Anchor protocol_ a Terra-based lending and borrowing platform.

2022-05-13, 16:17

The Anchor Protocol (ANC Protocol) is a savings protocol that offers stable currency deposits(which are characterized by insignificant volatility). It consists of an ecosystem of Depositors, borrowers, liquidators, ANC liquidity providers, Oracle feeders, an ANC circuit, and a token economy. As a result, it offers a fantastic opportunity for its users to borrow money, gain rewards, and fund the entire system's liquidity.

It can be used in liquidity mining, borrowing, staking in governance polls, among many others. With its robust system, it has the potential to be the next big thing.

The Anchor Protocol (ANC) is a platform that facilitates lending and borrowing on the Terra Blockchain. As a result, depositors have lucrative passive income opportunities, while borrowers have easy access to stablecoin loans backed by collateral.

What is Anchor Protocol?

The Anchor Protocol (ANC Protocol) is a savings protocol that offers stable currency deposits with low volatility returns. Among the leading proof-of-stake blockchains, a diversified stream of participation rewards is used as the anchor rate. The features of Anchor make it a platform that offers a much more stable savings rate than money markets.

The following are the most important features of Anchor Protocol:

With bAsset's guarantees, deposit yields will be high and stable

Deposits in stable currencies combined with instant withdrawals

Under-collateralized loans are protected through liquidation

Third-party applications can earn interest and connect to the platform without restrictions because it is open source and permission-free.

Using Anchor Earn, Anchor.js, or EthAnchor, developers can easily interact with Anchor.

Ecosystem

Anchor ecosystem participants include depositors (lenders), borrowers, liquidators, ANC liquidity providers, and Oracle feeder companies.

Depositor (lender)

Lends stable Terra currency to Anchor's money market, which is then pooled and lent to borrowers, with the accrued interest going to all depositors in proportion.

Borrower

Companies that borrow Terra stable currencies from the Anchor money market create bAsset collateralized lending positions. By borrowing money, the user can get access to liquidity while maintaining exposure to the value of their assets. The Anchor Protocol distributes Anchor Tokens in exchange for borrowing money.

Liquidator

Watches for risky loans and, if necessary, requests collateral liquidation. Collateral is settled by executing bids in the Settlement Agreement.

ANC Liquidity Provider

These are entities that provide liquidity to the Terraswap ANC-UST Pair. In addition, they manage the initial start-up of swap liquidity between ANC and UST tokens.

Oracle Feeder

The Terra account is responsible for providing accurate and up-to-date pricing feed for bAsset collateral. In addition, they fundamentally serve to provide the necessary infrastructure.

The token economy

$ANC, the Anchor Protocol governance token, is the Anchor token. By depositing ANC tokens, new governance surveys can be created. Its value will scale linearly with Anchor's assets under management (AUM), allowing it to capture a portion of Anchor's performance.

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ANC circuit

We've already said that Anchor Token holders manage the governance over Anchor. The amount of ANC votes cast determines voting power. As a result, voters whose stake in the ANC is higher have a greater influence on determining whether to implement the changes listed in a governance poll.

ANC's unique characteristics

Principal safety

Using collateral liquidation, the Anchor Protocol ensures that depositors' principles are protected at all costs. As long as they're over-collateralized, subsequent deposits are safe. By paying off all debts which might fail to meet collateral requirements, it ensures the safety of deposits.

A great way to save money

In the case of customers seeking low-risk passive income, crypto-assets may not be the best choice because of their significant price volatility. In that case, Anchor offers stablecoin money markets in Terra.

In return for Terra stablecoins, customers will receive stablecoins, avoiding the volatility associated with other crypto assets. Furthermore, Anchor's deposit rate stability method ensures stable returns by protecting against volatility.

Users can leverage price and stake yields.

