> For the complete documentation index, see [llms.txt](https://docs.anchorprotocol.com/anchor-2/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.anchorprotocol.com/anchor-2/protocol/money-market/deposit-rate-subsidization.md).

# Deposit Rate Subsidization

Anchor Protocol's deposit rate stability is supported by borrow demand from borrower ANC distribution and direct subsidization. Anchor defines a target deposit rate ($$r\_{target}$$), and a threshold deposit rate ($$r\_{threshold}$$) and constantly attempts to retain a deposit rate close to $$r\_{target}$$ and always above $$r\_{threshold}$$.

Every epoch, the average deposit rate during the last epoch ($$r\_{current}$$) is calculated and compared with the target and threshold rates. Appropriate measures are then made to readjust the deposit rate.

## Borrower ANC Incentives

Anchor's deposit rate is primarily adjusted by calibrating the rate of ANC emission to borrowers ($$e$$), updated through a feedback control algorithm.

### ANC Emission Feedback Control

Anchor alters the ANC emission rate based on a **multiplicative increase / multiplicative decrease feedback control** algorithm, which adjusts the ANC emission rate of the next epoch $$e\_{n+1}$$ based on the previous emission rate of $$e\_n$$:

$$
e\_{n+1} = k \cdot e\_n
$$

The feedback control algorithm adjusts incentives with $$r\_{average}$$ - the average of $$r\_{target}$$ and $$r\_{threshold}$$ - as the reference point:

$$
r\_{average}=\frac{r\_{target}+r\_{threshold}}{2}
$$

* If deposit rate is approaching the threshold ($$r\_{current} < \frac{r\_{threshold}+r\_{average}}{2}$$), increase emission by 0.7% ($$k \approx 1.007$$)
* If deposit rate approaches the target ($$r\_{current} > \frac{r\_{target}+r\_{average}}{2}$$), reduce emission by 0.3% ($$k \approx 0.997$$)

where the set $$k$$ values result in a 50% emission increase over a week-long period or a 15% decrease over a week-long period.

## Direct Subsidization

As an additional layer of safety, the protocol directly subsidizes the deposit rate if it is below the threshold rate ($$r\_{current}\<r\_{threshold}$$), funded from the yield reserve's stockpiled stablecoins.&#x20;

An amount required to raise the deposit rate to the threshold is distributed to depositors, which is limited to 10% of the yield reserve's balance per subsidization to prevent excessive drainage. Distributed subsidies are added to the money market’s liquidity, increasing the aTerra exchange rate and appreciating the value of aTerra.


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://docs.anchorprotocol.com/anchor-2/protocol/money-market/deposit-rate-subsidization.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.