Anchor Protocol – ANC

The Anchor Protocol is mostly known for delivering ~ 20% annually interest rates on  deposited UST tokens (Terra stablecoin). Next to the stablecoin UST, Anchor also allows you to deposit popular stablecoins with a high annual percentage yield – APY derived from multiple Proof-of-Stake – PoS blockchains. In this report we will cover the supported stablecoins and how you can earn with Anchor Protocol.

What is Anchor Protocol – ANC?

Anchor Protocol is a decentralized lending system on the Terra blockchain

In more simple terms, Anchor it is a Decentralized Finance – DeFi application that offers a stable, low-risk and high annual percentage yield  – APY on your deposits.

The Anchor Protocol sparks the interest of investors because it allows users to stake their tokens (meaning to lend out tokens and earn profit) Currently it promises an APY up to ~20%, for depositing one of the supported stablecoins on its platform.

Anchor offers an annual percentage yield APY ranging from 19.5 – 20.5% on your deposited UST (Terra’s stablecoin). Depositing other stablecoins would provide you with a yield of around 16,5% annually.

Anchor Protocol own dedicated token is the ‘ANC’ token.

It is used as a governance token, meaning users can lend out their ANC tokens to vote on new developments within Anchor’s protocol.

Anchor was created by Terraform Labs, which created the Terra Blockchain and its native coin Terra – Luna. Further down this report we cover more about Terraform Labs.

Anchor Protocol allows the deposit of stablecoins on the Ethereum network:

UST 

USDC 

USDT Tether

DAI

BUSD

 

Stablecoins are cryptocurrencies whose price is designed to stay true to its original value and are therefore a stable currency. Just like fiat money (e.g. dollar – $), stable coins fluctuate minimally. 

 

This review of Anchor Protocol – ANC was created for informational purposes. This article is not intended for promotion.

General info about Anchor Protocol – ANC

Anchor was launched in March 2021 by Terraform Labs, known for building the Terra Blockchain and the native coin Terra – LUNA. Their goal is to build decentralized payments, savings, and investments at scale.

Terraform Labs is a Korean company which was founded in 2018 by Daniel Shin and  Do Kwon. 

Do Kwon – AKA StableKwon – is Co-Founder and CEO of Terraform Labs.

From 2016 to 2017 he was Founder and CEO at Anyfi (Peer-to-peer telecommunications). We notice that anyfi.io is no longer active.

Do Kwon received his Bachelor Degree in Computer Science at Stanford University. At the age of 27, he was mentioned in Forbes 30 under 30a list of bright young entrepreneurs under 30 years, issued annually by Forbes magazine.

 

Daniel Shin co-founded Terraform Labs. He was active at the company from 2018 to 2020.

Daniel Shin received his Bachelor Degree in Economics at The Wharton School. Currently he is Founder and CEO of Chai Corporation, a company that provides its users Chai Pay, a way of making payments with benefits.

 

 

Roadmap

The Anchor Protocol website has not shared their roadmap publicly.

Whitepaper

For more information about how the Anchor protocol works, please refer to the official whitepaper

Use case of Anchor Protocol – ANC

As mentioned earlier in this report, Anchor’s token – ANC is Anchor Protocol’s governance token, meaning users can stake lend out- their ANC tokens to vote on new developments within Anchor’s protocol. 

Users receive 1 vote per lent out ANC token for every poll.  This will not affect the user’s current staking balance. Anchor is paired with Mirror Protocol (MIR), a DeFi protocol, built on the Terra Blockchain.

Bonded Assets (bAssets)

Anchor Protocol features two underlying types of bAssets.

The protocol describes bAssets as:

“A liquid, tokenized representation of staked (bonded) assets in a Proof-of-Stake blockchain. They allow stakers to gain liquidity over their staked assets, enabling the locked value in staked assets to be utilized in financial applications such as Anchor where staking rewards are distributed to its holders.“

Bonded LUNA (bLuna):

bLuna tokens are bAssets built for the Terra blockchain. They can be integrated into a wide variety of decentralized finance – DeFi applications and are used as collateral to borrow Terra stablecoins from Anchor.

