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 (rtargetr_{target}rtarget​
), and a threshold deposit rate (rthresholdr_{threshold}rthreshold​
) and constantly attempts to retain a deposit rate close to rtargetr_{target}rtarget​
 and always above rthresholdr_{threshold}rthreshold​
.
Every epoch, the average deposit rate during the last epoch (rcurrentr_{current}rcurrent​
) 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 (eee
), 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 en+1e_{n+1}en+1​
 based on the previous emission rate of ene_nen​
:
en+1=k⋅ene_{n+1} = k \cdot e_nen+1​=k⋅en​
The feedback control algorithm adjusts incentives with raverager_{average}raverage​
 - the average of rtargetr_{target}rtarget​
 and rthresholdr_{threshold}rthreshold​
 - as the reference point:
raverage=rtarget+rthreshold2r_{average}=\frac{r_{target}+r_{threshold}}{2}raverage​=2rtarget​+rthreshold​​
If deposit rate is approaching the threshold (rcurrent<rthreshold+raverage2r_{current} < \frac{r_{threshold}+r_{average}}{2}rcurrent​<2rthreshold​+raverage​​
), increase emission by 0.7% (k≈1.007k \approx 1.007k≈1.007
)
If deposit rate approaches the target (rcurrent>rtarget+raverage2r_{current} > \frac{r_{target}+r_{average}}{2}rcurrent​>2rtarget​+raverage​​
), reduce emission by 0.3% (k≈0.997k \approx 0.997k≈0.997
)
where the set kkk
 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 (rcurrent<rthresholdr_{current}<r_{threshold}rcurrent​<rthreshold​
), funded from the yield reserve's stockpiled stablecoins. 
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.

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Contents

Borrower ANC Incentives

ANC Emission Feedback Control

Direct Subsidization