So recently I did two articles about the Terra ecosystem and while researching Terra, I stumbled upon this very interesting protocol with some rates I thought were too good to be true.
Staking
The main purpose of Anchor is to stake your UST. UST is a stablecoin by the Terra network which is pegged to the Dollar, when staking your UST on Anchor you get a 20% APY.
This is amazingly attractive since you incurr very little risk in doing so. Compare this to a 0.05% on a regular Savings account at your bank and even a negative rate in some countries.
Borrowing
On Anchor you can also borrow money if you put up a collateral.
This collateral comes in the form of Bonded Luna (bLUNA)or Bonded Ethereum (bETH) and these tokens follow the price of the regular LUNA and ETH token strictly, the only difference is that you can’t use the regular versions to borrow against on Anchor. In the future they will be adding Bonded versions of other tokens like Cosmos and Polkadot.
Anchor token
Anchor also has it’s own token, the ANC token. It’s a governance token which means that the people who hold it are able to vote on proposals made by the community.
You can also stake you Anchor token on the platform and get a return of 28.4% yearly, which is also quite attractive.
Anc-UST Liquidity Pool
If you provide both Anchor tokens and UST you can help with keeping the token liquid so people are always able to withdraw their tokens.
Of course, you’re not going to be doing this for no reason, Anchor will give you a 55% return rate and even a 74% return if you stake your rewards and let the amount compound.
- 19–20% APY on staking UST might not stay forever. However, the APY has sustained this rate for quite some time now and they are looking to keep it up for the next couple of months.
- Due to it’s inflationary nature, the Anchor token may go down in price, remember that those tasty 55 and 74% returns must ultimately come at a risk.
You might be wondering, How in earth is Anchor making profit? Well I tought the same thing so I’ll quickly explain how they do it.
- They receive Interest from loans they give out
- When people borrow they have to provide a collateral which they can not withdraw during the period of their loan, Anchor stakes these tokens and takes the profit which they get from the staking
- Liquidation fees, when people get liquidated, there are certain fees that people incurr and those go to Anchor.
This is a very interesting protocol and personally I’m considering using the UST stake function as a money market account in the future. That way I’m able to stay in Stablecoins so I can buy up dips in the crypto market while keeping up with inflation by a big margin.
However, I won’t be using the borrowing functions or Liquidity pool because there are platforms with better borrowing rates (like Celsius) and the Anchor token is too inflationairy for my liking.
If you’re curious to gain a little deeper understanding about the Anchor protocol definetly check out their whitepaper:
