Terraform Labs (TFL), the company behind the Terra blockchain network, today officially released the network’s new savings protocol, Anchor.
Anchor is an inter-chain DeFi application that pools the emission from PoS blockchains, stabilizes it, and passes it on as fixed, high-yield interest to depositors.
“Stable & attractive yields denominated in the dollar, and composable in smart contracts is the holy grail of cryptocurrency,” says Do Kwon, Co-Founder, and CEO of Terra. “Anchor’s attractive yields on TerraUSD is going to lead millions of households to move their savings onto Anchor’s smart contracts, and will bring DeFi from the fringe to the mainstream.”
At a high-level, Anchor operates as a decentralized money market on the Terra network that only accepts liquid staking derivatives as collateral on the supply-side.
On the demand side, Anchor users deposit UST, one of Terra’s suite of fiat-pegged stablecoins, into the Anchor web app and accrue stable interest with a low-volatility yield enclosing a tight band around 20% APY.
Anchor’s launch partner, crypto exchange CoinList, has also integrated Anchor and will enable CoinList users to directly deposit UST into Anchor without leaving the exchange’s interface.
“We evaluated a number of products that would enable CoinList users to earn interest on their deposits; both centralized and decentralized,” says Mike Zajko, Head of Token Sales at CoinList. “In the Anchor savings protocol we discovered one of the most elegant crypto native solutions for offering risk minimized stable yield and we are thrilled to be a launch partner.”
On the supply-side, liquid staking derivatives enable bonded network tokens (e.g., SOL) into a PoS blockchain’s consensus model to be unlocked by the staker and deployed as a derivative representing a claim on the staked position’s cashflows across various DeFi apps.
With Anchor, borrowers lock-up collateral (staking derivatives) at a minimum collateral ratio of 150 – 200%, depending on the underlying collateral used. Borrowers are subsequently issued aUST, Anchor’s stablecoin, as debt in return for their locked collateral.
The first liquid staking derivatives viable as collateral on Anchor is bLUNA, a staking derivative of Terra’s native token LUNA. The bLUNA implementation is led by LIDO Finance — the same DAO behind the ETH 2.0 liquid staking derivative.
bLUNA’s collateral ratio will initially be 200% and will soon be followed by several other staking derivatives from major PoS chains such as Polkadot (DOT), Solana (SOL), Ethereum 2.0 (ETH), and Cosmos (ATOM).
Anchor will be governed by the protocol’s native token, ANC, which captures a portion of Anchor’s yield and uses the generated revenue to buy back ANC on TerraSwap and disperse to ANC stakers — scaling the token’s value capture linearly with the TVL of Anchor.
Via the Anchor API and SDK, Anchor can be integrated into exchanges, crypto wallets, and fintech platforms — opening up fixed-income savings derived from DeFi’s composability to the masses.