Anchor Protocol $ANC: Better Savings With Crypto | by Maximilian Perkmann | Feb, 2022

Decentralized finance (DeFi) is developing rapidly at the moment. In contrast to the traditional financial market, the crypto market has proven that it is possible to optimize many aspects of finance in favor of the user and not the bank. Anchor Protocol, as a permissionless and decentralized DeFi application, makes it possible to create a point of contact between people who want to have a stable and low-risk return by depositing their USTs and people who want to borrow money by depositing collateral. The Anchor Protocol attempts to set a stable “anchor” in your finances, so to speak. If successful, it could be the first major pass to make DeFi mainstream.

Anchor is based on the Proof-of-Stake (PoS) blockchain concept in which validating blocks in the chain requires staking cryptocurrencies. Whenever validators are chosen to confirm or not confirm the validity of a block, they lose their staked coins if they behave maliciously.

The main elements of Anchor are:

• bAssets: are the liquid version of the cryptos staked. Currently, bLUNA and bETH are supported. Generally, when crypto is staked it is no longer usable. Making a staked asset liquid allows you to get more efficiency from your capital.
• Money market is a pool of stablecoin USTs. These UST’s are derived from people providing their capital for other users to borrow.

We have two types of users:

• Those who put their USTs into the money market for about 20% APY.
• Those who deposit bAssets to borrow USTs.

The strength of Anchor lies in accepting bAssets as collateral. These assets, by guaranteeing those who hold them a constant yield from staking, will guarantee the protocol a more or less constant income and therefore a way to incentivize its use.

We have said that Anchor receives income thanks to the bAssets that people deposit and that generate a staking return. In addition to this, Anchor has another income from the interest a user who takes a loan has to pay. Adding up these two incomes we have the inflow of the protocol. The outflow, and therefore the output, is the sum of the interest paid to the UST depositors.

There are several ways to earn with Anchor, and they include:

• Deposit: One easy way to earn money with Anchor is to deposit UST. The project positions itself as a savings product with 20% APY.
• Borrow: Users can borrow UST by providing bAssets as collateral. The reward (ANC tokens) is higher than the interest attached to the loan. You can check the exact Net APR on the borrow page.
• Stake ANC: Users can also purchase and stake ANC to earn the staking rewards and participate in governance. The current APR for staking can be checked on this here.
• Provide liquidity: It is also possible to earn rewards by providing exchange liquidity for ANC by staking ANC-UST LP tokens. Here you can find the actual APR.

The Anchor Rate

The protocol is a collection of 3 components: ANC token incentives/governance, money markets, and diversified staking yields:

1. Anchor Rate: The target APY that Anchor tries to pay out depositors. The governance is what sets the rate during a vote when setting the boundaries.
2. Real Yield: Is using collateral to earn staking rewards which allow staking rewards to make up real yield.
3. Balancing out the Anchor rate happens in two different ways:

• When the Anchor Rate > real yield; ANC incentives to the borrowers surge by 50% every week until the real yield connects to the Anchor Rate.
• When the Anchor Rate < real yield; A yield reserve is created allowing the surplus of yield to be stored in UST.

Anchor is a Terra-based application built by Terraform Labs (TFL). The launch was the realization of the vision of Terraform Labs of integrating three primary financial primitives:

• payments via UST
• savings via Anchor
• investing via Mirror Protocol

on the Terra blockchain.

The initial goal was to increase demand for Terra’s native stablecoin, UST, by offering a 20% yield to lenders. It also allows traditional finance participants to integrate with DeFi. Anchor has an API that fintech platforms, exchanges, and B2B businesses can integrate and offer savings accounts.

The Anchor Token (ANC) is Anchor Protocol’s governance token. The ANC token is used as a means to propose how to spend the community pool, change parameters, and vote to include new collateral on the supply side.

150 million ANC tokens were released at genesis, distributed as follows:

• LUNA staking airdrop: 50 million ANC tokens (33.3% of initial supply and 5% total supply) were airdropped to LUNA stakers
• Anchor Community Fund: 100 million ANC tokens (66.7% of initial supply and 10% final supply).

ANC currently has a market cap of about $319,500,000. The supply of ANC is limited. The more applications and protocols rely on Anchor, the more fees the protocol accumulates. Holding ANC and staking them guarantees a portion of the fees that the protocol receives, which means that the more Anchor becomes a fundamental element of DeFi, the more its token holders will be paid back.

Anchor Protocol also raised a $10 million private round in March 2021.

Governance

Governance with the ANC Token is an additional key feature for this project. The governance is designed to help progress and improve the platform in the future. When the user begins to stake $ANC on the platform, the consumer is given the right to contribute to the polls that should help develop the protocol.

The more $ANC that the consumer is staking the more voting power he receives.

For newcomers, I’d personally recommend crypto.com* as an easy-to-use trading platform with a user-friendly interface and step-by-step instructions. Crypto.com*offers a whole ecosystem with a credit card (including crypto-cashback), staking, and many more features. Read more here.
For EU citizens, Bitpanda* also provides a well-rounded service including savings plans and even supports stocks and precious metals at low fees. Here you go*

For anyone seeking a more advanced platform with lower fees, BitForex* is your choice!

Anchor positions itself as a revolutionary protocol in the world of DeFi with many new features and developments in store. The team’s main objective is to become the gold standard for creating passive income on the blockchain by providing a stable savings solution for the DeFi space.

In doing so, it offers a convenient and frictionless way to get high returns on stable coin deposits. There is no doubt that one of the project’s key features is the security it provides against market volatility. Especially in current times.

The continuous growth and adoption within the DeFi space make projects like Anchor Protocol one to keep an eye out for.