Bonded ETH (bETH):

bETH tokens are bAssets built for Ethereum 2.0 staking. They exist on both the Ethereum blockchain and the Terra blockchain and are used as collateral to borrow Terra stablecoins from Anchor.

For more information about bAssets, please refer to this document.

How do you stake and lend out your stablecoins to Anchor Earn?

Follow these simple steps to stake on Anchor;
  1. First of all you need to make sure to buy LUNA coins. You can find the LUNA/USDT pair on most crypto exchanges.
  2. Withdraw LUNA and send it to your Terra Station wallet
  3. Connect your wallet to the Anchor Protocol app.
  4. Visit the Anchor Earn on the Anchor Protocol app. Make sure you are in the ‘Earn’ tab.
  5. Connect your wallet and click the ‘deposit’ button.

Will a high yield of Anchor (20%) remain sustainable?

Current users, as well as potential users worry about sustaining these high interest rates. When the market is lacking and insufficient, Terra could be unable to pay out to its users during the year. To cover this uncertainty, Terra uses money from its own yield reserve. 

This yield reserve is currently around $35 million, which has been cut in half since early December 2021. At the current high interest rates that Anchor provides, it is expected to have a shortage of just under $9 million per year, according to the AWAGMI? report

What if the yield reserve gets depleted?

Do Kwon reassured his Twitter followers that if this would occur, there would be no need to panic. Read the full thread here.

“If the yield reserve depletes, Anchor will operate like a regular money market. Staking returns and ANC borrowing incentives will still offer a rate of 15 – 16%. Anchor will still offer the highest return on a stablecoin, by far. It will be fine.”

 

Other concerns?

In addition to the tokenomics, this AWAGMI? report states:

  1. Over 10.6 billion UST tokens have already been staked on Anchor with a 19,5% annual return on their stablecoin investment. With a UST market cap of only 15.2 Billion, of which 10.6 billion tokens have been deposited with Anchor Protocol, this would mean 69% of UST market cap is all in Anchor. That is a worrying thought.
  2. The Terra Foundation allegedly burned LUNA tokens to create more UST. In most cases, these tokens would be bought through market buys. In this case the LUNA tokens were taken from the treasury meaning this LUNA hasn’t circulated the market yet.

 

Tokenomics

Circulating Supply: 265.504.889
Total Supply: 1.000.000.000
Max Supply: 1.000.000.000

Where to buy and sell Anchor Protocol – ANC?

What do we think about Anchor Protocol – ANC?

To be frank, earning up to 20% interest per year on your investment is a generous offer in the current society we are living in. Over the last few months we have had to deal with the stock markets being down, Covid-19, inflation, traditional FUD (fear, uncertainty and doubt) to even warfare.

All the more reason to secure a way of earning good interest on your savings. By depositing stablecoins, you are no longer dependent on the volatility of the crypto market because stablecoins keep to their value, even in a downtrend.

Anchor Protocol – ANC conclusion

Anchor provides up to 20% annual interest rate when you lend out your Terra stablecoins (UST). Depositing 100 UST coins would result in a profit of ~ 20 UST coins per year. Most popular Ethereum based stablecoins are compatible for deposit.

If you wish to bring variety to your crypto portfolio investments, Anchor Protocol offers you a stable way of earning passive income. Yet we must acknowledge that it remains a possibility that the government might place restrictions or even ban the use of stablecoins at one point in the future.

Furthermore it is said that these high interest rates will not remain sustainable if Terra were to use up all of its yield reserves, as it is doing so every year, in its current circumstances.

Crypto_Library_logo_512x512_svg

Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.

Are you ready to take your trading skills to the next level?

"Trade Like a PEPE" is the ultimate course that will transform you into a confident and profitable trader! 📈

🐸 Transform into a confident and profitable trader

📈 Master technical analysis, risk management, and market psychology to navigate the crypto markets like a pro.

🔍 Develop a proven trading plan and spot high-probability setups.

Safe your spot!