What Is Anchor Protocol
Anchor protocol is a decentralized money market built on the Terra blockchain. It facilitates lending, borrowing, and interest gains for its users.
Anchor’s protocol is a savings protocol developed to solve the problem of high volatility in most crypto assets. The unstable nature of most crypto assets makes them unsuitable for most stakers. At Anchor protocol, you can receive up to a 20% stable yield on your deposits. This makes Anchor protocol one of the best markets to earn passive income on the crypto-verse.
The Anchor protocol serves the interest of two types of users:
1. The Lender or the Depositor
2. The Borrower.
For lenders, the Anchor protocol guarantees a low volatility interest rate on deposits, which also happens to be one of the highest stable coin rates out there (20% per annum).
For borrowers, the Anchor protocol makes available deposits after accepting liquid-staked PoS assets, bLUNA, and bETH as collateral.
The borrowing and lending transactions are realized with UST, the USD-pegged stablecoin from Terra. Users can now also deposit various stablecoins based on Ethereum, including BUSD, USDC, Dai, and USDT.
Anchor Protocol Founders
Anchor Protocol was launched in March 2021 by Terraform Labs. Terraform Labs was founded by South Korean-based Do Kwon and co-founder Daniel Shin.
The Terra blockchain, a decentralized finance (DeFi) ecosystem that creates algorithmic stablecoins, is the brainchild of Terraform Labs.
How Does Anchor Protocol Work
The Anchor Protocol runs on three main mechanisms: Anchor Protocol runs on three primary mechanisms, which include:
- bAssets (bonded assets)
- Terra Money Market
- Loan Liquidation.
bAssets
A bAsset is a tokenized stake situated on a Proof of Stake (PoS) blockchain. It signifies the ownership of a PoS asset. These bAssets are the collaterals deposited by users who seek to borrow UST stable coins from the Anchor Protocol. The Anchor Protocol mainly accepts bLUNA and bETH as collateral.
Terra Money Market
The Terra money market is a WASM (Web Assembly) smart contract on the Terra blockchain. It facilitates the lending and borrowing of Terra stablecoins. The Terra money market comprises a pool of Terra deposits that generate interest from any loans. The interest rates are calculated based on the current availability and borrowing demand. Anchor Protocol can yield up to 20% return for its depositors. The Anchor Protocol’s interest rate is determined by its algorithm and the interest gained from staking the borrower’s bAssets in different Proof-of-Stake blockchains. A combination of these two interests yields depositors up to 20% return on their deposits, making Anchor protocol one of the best examples of blockchain passive income out there.
Loan Liquidation
The loan liquidation mechanism of the Anchor protocol supervises loans and prohibits borrowers from defaulting on their loans. It liquidates loans with a borrowing amount above the allowed borrowing limit. The collaterals of liquidating loans are converted to UST stablecoins which are then used to repay defaulting loans.
How to Buy Anchor Protocol
The top cryptocurrency exchanges for trading Anchor Protocol are currently Binance, OKX, Mandala Exchange, BingX, and Hotcoin Global.
It's advisable to research the exchanges' fees, payment methods, and security before settling for an option.
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