What is Anchor (ANC)?
Anchor —— A New Type of Savings Product for Decentralized Finance
- Anchor Protocol was created based on the stablecoin project Terra. It is a new type of savings protocol that aims to balance interest rates by coordinating block rewards from multiple different PoS consensus blockchains, and finally achieve a stable yield of storage interest rates.
- To maintain stability, Anchor Protocol introduces another source of income into the system, that is, the block reward earned by the encrypted assets mortgaged by the lender, and dynamically adjusts the reward income to borrowers and lenders to achieve the Anchor Rate. The goal is to bring the deposit interest rate infinitely close to the anchor rate.
- ANC tokens are mainly used for two purposes in the Anchor ecosystem:
- Governance: ANC pledgers can use token voting to change related parameters in the system (including Anchor interest rates) and can control the community fund pool (accounting for 27.8% of the total supply of ANC).
- Obtaining repurchase income: Part of the income generated by the pledge of the Anchor platform will be used to purchase ANC tokens on Terraswap, and then distributed to ANC pledgers. This will increase the buying pressure of ANC tokens.
Anchor Key Metrics
Anchor Protocol was created based on the stablecoin project Terra. It is a new type of savings protocol that aims to balance interest rates by coordinating block rewards from multiple different PoS consensus blockchains, and ultimately achieve a stable yield of storage interest rates. The project hopes to become a reference interest rate or a savings version of Stripe for the entire blockchain market and hopes to provide stable interest rate gains for cryptocurrency holders to promote the mainstream adoption of DeFi.
The Anchor protocol defines a currency market between the lender and the borrower. Lenders hope to earn a stable rate of return through their stablecoins, and borrowers hope to borrow stablecoins through pledgeable assets. To borrow stablecoins, the borrower locks up bond assets (bAssets) as collateral and borrows stablecoins at a lower LTV ratio than defined in the agreement. Then, the diversified pledge rewards accumulated in all collateral pools are converted into stable coins, which are then given to lenders in the form of stable yields.
ANC is Anchor Protocol's governance token. ANC tokens can be deposited to create new governance polls, which can be voted on by users that have staked ANC.
- ANC is designed to capture a portion of Anchor's yield, allowing its value to scale linearly with Anchor's assets under management (AUM). Anchor distributes protocol fees to ANC stakers pro-rata to their stake, benefitting stakers as adoption of Anchor increases -- stakers of ANC are incentivized to propose, discuss, and vote for proposals that further merit the protocol.
- ANC is also used as incentives to bootstrap borrow demand and initial deposit rate stability. The protocol distributes ANC tokens every block to stablecoin borrowers, proportional to the amount borrowed.
Anchor Project Feature
The core mechanism of Anchor is to use a money market structure to connect depositors and borrowers. However, contrary to most current currency markets in the crypto industry (such as Aave and Compound), its architecture is specifically designed for depositors to provide them with more stable interest rates. To achieve this goal, the following three components play a big role:
- Depositor: Anchor platform provides stablecoin depositors on the Terra platform with a fixed interest rate called the Anchor Rate. Initially, the interest rate is set at 20%, which can be adjusted based on governance in the future.
- Borrower: the protocol only supports blockchain pledged asset derivatives that are consensus on mainstream PoS as collateral assets. As assets that naturally generate income, the rewards generated by these blockchains are more stable and powerful, which can ensure that the Anchor rate of depositor is maintained at a certain level.
- Stabilization Mechanism: The goal is to bring the deposit rate infinitely close to the Anchor Rate. Anchor stabilizes the deposit interest rate by passing on a variable fraction of the bAsset yield to the depositor. It guarantees the principal of depositors by liquidating borrowers’ collateral via liquidation contracts and third-party arbitrageurs.