Written in January 24, 2022
Anchor Protocol
1/ @anchor_protocol ($ANC) is a decentralized savings protocol offering low-volatile yields on the $LUNA blockchain. The Anchor Protocol rate is derived by staking rewards from a diversified basket of PoS blockchains; stable and higher than the traditional money market interest rate.
2/ $ANC was founded by @stablekwon and Daniel Shin. Do Kwon has a bachelor of Computer Science from Stanford and was Founder at Anyfi. Daniel Shin is the Financial face of Anchor, with bachelor of economics from Wharton and extensive experience in the finance and consulting industry.
3/ Back in March 2021, ANC successfully raised $20 million in a venture round investment made by @naval, Hashed, Delphi Digital, Pantera Capital, Dragonfly Capital, Alameda Research, Jump Trading, and Galaxy Digital.
4/ Network TL;DR governance sets the ‘anchor rate’ (target APY), staking rewards make up the ‘real yield’, the ‘real yield’ is stabilized around the ‘anchor rate’ – reserves and borrowing serves as incentive to help real yield reach around the anchor rate
5/ At its core, Anchor relies on the Terra money market – a web assembly smart contract on the $LUNA blockchain that facilitates deposits and borrowing of Terra stablecoin. The interest rate of the platform is algorithmically determined and encoded by the pool’s utilization ratio.
6/ The deposited stablecoins are represented by Anchor Terra ($aTerra). $ANC is structured to provide benefits: high and stable deposit yield powered by bonded assets collateral, instant withdrawals, and principal protection via liquidation risk of under-collateralization.
7/ Network participants consist of not only borrower and lender, but also liquidators and ANC liquidity providers. Liquidators monitor for the existence of risky loans (those with LTV above the set maximum). Liquidity providers provide liquidity to the LP in the form of an ANC-UST (Terra’s USD equivalent) pair.
8/ Diving in-depth towards its borrowing, ANC employs a borrowing limit per account. The borrow limit is based on the user’s liability compared with max LTV. The applied borrow rate is constantly adjusted based on supply and demand for stablecoins (automatically adjusted by algorithm).
9/ $ANC Tokenomics: use cases include governance, yield benchmark, and network purposes (incentives). Anchor also captures protocol fees; 10% of value flowing into yield reserve would be used for value accrual of ANC.
10/ 10% of bAsset rewards and 0.1% of liquidation fees regardless of cash flow is positive or negative would be bought back. The token also employs a burning mechanism to meet its anchor rate benchmark. Minting is the equivalent of burning; burn to redeem deposited assets.
11/ The current state of $ANC has deposits more than its collateral, almost 5:3 ratio. Furthermore, the project has bought back 193,700 in the last 72 hours. With a total of 3,541,288 ANC since TGE.
12/ $bLUNA makes up 88.42% of the total collateral and bETH 11.58%. This indicates that the protocol is heavily influenced by bLUNA price. The more volatile $LUNA is the higher probability of liquidation.
13/ Security-wise, $ANC has verified all contract nodes and balances publicly. The network has gone through multiple audits: ANC Smart Contract – Cryptonics, ANC Token and Distributions Smart Contract – Cryptonics, and ETHAnchor – Solidified.
14/ To incentivize security protection, ANC implemented Anchor Bug Bounty Program. White hat hackers or independent security penetration testers in good faith could earn through @immunefi bounty platform.
15/ $ANC has announced a partnership with Lido Finance. The agreement would launch bETH (wrapped ETH and bonded Ethereum on Terra). Anchor Protocol would now have bETH and stETh as an option of collateral.
16/ Looking forward, the protocol is awaiting integration with traditional financial platforms and exchanges; $ANC is also planning to offer direct banking on-ramps to Anchor’s UST deposits via credit/debit or direct bank wires.