Yield Opportunities in Terra: Anchor Protocol
Use Liquality to earn 20% APY on your UST stablecoin in Anchor.
We’ve talked about how the Liquality Wallet enables you to use dapps in Terra’s ecosystem. Now, let’s talk about what this could mean for your portfolio.
Terra’s dominant solution is Anchor, a savings protocol that is exclusive to the ecosystem and holds over $5.7 billion in TVL. It aims to become the “Benchmark Rate for DeFi” by offering stablecoin depositors fixed income, instant withdrawals, and principal protection. The protocol also offers incredible opportunities for borrowers in the form of net positive APR incentives.
Opportunities for Lenders
You’ll be able to easily access Anchor’s Earn feature once you’ve swapped your assets from other chains into UST. Use the Liquality wallet to swap into LUNA first, then use an exchange like Terraswap to swap from LUNA into UST. There, you can choose to deposit funds in return for a relatively stable APY defined by the Anchor Rate, a target for what the protocol aims to pay lenders. The Anchor Rate is currently set at 20% while the protocol offers a real-yield of around 19%. One of the highest available for stablecoins.
Besides these yields, lenders are also given aTerra tokens which may accrue in value over time. These are redeemable for their deposited funds at any given time.
Opportunities for Borrowers
The pool of stable assets provided by lenders is available for collateralized loans. Users interested in taking out Terra stablecoins from the pool can do so by providing bAssets as collateral. These are Anchor’s own tokens, such as bLuna, that represent yield-bearing assets in Proof of Stake chains. Once a borrower locks these PoS assets using Anchor’s Bond feature, they can then use the resulting bAssets to take out a collateralized loan.
This is where another incredible opportunity exists. Given the way Anchor’s money market works, the protocol incentivizes borrowers with its native ANC token to ensure that enough yield-bearing collateral is available to the protocol in order to pay lenders. Whenever the protocol falls short of its Anchor Rate goal, the result is often a net positive APR situation where the ANC rewards are greater than the interest charged to borrowers.
Rounding it up
In a nutshell, you can now use the Liquality Wallet to participate in a protocol that not only delivers attractive yields for stablecoins but, on occasion, also pays you to borrow. If you’re interested in a more in-depth explanation of how Anchor works, be sure to check out the protocol’s documentation.
Stay tuned for a video tutorial on how easy it is to take advantage of these features using the Liquality Wallet and download the browser extension to use it with Anchor today.