Introduction to Anchor Protocol
The rise of decentralized finance (DeFi) is here to stay, and DeFi protocols that aim at resolving conventional issues in traditional finance are gaining more and more attention. The list of popular DeFi protocols is indeed long, and Anchor Protocol is one of our primary interests.
What is Anchor and why has it gained popularity in the DeFi ecosystem?
What is Anchor Protocol?
Anchor is a decentralized savings protocol that offers low volatility returns on Terra stablecoin deposits. Equally important, being open and permissionless, Anchor does not restrict access for third-party applications that can freely connect to the protocol and earn interest.
The Anchor rate is grounded on a diversified stream of participation rewards from the most notable Proof-of-Stake (PoS) blockchains. As a result, Anchor ensures more stable savings than money market interest rates.
Anchor Protocol’s Features
For you to get a better grasp of Anchor Protocol’s design, here’s a summary of the protocol’s most notable features:
- High and stable deposit yields based on the rewards of bAsset collaterals.
If the word “bAsset” sounds Greek to you, let us provide a brief explanation. bAssets are liquid, tokenized representations of bonded, or staked, assets in PoS blockchains;
- Instant withdrawals made possible through combined lending of stablecoin deposits;
- Protection through liquidation of undercollateralized loans (i.e., loans that don’t require borrowers to provide collateral);
- For developers: easy interaction with Anchor through Anchor Earn, Anchor.js, or EthAnchor.
ANC is the protocol’s native governance token. First off, the tokens serve to create governance polls, in which the main voters are users who stake ANC.
Alternatively, ANC tokens can be used to accelerate borrow demand and secure stable deposit rate levels. ANC token distribution to stablecoin borrowers happens every block. To specify, the amount of distributed ANC tokens is proportional to the amount crypto assets borrowed.
Moreover, ANC stakers are drivers of Anchor. They are incentivized to further merit the protocol by proposing, discussing, and voting for proposals.
Anchor Protocol, Terra Ecosystem, and Coinmetro
Anchor is the flagship savings protocol of the Terra Ecosystem. In case you happened to miss the big news, Coinmetro has recently welcomed the Terra Ecosystem and now supports its native tokens, UST and LUNA.
You can buy UST on our main exchange and participate in dApps or the Anchor Protocol to make a stable 20% APY. What’s more, Coinmetro also features the LUNA/USD and LUNA/EUR pairs.