Tracking Anchor Protocol And Its Derivative

Tracking Anchor Protocol And Its Derivative

Introduction

Anchor is a decentralized savings protocol offering low-volatile yields on Terra stablecoin deposits. The Anchor rate is powered by a diversified stream of staking rewards from major proof-of-stake blockchains and therefore can be expected to be much more stable than money market interest rates. The Anchor community believes that a stable, reliable source of yield in Anchor has the opportunity to become the reference interest rate in crypto.

The Anchor protocol defines a money market between a lender, looking to earn stable yields on their stablecoins, and a borrower, looking to borrow stablecoins on stakeable assets. To borrow stablecoins, the borrower locks up Bonded Assets.

Four types of users exist in the Anchor ecosystem: depositors (lenders), borrowers, liquidators, and ANC liquidity providers. Anchor also requires oracle feeders, critical for providing the necessary infrastructure. The depositor’s deposit is used to fund the loans made by borrowers. Borrowers have to collateralize their loans with a maximum LTV (Loan-to-Value) of 50%. This collateral has to be a yield-generating asset, mainly Proof-of-Stake tokens, currently only LUNA. Here’s a quick walkthrough:

1.The depositor puts in $100 and expects to receive $20 in savings interest in a year;

2. The borrower puts down $200 worth of LUNA as collateral and borrows up to $100 at 50% LTV. This $100 is supplied by the depositor’s funds；

3. The LUNA is staked by Anchor and the staking rewards go to Anchor. Let’s assume current staking rewards are 11% APR. At 11%, Anchor gets back $22；

4.$20 goes to the depositor as their yearly return and the excess $2 is put to Anchor’s treasury which serves as liquidity reserves or can be used for ANC buybacks in the future.

 

Peculiarity

The yield of anchor for savings users is relatively fixed, and the target interest rate can be adjusted by its community governance. At present, it is 19.46%. Compared with the floating deposit rate of most defi products, anchor's fixed interest rate is more in line with the financial habits of traditional financial users. This high and stable ‘financial product’ is a crude and effective means to pull new funds.

How does the anchor ensure that its deposit interest rate is around 20% for a long time?

There are two main reasons:

1. It only accepts assets with original stacking income as loan collateral, such as Terra's core token Luna and recently supported Seth (through cooperation with stacking service provider Lido), so anchor can obtain an additional stacking income of mortgage tokens to subsidize depositors.

2. After anchor went online, it launched a four-year borrowing and mining mechanism. When the actual rate of return of the system (borrowing interest rate + stacking income of mortgage tokens) is lower than the target savings interest rate, the system will increase the intensity of borrowing and mining to stimulate borrowing behavior (essentially reducing the borrowing interest rate through token subsidies), to improve the utilization rate of deposit funds, Finally, raise the lending rate to the target savings range (such as the current 19.46%) to meet the income needs of depositors.

You might doubt: With the expansion of the scale of savings funds, the gradual reduction of the stacking income of mortgage assets (the reduction of POS network inflation), and the exhaustion of ANC token incentives, how can anchor maintain the current 20% savings yield?

The author believes that 20% can not be a yield level that can be maintained for a long time, but the ‘early bird subsidy interest rate’ of Terra ecology. Its purpose is to quickly attract users from the traditional world through high yield, just as early P2P products increased their financial yield through various interest rate increasing vouchers to obtain customers, Anchor's ‘coupon’ is its token ANC. Finally, the anchor's deposit yield will also fall back to the industry benchmark. Perhaps by then, it has completed its customer acquisition mission in the cold start stage.

 

Growth

As of March 7, Anchor Protocol TVL reached $13.89B. The annual growth rate reached 24000%.

 

Ecosytem

1、INK Protocol

INK Protocol is the first decentralized passive income and prize savings protocol on the Terra blockchain that lets you win by saving. We aim to gamify savings for users who favor big and fast returns with no loss on their money.

INK Protocol lets users deposit their UST into the protocol. The deposited UST is used to get yield from Anchor Protocol. The interest that is accrued on Anchor Protocol is then pooled into INK Protocol as prizes. Every week, the protocol picks 10 winners randomly to get a portion of the total deposit yield as prizes. Deposits give you recurring participation, which means that the deposit will keep your eligibility for every prize draw until you withdraw your deposit.

2、Edge protocol

Edge Protocol is a money-market-as-a-service (MMaaS) provider on the Terra ecosystem.

Edge acts as botha community-based pool creation platform; and a portal giving retail users access to various lending pools.

These roles, however, are not our focuses during the Dawn of Edge (Beta Launch).

Dawn of Edge will contain the first money market pool of Edge Protocol marketplace.

With Dawn of Edge, you can: Earn interest, Borrow, and leverage long.

3、WhiteWhale

White Whale is an arbitrage protocol devoted to maintaining the peg on Terra stablecoins and allowing the community to contribute to helping to achieve this mission.

Deposited tokens are represented by vault tokens (vUST, vLUNA, ...). These tokens are redeemable for the initial deposit along with its accrued interest, making these tokens auto-compounding. White Whale vaults are structured to provide depositors with: High, stable deposit yields powered by the Anchor Protocol，Arbitrage Exposure through White Whale arbitrage of stablecoin deposits.White Whale is an open, permissionless arbitrage protocol, meaning that any third-party application is free to connect and earn interest without restrictions. Furthermore, all arbitrage contracts are publicly callable.

 

Future

According to the footprint. network statistics, Terra currently has a total lock-up scale of US$17.66 billion on the chain and Anchor accounting for over 40%. From the perspective of ecological patterns, it is one of the most important protocols on the Terra chain.

Anchor is a sub-project incubated by the Terra team. It is mainly used to create demand scenarios for the stable coin UST, and to realize the value cycle of the ecology on the chain, the agreement mechanism has a certain amount of funds attractive. Meanwhile, Terra Future will be connected to the Cosmos ecosystem. As a project supported by the official team, Anchor's future development is quite impressive.