anchor Earn (yielding 20%)
2. Receive aUST
3. Use aUST to mint mAssets on Borrow (or Short Farm)
4. Use remaining UST at Long Farm with minted mAssets (or purchase mAsset via Trade against Short Farm)
*See this great video from our friends at TerraBites to learn more about how this works manually! Updated Tutorial: Three 40+% APR Delta Neutral Mirror Protocol Plays — Win Whether Market Up or Down!
This process results in a possible APY of 40%+ delta neutral yield at the time of writing. This helps Mirror Protocol to maintain tighter mAsset pegs, whilst providing additional CDP closures which helps add Value to MIR Stakers.
The current problem with this strategy is that it requires a significant amount of knowledge in order to execute properly, and it adds another LTV that needs to be monitored (users can be liquidated using this strategy if they do not adjust their LTV appropriately).
Nexus aims to provide users a ‘1 click’ solution which optimizes these yield opportunities.
Whats Next?…
Nexus is aiming to be the first product in the market to address these issues. We are committed to delivering a groundbreaking system which will drive significant value for both Anchor and Mirror. Nexus aims to support all future projects on Terra which require users to borrow funds to facilitate some network activity.
If you are blockchain-related project team aiming to allow users to integrate into Nexus, please contact us at contact@nexusprotocol.tech
