Guide to Anchor Protocol on Terra — 20% APY on UST
Anchor Protocol is a newly launched savings protocol offering low-volatile yields on Terra stablecoin deposits (UST).
The yield comes from a diversified stream of staking rewards from major proof-of-stake blockchains.
Where does the yield come from?
Anchor Protocol obtains yield from staking, money markets and ANC token incentives.
Governance sets an Anchor rate, which is the target APY to pay out to depositors.
Staking rewards from collateral make up the yield, and yield reserves and borrowing incentivses help the yield converge to the anchor rate.
Anchor Protocol defines two parties where a money market exists:
- A lender looking to earn stable yields on their stablecoins
- A borrower looking to borrow stablecoins on stakeable assets.
To borrow stablecoins, the borrower locks up Bonded Assets (bAssets) as collateral, and borrows stablecoins below the protocol-defined LTV ratio.
The diversified stream of staking rewards accruing to the global pool of collateral then gets converted to stablecoin, and then conferred to the lender in the form of a stable yield.
