Wherefore Art Thou, Rewards?

    Question 145: What are users doing with their Anchor rewards? Quantify and visualize the differences between how users deploy rewards earned from each of the following: borrowing, staking, liquidity pooling.

    Introduction

    Anchor is a savings and loans application built on the Terra blockchain to serve crypto users worldwide in a decentralized and permissionless way. Like every decentralized application or crypto project, distributing incentives is one way to drive traffic to the project. Anchor incentivizes key parts of the protocol by distributing ANC incentives to users.

    These key parts where Anchor distributes ANC tokens are borrowing, governance staking, and liquidity pooling. The emission rates are variable depending on network effects, and, when the rewards are claimed, users have three (3) options as to how to deploy the rewards. Users can stake, swap or transfer to another user.

    For every protocol function, we shall look at how users deploy the incentives whether to stake, swap or transfer.

    Borrowing

    Anchor only allows collateralized loans hence, users must provide collateral in the form of bAssets. To incentivize borrowing Anchor tries to reduce the borrow APY by distributing ANC tokens to borrowers. This is known as the distribution APY.

    Divided into Transfer, Staking, and Swap, the chart below shows how ANC rewards earned by borrowers are deployed.

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    Method

    To quantify and visualized what users who earn rewards from borrowing, staking, and liquidity pooling do with the rewards, we will first have to get a list of all users who have engaged the relevant contracts. Then we will go on, to sum up, all the ANC amounts swapped, staked and transferred.

    Relevant Contracts

    • Anchor Market (Borrow Rewards) - terra1sepfj7s0aeg5967uxnfk4thzlerrsktkpelm5s
    • ANC Token (Staking Rewards) - terra14z56l0fp2lsf86zy3hty2z47ezkhnthtr9yq76
    • Anchor Rewards (LP Rewards) - terra17yap3mhph35pcwvhza38c2lkj7gzywzy05h7l0
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    Staking

    ANC tokens serve an important purpose for voting on key decisions concerning governance. To be eligible to vote, users must stake their ANC tokens. The protocol incentivizes governance staking which provides an avenue for users to earn more ANC tokens.

    Divided into Transfer, Staking, and Swap, the chart below shows how ANC rewards earned by gov stakers are deployed.

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    Liquidity Pooling

    Liquidity is essential to every commodity in an open market because it has a direct correlation to the commodity's value. Similarly for ANC, liquidity is important, and that is why Anchor incentivizes liquidity provision.

    Divided into Transfer, Staking, and Swap, the chart below shows how ANC rewards earned by liquidity providers are deployed.

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    Summary of Findings

    • At first sight, it is easy to notice that over 50% of all ANC rewards are transferred between wallets. These transactions are likely to be transfers to second-hand wallets.
    • 45% of rewards claimed by LPers, 40% claimed by gov stakers, and 13% claimed by borrowers were staked in governance. This is a positive indication that rewards are being invested in the Anchor protocol.
    • Less than 5% of ANC rewards across the three groups are sold off. This is yet another positive indication that ANC awardees are bullish on the protocol are less interested in farming and selling ANC tokens.

    For liquidity providers, 49.9% of the rewards have been transferred to other wallets, 45% have been staked, and about 5% have been sold.

    For liquidity providers, 40% of the rewards have been transferred to other wallets, 54.2% have been staked, and about 5.85% have been sold.

    For borrowers, 84.8% of the rewards have been transferred to other wallets, 13.5% have been staked, and about 1.7% have been sold.