Anchor

Anchor is a savings, lending and borrowing platform on the Terra blockchain. It offers passive income opportunities of up to 19.5% on stablecoin deposits and provides borrowers easy access to collateral-backed stablecoin loans. The platform was built by the South Korea-based Terraform Labs and launched on March 17, 2021. It was created in part to boost the overall demand for Terra's native stablecoin, UST. The current TVL of Anchor is over $15b.

Overview

Anchor protocol has three main components: Bonded assets, a money market, and loan liquidation.

Bonded Assets

bAssets are liquid, tokenized representations of staked (bonded) assets. They allow stakers to have a liquid version of their staked asset that they can use as collateral on Anchor. ETH can be bonded on Anchor for bETH which is a wrapped version of staked ETH on Lido.

Money Market

Anchor's money market is inspired by Compound Finance lending protocol. It allows users to deposit assets like stablecoins on the Anchor platform, and in exchange for doing so, users receive a yield of around 19.5%. Anchor pools the deposited stablecoins and lends them out to borrowers.

Loan Liquidation

All loans on Anchor are over-collateralized, that means that the value of the collateral must be greater than the value of the loan. If the loan-to-value ratio falls below a specified percentage, Anchor starts selling the collateral to repay the loan. They use liquidators to observe and liquidate loans with a borrow amount above the allowed borrowing limit.

History

Anchor Protocol's yield reserve has been replenished on two occasions: once in July 2021 for $70 million and once in February 2022 for $450 million. In March 2022, Anchor Protocol governance voted to make the yield rate dynamic.

Significance

Anchor Protocol is widely seen as the primary driver for the expansion of UST usage. Through March 2022, Anchor provided a static 19.5% yield for UST deposits, funded by borrowing fees and the Anchor yield reserve. Deposits vastly outpaced borrows during this entire period, leading to near-depletions of the yield reserve. Anchor conducted two rounds of top-ups from the Luna Foundation Guard.

The ANC token

The Anchor Token (ANC) is Anchor's Protocol's governance token. ANC tokens can be deposited to create new governance polls, which can be voted on by users that have staked a minimum of 1000 ANC.