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Great post and thought here.

In short - Anchor offers a fixed income security with coupons supported by ANC emissions/rewards (i.e. effectively selling equity (ANC rewards) to fund debt coupon payments).

* Those who deposit bAssets are foregoing the staking rewards they would have earned on those bAssets.

* Depositors do this because they expect to receive more in borrowing incentives (ANC) than they forgo in staking rewards. [More technically, there is a subsidy to their borrowing].

* This works while ANC price is rising, but requires a lot of ANC to be minted/distributed if ANC starts to fall in price.

* Absent ANC rewards, one would imagine liquidation thresholds will revert to be competitive with other stablecoin lending platforms, and then interest rates paid on UST will revert to be competitive with rates paid on other stables (DAI, USDT, USDC).

* Therefore, I expect Anchor tokens will end up being valued somewhat like Compound or Aave tokens and depend on the success of Terra overall.

Just a side-note on Luna. Today March 7th 2022:

a) LUNA's market cap is just shy of $30B

b) UST's market cap is just shy of $14B

If LUNA starts to fall in price, LUNA is minted so that UST can continue to be redeemed. If you think about it, with infinite minting, LUNA could transfer $30B of value to allow for UST redemption. However - add in reflexivity - and LUNA tokens can probably only support a small fraction of $30B in UST redemptions.

I don't own (nor am I short) LUNA or UST, and I want decentralised stables to succeed, but this doesn't paint a picture of confidence.

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