** Not Financial Advice. Please do your own research before investing**
Anchor Protocol (18~20% APY)
Given how we are used to keeping our savings in banks and earning a measly 0.02%, what we have here is a saving platform that offers 1000x the interest! Anchor Protocol is basically a savings and borrowing platform where depositors can earn a fixed rate of 18-20% while borrowers can post collaterals like $bLUNA or $bETH (proposal just passed) and more incoming collaterals such as $bATOM and $bSOL.
You must be wondering how can Anchor guarantee such a high fix rate, Ponzi Scam? Well no because the thing is that borrowers collaterals are actually earning staking rewards such as bLUNA and bETH. All these tokens are generating income which will then be repaid to the depositors. Furthermore, borrowers are given $ANC tokens when they borrow $UST and this results in a net APR for borrowers! (You are actually paid to borrow now!)
As Anchor accepts more collateral tokens, more users will be able to deposit and in turn generate more yields for the savers. Lastly, there is a yield reserve which is $UST that will be paid out when the borrowing rate is unable to match the saving rate. Feel free to explore more on Anchor Docs to understand the functions.
While the interest sounds tempting, some of you might be wondering if it is safe to use Anchor. The good news is that there are insurance protocols available that help to cover events such as smart contract exploits and UST depeg. In addition, TFL (Terra Team) will be releasing their own insurance protocol OZONE in the near future.
Personally, I have been using Anchor for the past few months where I just deposit my $UST from the Terra wallet and I would say the user experience is wonderful. It is simple and withdrawals are fast. Furthermore, multiple Terra projects are building on top of Anchor which would mean more demand for borrowing and deposits. We can see that the TVL in Anchor has exceeded 2 Billion and is still growing rapidly!
Thank you for reading and hope that this was informative for you. Feel free to comment or rectify any errors that I might have made! Cheers :)