About the editor: Spencer Noon is Co-founder & General Partner at Variant.

Network Coverage
Coverage on UST/Anchor, Liquity, and MakerDAO.

• Anchor is a protocol with $9.5B in TVL and is the most popular destination for Terra’s native stablecoin, $UST (explore $UST here). 38% of outstanding UST supply is currently held in Anchor, where lenders are earning a yield of 19.5% APR on their deposits. Anchor’s reserves have been dwindling, leading to a recent recapitalization. For the past 180 days, Flipside community analysts butcherbrainard, anduril, and jxboi have analyzed reserve dynamics. The decline began in December and was exacerbated by a declining market and the popularity of Abracadabra’s Degenbox.

• Anchor uses reserves and income from borrowers to pay Anchor Earn rewards. As this imbalance grew, Anchor’s ability to maintain ~20% yield came into question. If the reserves go to zero, Flipside analyst jxboi found that yield would fall to ~7.4% APY — still a fairly competitive rate for stablecoins.

• Net deposits saw a downtick with the recent Wonderland drama, but Anchor still attracts significant liquidity, leaving it with options including increasing reserves, raising max LTV for borrowers (they did both recently), addressing DegenBox, and adjusting reward mechanisms.

• After Liquity was last featured in OurNetwork on September 17th, 2021, the LUSD supply grew from 600m to 930m in only two months. Since then, liquidations, redemptions, and loan repayments have occurred due to ETH’s recent volatility, resulting in a 400m decline in LUSD’s supply. Because the ecosystem around LUSD has matured, the recent supply shrinkage was far less severe compared to the flash crash on May 19th, 2021.

• Numerous projects have adopted LUSD due to its decentralization, but the most notable are OlympusDAO, Fei Protocol, and Synthetix. Whether it's for the treasury, as a form of collateral, or as a source of yield, these projects have accumulated and utilized a combined 230m LUSD.

• Liquity has excelled in generating yield. Since launch, LUSD holders in the Stability Pool have earned ~67.5k ETH from liquidations at a ~9% discount, while LQTY stakers have earned ~$27m in revenue from protocol fees — an 86% increase from total revenue in September.

• MakerDAO hit the 10b DAI outstanding supply mark this past week. DAI supply grew by ~8.5b in the past year. ~6.2b (60%) of the current supply is backed by stablecoin vaults, which is a YTD high point. ~2.3b of this supply is currently backed by ETH. New use cases have emerged recently as well; for example, ~2.7% of DAI supply is backed by Gelato DAI-USDC positions. MakerDAO currently has $17.7m in collateral locked, with ~44% in ETH and ~31% in the PSM (stables).

• MakerDAO has burned >22k MKR to date, equal to roughly $47m in realized revenue for MKR holders. The DAO has burned ~18k MKR (~$37M) in the past year. Additionally, the system surplus hit ~$61m DAI of unrealized revenue, bringing the would-be total to >$100m (barring any costs/insolvency events).

• DAI is used all across DeFi, with 1.6b in Curve, ~850m in Compound, ~390m in Uniswap, and 100m in Balancer. L2 and alt-L1 protocols have emerged as a new use case for Dai. More than 20% of the current DAI supply exists on these protocols. The largest portion is on Avalanche.