Equities can be used as collateral for stablecoin loans. As a result, users can leverage their positions by buying more of the same asset. Furthermore, users can borrow stablecoin at a low cost and invest in bAssets that yield a higher return than their borrowing cost. Deposit interest rates on stablecoins can be supported by the block rewards generated by users' assets, so users seeking additional liquidity can do so with little to no additional interest.

How do I use the Anchor Protocol platform?

Here is the step by step procedure on how to use the Anchor Protocol Program:

STEP 1

Download the Terra Station extension from the Chrome store.

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STEP 2

The native token of Terra is LUNA. With LUNA, you can participate in governance and get performance rewards. It also functions as part of the Terra operating system as a utility token. With this in mind, you should use LUNA and keep it in your wallet. LUNA is available on many exchanges.

STEP 3

Transfers of assets between Ethereum and Terra-based blockchains will be possible through Terra Bridge. Therefore, our Terra Extension wallet should be entered in the appropriate field of the Metamask wallet to send LUNA.

Terra Bridge

STEP 4

In the Anchor Protocol, your LUNA can be staked as LUNA or bLUNA as collateral for a loan and can be withdrawn. We will do this by going to Anchor's Bond page and selecting some LUNA amounts to convert them into linked LUNA.

Our next step is to press "Mint." After that, you can go to the tab showing "Borrow." Click on it and "Provide" also. After that, you'll select the bLUNA number next to the "Purse" tab. This move allows you to use your bLUNAs as collateral for the borrowing.

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STEP 5

The next step is to move to the "borrow" page via the top menu. Then, you'll select the amount you'll want to borrow and continue. When you've done this, you'll get to earn ANCs as rewards for getting loans and keeping the Anchor running.

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STEP 6

Also, you can click on the governance tab and provide liquidity with the ANC-UST. This makes you eligible for more rewards.

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How do you borrow and lend?

Borrowing and lending on the Anchor platform is a very simple process. First, users deposit their stablecoins in exchange for their returns of about 20%. The Anchor platform then uses this pool of stablecoins to fund other users who want to borrow.

To secure their loan, borrowers deposit their bAssets as collateral. These staked assets, in turn, provide a string of returns as it helps to power the returns the depositors in the network gets. However, more demand is placed on borrowers as they have to provide more collateral for their loans. As beautiful as this helps balance the platform, Anchor will have to start selling the assets to repay the loans if the loan-to-value ratio dips past a certain percentage.

The rate ratio for borrowers and depositors is calculated using an algorithm known as the automated interest rate. It works based on the borrowing demand and availability. The focal point of this algorithm is the utilization ratio of the Terra pool.

Currently, the Anchor protocol only transacts loans and deposits in TerraUSD(UST). The platform also accepts only two bAssets for UST loan collaterals. They are the bonded ETH (bETH) and the Bonded LUNA (bLuna)

Use cases of Anchor Protocol

Generating Protocol fees:

It helps to generate Protocol fees that are needed to purchase ANC tokens.

Liquidity Mining:

Rewards on the Anchor Protocol platform can be earned by staking LP tokens of the Terraswap pair (ANC-UST).

Used as incentives for borrowing:

ANC is used in borrowing demand and IDR (Initial Deposit Rate) stability as an incentive. The protocol; gifts stablecoin borrowers ANC tokens in proportion to the amount they borrowed.

Governance:

ANC tokens can be staked in the creation of government polls. It can also be used to vote on the government polls by users who have their ANC tokens.

Gate.io

Gate.io provides a platform for you to trade in ANC-USDT and LUNA-USDT

Gate.io ANC/USDT

Gate.io LUNA/USDT (Terra)

Conclusion

Anchor protocol provides a more convenient and seamless way to get high returns on stable coin deposits and spend them with ease. This guarantees that Anchor Protocol's biggest advantage is its massive security against the market's volatility.

With its incorporation of Terra, there is a surety that the project will blossom and grow more in the coming years. It has a great potential to be one of the world's leading platforms.

Author: Gate.io Observer: M. Olatunji
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
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