3 months ago, I decided to invest a small amount of money into a defi project called Anchor Protocol. This project has been gaining popularity amidst the crazy volatility of the crypto market as it touts itself as a savings protocol.
Sitting on the Terra network, the Anchor Protocol has grown steadily, growing their Total Locked Value from $70M in March of 2021 to over $10B in TVL as of this writing.
In my first 6 weeks in Anchor, my $233 savings wallet grew to $238. That’s around a 2% growth, which is very impressive, despite being a very small amount. My best High-Yield Savings Account at the moment is Ally Bank and it only boasts an APY of half a percent.
It’s been 3 months now since I started Anchor Protocol, and there has been some changes along the way. In this article, I’m sharing with you my results in Anchor for 3 months, what are some news about the project and Terra, and my plans for Anchor moving forward.
Terra Network Update
The Terra ecosystem is becoming a favorite in the crypto space, especially with the TerraUSD (UST) stablecoin used in Anchor Protocol. But while that growth and widespread adoption is good, it has brought some issues to light. The recent volatility in the space has prompted the network to look into backing its stablecoin with Bitcoin reserves.
UST ran into some trouble earlier this year and broke peg as a result of its close connection to the Wonderland DeFi project. When news that one of its leadership was a known crypto scammer, a flood of users had caused enough to knock UST, alongside another stablecoin called Magic Internet Money, or MIM, from its $1 peg.
Since the developers didn’t want this happening again, they have decided to pad the UST value by adding Bitcoin to their reserves. Even though UST is supposed to be pegged to USD, that’s not the case with this stablecoin. Its $1 value is closely related to the value of LUNA. The two cryptos have elastic total supplies that are joined to one another.
If UST goes below $1, UST holders can burn their tokens for LUNA rewards. When it moves above $1, LUNA holders can burn LUNA to mint new UST.
With the Wonderland issue, it proved that the current process cannot hold up against such events. The de-pegging of UST resulted into the rapid loss in value for LUNA.
In late February, the Terra team raised $1 billion to help the ecosystem and bring stability to UST. As of today, Terra has plans to buy $10 billion in BTC to act as a UST reserve. According to Terra’s founder, Do Kwon, the choice of BTC over USD as a reserve is because the OG token is more attractive to hold for people and easier to use.
Anchor Protocol Updates
Dynamic Earn Rate Proposal
The first update is about the Anchor Earn rate. A proposal was submitted back at the beginning of March, titled “Dynamic Earn Rate”. The proposal suggests that as the protocol gains popularity, a semi-dynamic earn rate should reflect the success of the platform.
As an example, if the yield reserve is growing, the earn rate could increase; if the yield reserve is falling, the rate could decrease. And the rate of change in the yield reserve is taken from a one-month period. To make the earn rate more stable, a limit of 1.5% per period on the earn rate will also be implemented.
Formula:
(% Earn Rate Change) = min( abs(1.5%, ((YR % Change) – 3%)) )
This earn rate change is then added or subtracted to the current targeted deposit rate.
New Earn Rate = Current Deposit Rate +/- % Earn Rate Change
The proposal ends today, March 23rd, so you can cast your votes on the Anchor Protocol website if you want to. Once the proposal has passed, I will update my Medium blog to reflect the changes.
Avalanche and Anchor Protocol
Another big update to Anchor didn’t happen inside the project, but with its partnership with a very big blockchain. The Avalanche network announced in late January that they’re bringing in TerraUSD (UST) as the main stablecoin on its network.
Through the Avalanche Rush program, they are trying to incentivize dapp developers on Avalanche to use UST over other stablecoins. Pangolin, a native DEX on Avalanche, announced its participation in the Avalanche Rush program and states that the move is part of its commitment to support decentralized stablecoins that push the boundaries of innovation.
#PangolinDEX joins #Avalanche Rush to bring $UST to #AVAX is the most abundant and widely used algorithmic stablecoin of any blockchain! Our new farm later today will provide huge rewards as our second round of Super Farming.
Read more: https://t.co/RQEIIlLNpd
— Pangolin 🔺 (@pangolindex) January 27, 2022
Because of this, Avalanche users can now stake their UST in the Anchor Protocol without having to take their funds off-chain. This marks Avalanche as the first non-Terra chain to offer low volatility, high-percentage yields through Anchor.
My 3-Month Result in Anchor Protocol
You can see why I’ve stuck with this project ever since I started with it. The potential of Anchor is so huge that it’s hard not to see it making bigger leaps in the future. More partnerships are being made, more dapps are being developed on the Terra network, and there’s more utility coming our way in the next months and years.
I started with Anchor on November 16 with a $233 investment—no, savings. In my first 6 weeks, I received an interest income of $5, or a 2% return.
In March 19th, I looked at my 3-month result with Anchor Protocol, and that $233 savings grew to $249.65. That is around a 7.15% growth since 3 months ago. With my savings amount, it is estimated that I would earn 13 cents a day or $48.66 a year.
My Plans for Anchor Protocol
I can only say positive things about the project since it has been providing me with a consistent stream of interest income. I haven’t encountered any new problems as of the moment, so I plan to stay with Anchor for a long time.
With the growth of the Terra network and its suite of new projects, it makes sense for me to stick with Anchor long term. I’m thinking of starting with $50 every month, or depending on what my budget allows me. That way, I can grow my savings in the protocol while also riding on the growth of Terra and Anchor.
With the way things are working for me, I’m starting to move more of my assets into the crypto space. I don’t have the balls yet to move everything, unlike other crypto youtubers you see out there, but it’s the move I’m planning to make this year. I’d rather take it slow, feel out the platform and see if it makes me even more passive income.
At the end of the day, this is what the goal is—to make money and build wealth in the crypto space, so I can use that money to generate more passive income in the future