Diogo Mónica, Co-founder and President
Anchorage clients who hold Stellar lumens (XLM) can now receive inflation awards with their lumens in custody, and Anchorage clients who hold Tezos (XTZ) can receive baking returns through delegating their baking rights either to Anchorage’s baker, or to any other third party baker. The underlying flexibility of the Anchorage platform enables clients not only to delegate to their baker of choice, but also to switch between bakers at any time. Stellar and Tezos are the first of many assets for which Anchorage will enable secure active participation, helping institutional investors capture greater returns and meet fiduciary obligations.
Today’s announcement represents a major step forward in our mission to advance institutional participation in the digital asset class. We’ve been hard at work building the ideal custody solution for institutional investors, starting with a product that’s safer than cold storage, adding industry-leading insurance, and recently becoming a Qualified Custodian. Yield generation is among the most important requirements for institutional investors, and enabling participation for assets like Stellar and Tezos has been a priority since we launched. We’re proud to offer these services to our clients today, and we look forward to supporting yield generation for even more assets in the near future.
Why Stellar inflation?
Stellar has a fixed inflation rate of 1% per year written into its protocol: as the protocol is currently written, if all asset-holders participate fully, each will receive a total distribution of 1% more Stellar annually, proportional to their holdings.
Being able to capture inflation returns is critically important for institutional investors who hold any significant position in Stellar, especially considering that the total gains or dilution for any given asset-holder could be greater than 1% depending on the overall community’s participation. If asset-holders don’t enable inflation collection, they won’t receive an inflation distribution, and their holdings will be diluted. If some asset holders enable inflation collection and others don’t, those who do may grow their holdings faster than the inflation rate. Each asset holder’s gains or dilution will compound over time, as new inflation distributions are issued weekly.
How it works
- Delegate to a trusted inflation pool: Clients can delegate their votes to a specified inflation pool, and receive inflation awards.
- Low fees: We charge a small fee for inflation awards claimed.
- Detailed reporting for taxes and fund administration: We provide reporting for clients and their fund administrators to categorize awards correctly, available through both the Anchorage dashboard and our read-only API.
- Simple interface: Inflation is a first class feature, and running the delegation operation can be done from within the Anchorage user interface.
Why Tezos baking?
In addition to supporting Stellar, we’re excited to announce support for Tezos baking. As with Stellar, institutional investors who hold Tezos must be able to capture baking returns safely and in full. Clients who hold Tezos can now delegate their baking rights to their preferred baker (including ours), which will enable them to receive baking returns at a rate of roughly 7% annualized.
If you’re wondering what “baking” means in the first place, it’s a variant of staking, an increasingly popular mechanism for validating new blocks of transactions on a blockchain. For a more detailed explanation, check out our blog post: Staking and Inflation Explained for Institutional Investors.
Tezos co-founder Arthur Breitman says, “Tezos as a network is safeguarded by the active participation of its community. By letting their customers delegate to the baker of their choice — including the customer’s own servers — Anchorage’s offering aligns itself very well with the philosophy of the project.”
How it works
- Bring your own baker: Clients can delegate their Tezos to our baker or a third party baker of their choice, and Anchorage will deposit each client’s baking returns directly into their account.
- Switch bakers anytime: Clients can easily switch delegation from one baker to another.
- No need to post bond: Anchorage will post bond on our clients’ behalf.
- Low fees: We charge a small fee for baking returns earned.
- Detailed reporting for taxes and fund administration: We provide reporting for clients and their fund administrators to categorize returns correctly, available through both the Anchorage dashboard and our read-only API.
- Simple interface: Baking is a first class feature, and running the delegation operation can be done from within the Anchorage user interface.
Anchorage’s smart storage architecture enables using private keys from custody without human operations that expose assets to risk or compromise exclusive control, so clients won’t face any trade-off between the security of their assets and generating additional yield.
Participation is the future of crypto: new chains are increasingly adopting Proof-of-Stake consensus mechanisms, and on-chain governance for making protocol changes. It’s safe to say that even more forms of participation will be developed and widely adopted in the years to come. As these new asset types evolve, cold storage custody is struggling to support their participative features securely. We created Anchorage to meet institutional demand for custody that helps investors stay ahead as crypto advances, and we will be enabling all participative mechanisms for all assets we support.
To learn more about Anchorage, please get in touch.
Services are offered either through Anchorage Hold LLC, a Delaware limited liability company and registered Money Services Business, or Anchorage Trust Company, a South Dakota-chartered trust company. Anchorage Hold and Anchorage Trust Company are not registered with the SEC. Services are not yet offered to residents of New York. Anchorage Hold and Anchorage Trust Company do not engage in the offer or sale of securities or digital assets, and do not provide legal, tax, or investment advice. Anchorage Hold LLC and Anchorage Trust Company are wholly-owned subsidiaries of Anchor Labs Inc., a Delaware corporation headquartered in San Francisco, California.