All aboard! It’s time to continue our ongoing look at the Terra ecosystem, following up on our examinations of Mirror and Terra as a whole. This time, we’re learning all about Anchor, a new protocol launched in March of 2021 by Terra.
What Is Anchor?
In July of last year, Terra Head of Research Nicholas Platias published a Medium post introducing the world to Anchor, the newest protocol hosted on the Terra blockchain.
According to Platias, Terra’s goal was simple — fill a gap in the DeFi ecosystem, specifically the need for a convenient and straightforward savings tool. Anchor was designed to provide exactly that by offering users a savings protocol on the Terra blockchain enabled by a “principal-protected stablecoin that accepts Terra deposits and pays a stable interest rate.”
The protocol, which went live in March of this year, generates yield by lending out deposits to borrowers, who offer Proof of Stake assets from major blockchains as collateral for the loans. This allows Anchor to offer three key features to its users — principal protection, which results from its liquidation protocol, designed to liquidate borrower collateral when a loan is in danger, protecting the principal of deposits, instant withdrawals, and stable interest rates.
How Anchor pulls its weight
Anchor was a serious breakthrough for the Terra ecosystem, at least according to the creators of the protocol. In a tweet announcing the debut, Terra said that the new protocol “completes Terraform Labs’ vision” and that the role of Anchor in the broader ecosystem is “pivotal.”
In a recent Ask Me Anything, Terra’s Do Kwon said that Terra’s vision for Anchor would be to fill the role of federal funds rate in the world of chains. Put more simply, Terra believes it could become the target lending rate for crypto savings accounts and other savings-focused products.
Why should that matter to you — or to the crypto world at large?
Because a stable interest rate could be a massive breakthrough for the Defi space. Terra is trying to provide just that with Anchor by making it easier for stakeholders in the ecosystem to get access to stable, predictable returns on investment. The 20% return rate offered by Terra may seem small to Defi natives, but what it lacks in radical returns it repays with stability, peace of mind, and an access point for risk-averse investors or institutions looking to get involved in crypto.
How to pull set sail
Want to climb aboard and get involved with Anchor for yourself? You’re not alone. As of May 12, a total of $287 million has been deposited to Anchor, while $242 million has been borrowed.
You can also join the Flipside Crypto community on Discord to follow the discussion on Anchor, Mirror, and the rest of the Terra ecosystem, and keep up with the latest news on our bounty program. You can follow Flipside on Twitter and subscribe to the On the Flipside blog to get the latest news, data, analysis, and insights!