Interpretation of the lending protocol ANCHOR in the algorithmic stable currency LUNA

Compared with the short 1CO boom in 2017, this bull market in the currency circle can already be called a long bull. Among them, in addition to the global central bank's large-scale release of water, the biggest reason is Defi-the currency circle users finally have a reason for holding "air coins": income is generated through pledge and liquidity mining. Defi has brought an unprecedented wealth effect to the currency circle, because the income of DEFI users is calculated on the currency standard (COMP, UNI), and these coins have increased several times at this stage. However, the bull market makes money and the bear market makes money. In a bear market, these gains are extremely volatile. Can you manage your finances with a fixed rate of return? Welcome to Anchor, where you can earn 20% of stablecoin revenue.

Currently the biggest pain point in the Defi lending field-floating interest rates

Although Defi's TVL is currently as high as 450 billion U.S. dollars, considering that the completion of an operation on Ethereum requires a two-digit to three-digit gas cost, it is obvious that most of them are "giant whale" users. The reason for preventing ordinary retail investors from entering the DeFi field is the high gas cost on Ethereum. At present, the biggest pain point of Defi is its cumbersome mechanism and the unbelievable, but fluctuating benefits of ordinary people.

In the lending field, mainstream lending platforms such as Compound and Aave are very popular from the perspective of TVL, but they are still too difficult to understand if they are operated. Users need to constantly monitor interest rates, especially for users who want to lend. The current mainstream Defi lending platform is basically a paradise for giant whales. Their amount of funds allows them time to understand lending aggregators such as Year's, or to constantly switch platforms to chase the current highest returns. But for ordinary users, it is difficult for them to understand the principle of borrowing due to their amount of funds and knowledge level: Why is the annualized return of one day 20% and 30% on the other day? The learning curve is too high.

Anchor-an agreement to use POS pledge proceeds

Anchor is a lending agreement released by Terraform Labs, the team behind the algorithmic stablecoin project LUNA, in mid-March of this year. It innovatively uses the pledge income of POS tokens (LUNA, DOT, SOL, ETH2.0, etc.) to stabilize users through the reserve pool Lending interest rate. Simply put, the reason why Anchor can bring stable U-standard benefits to users is because deposit users can not only charge interest, but also sell additional pledge rewards for borrowing users. At present, Anchor's stable deposit interest rate is 20%. In the future, it will continue to monitor the supply and demand of borrowing to adjust. There are two core components in Anchor to stabilize interest rates, the revenue reserve pool and ANC (Anchor's token). In order to facilitate understanding, I will use two scenarios of "bull market" and "bear market" to introduce how Anchor stabilizes the rate of return. In a bull market, the demand for borrowing (plus leverage) is greater than the demand for lending (financial management). Anchor will absorb the income that exceeds the stable yield and put part of it into the reserve pool and part of it for ANC repurchase; at the same time, it will give the lender ANC Token rewards are reduced by 15% every week. In a bear market, the demand for lending (financial management) will be greater than the demand for borrowing (with leverage). At this time, the reserve pool that absorbs additional income in the bull market will be used by lenders to make up for the lack of loan utilization, and at the same time Increase the rate of up to 50% weekly to the lender to airdrop ANC tokens to encourage lending behavior.

The purpose of Anchor is to get out of the circle

Through a simple interface and stable yield, the target group of Anchor is not users already in DEFI, but ordinary people who cannot get normal interest rates in traditional banks in the current low interest rate environment. Anchor's next step is to cooperate with various financial technology platforms and use its prepared SDK to plug into each platform, providing users of these platforms with stable and high income. Currently, Intellabridge, a Canadian listed company, is cooperating with Terra to develop a one-stop platform for wealth management, investment, and transfer using its stable currency UST, Kash, which is in Alpha testing. Among them, the reason why the platform is expected to quickly attract users is to connect Anchor with 20% of financial management income.

Investment opportunities brought by Anchor

1. Deposit UST to earn a stable interest rate of 20%: Anchor can currently provide stable, 20% U-standard annualized income.

2. Mortgage LUNA to earn 100%+ ANC token rewards: At present, it is profitable to borrow LUNA through mortgage, and you can get 100%+ ANC token rewards with annualized income. Because Anchor’s token rewards are reduced by 15% every week, it will take several weeks for the rewards to slowly disappear. Now is a good opportunity to squeeze the wool!

3. Invest in Anchor tokens (ANC): I think there are three highlights of investing in ANC. The first point is that Anchor is currently the only protocol that can provide stable income in the Defi field, which makes it a great attraction for users in the currency circle who know less about Defi, and even ordinary people who don't know the blockchain. The second point is that Anchor will serve as the flagship lending agreement for the current POS currency. At present, the main Defi lending platforms are based on Ethereum and ERC-20 tokens. However, there is currently no Defi lending platform for PoS altcoins with large market value such as Polkadot, Solana, Cosmos, and ETH2.0. The third point is that ANC has a repurchase function. Here is an introduction to the ANC token model. If the loan interest rate is greater than the guaranteed stable interest rate, the interest rate difference will be used to repurchase the ANC and redistribute it to the holders of the ANC. Anchor's institutional endorsement is also very strong, which to a certain extent reflects the pursuit of ANC by top investment institutions and ensures the stability of the bargaining chip. There are not only the already listed Galaxy Digital, Alameda Research on the FTX exchange, Delphi Digital, the top cryptocurrency investment research institution, Pantera and Dragonfly, the top VC in our cryptocurrency circle, and Jump trading, a traditional high-frequency trading institution in the financial sector. But for now, I personally think that the price of ANC is too expensive and is expected to fall or consolidate. Mainly because the current chips are too easy to obtain, airdrops and loans to luna pledgers can be rewarded with large ANC tokens, which takes time to digest. However, its potential should not be underestimated, especially after ANC begins to support more POS tokens such as ETH2.0, Dot, etc., it is expected that there will be a large interest rate differential that can be allocated to token holders.

4 Invest in LUNA: As an algorithmic stable currency, every time 1 UST is printed, 1 UST worth of LUNA needs to be destroyed. More demand for UST (the only stable currency supported by anchor) equals more demand for LUNA. Therefore, Anchor's support for the price of LUNA will also be significant.