The EASIEST Stablecoin Strategy To Earn 67% APR🔥

5 min readFeb 18, 2022

Who doesn’t love the opportunity to earn high yields on stablecoins?

With the introduction of Edge Protocol, it is now possible to earn higher than the typical 19–20% APY on UST through Anchor Protocol.

What Is Edge Protocol?

Edge Protocol is a money-market-as-a-service (MMaaS) provider on the Terra ecosystem.

This means that Edge offers both:

A community-based pool creation platform.
A portal giving retail users access to various lending pools.

However, Edge Protocol is new to the scene and currently is in beta mode.

With their beta launch, Edge is currently only offering the following options:

Collateralize assets to borrow.
Leverage on long positions.
Open short position.

Assets in the Genesis Pool are UST, aUST, LUNA, LunaX, bLUNA, ANC, MIR.

For the purpose of this tutorial, we are going to focus on UST and aUST.

How to Earn 67% APY on UST

Step 1) Supply UST into Anchor Protocol in order to receive aUST in return. This can be done in the Terra Station Wallet directly by selecting “Earn”.

Select “Earn” and Deposit UST into Anchor to Revive aUST

Step 2) Head to Edge Protocol and select “Go To Beta Launch” in the top right and connect your wallet.

After Selecting “Go To Beta Launch” Ensure You Connect Your Wallet

Step 3) Look for aUST in the supply market and click ‘Supply.’

Enter the amount and click ‘Supply’ when you are ready to submit the transaction. Then, you will be asked to confirm the transaction in your wallet.

Keep in mind once you supply the aUST it will no longer show in your wallet because it has been deposited into Edge Protocol.

Step 4) Scroll down to the “Borrow Section” and select to borrow UST.

Next, you will have to enter the amount you want to borrow. You can enter the amount directly into the text field or drag the slider to your targeted risk ratio. Be aware that the higher your LTV (loan to value ratio) is, the risker your position will be. This opens the door to potentially being liquidated.

Step 5) Take the UST you borrowed and deposit it back into Anchor and repeat these steps as many times as you would like.

How To Determine APR

There are a few factors at play that determine how much % APR you are able to earn with this strategy.

First, each asset has a “collateral factor”. In the case of aUST, the collateral factor is 90%.

This means if I deposit $1000 of aUST, my maximum borrowing power is $90.

($1000 x 90% = $900)

There is also a “borrowing factor” for each asset. aUST has a factor of 95% as well as a 10% fee reserved for the Fund Insurance fee.

If I wanted to borrow the maximum amount available to me, I could borrow up to $769.5 in UST.

($900 x 90% x 95% = $769.5)

So in this example, if I started with $1000 and borrowed a total of $769.5 to deposit back into Anchor Protocol earning ~19.5% APY, I would be earning about $345/year, or 34.5% APY.

($1000 + $769.5 = $1769.5)

($1769.5 * 19.5% = $345)

If I repeated this process 5 times, I would end up with a total of $3437 in Anchor Protocol earning ~19.5%.

This works out to an APR of 67% on the original $1000 investment.

One important caveat to add is that Edge Protocol offers interest on supplied assets as well as charges interest on borrowed assets. The interest rates fluctuate depending on the utilization rate.

The supply interest on aUST is currently 2.16% while the borrow interest rate on UST is currently at 16.44% netting a total interest rate of -14.28% on the borrowed UST.

So in our $1000 example, the total APR rate you would be earning after 5 loops would be around 55%.

Your results will vary depending on your LTV, current supply and borrow interest rates, and how many times you decide to loop this strategy.

Risks Involved

It is always important to understand the risks involved with an investing strategy before deploying your capital.

For this particular strategy, there are three main categories of risk:

Protocol Risk

Anytime you are dealing with a DeFi protocol, smart contract risk is involved.

The Z Institute has officially audited Edge Protocol, but there’s always the possibility of a bug or vulnerability that compromises participants’ funds.

Lender Risk

In this strategy, you will be lending your aUST to Edge Protocol. There is a possibility of a “bank run” or a panic-inducing event that could cause all lenders to come withdraw their deposit from the pool simultaneously.

Edge Protocol would have to pause the operation since they cannot give all the capital out simultaneously and your lent assets would be illiquid.

Borrower Risk

In this strategy you will also be borrowing UST from Edge Protocol. This strategy involves leverage.

There is the possibility that the borrower doesn’t repay or doesn’t supply more assets in time before reaching liquidation.

The liquidation risk means that borrowers will lose some of their collateral and liquidity incentives to the liquidators.

Limitations

The final point I want to add is because Edge Protocol is still in beta, the team is allowing users to deposit assets in the pool until the total value supply of assets in the pool is $10M.

Once, this cap is reached, the action of supplying any assets will be halted. The cap can be raised according to the demand and pool’s circumstances.

This cap was reached in the first 10 minutes of the beta launch.

You will need to wait until that cap is increased to take advantage of this strategy.

I suggest following the Edge Protocol Twitter and Discord accounts to stay up to date on cap increases.

Conclusion

Although Edge Protocol is just in beta, it offers an intriguing Terra-native strategy to maximize UST returns.

If you give this strategy a try, I suggest starting with a small amount and working your way up.

Thank you for reading and I will see you next week!

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