Anchor Protocol is a protocol of the Terra ecosystem, which allows users to take loans in UST stablecoins, for delegated assets, also called bonded assets or bAssets.
Anchor also allows for stable yearly profits for depositing UST with a rate of 20%. Those who invest (deposit) their UST, provide their money to be used, and for that they get a reward in the form of a rate. In the Anchor protocol these users are called lenders.
bAssets are assets delegated to specific validators from a list called the whitelist. But the delegation rewards don’t go to the stakers (coin owners), but to a special pool, called the pool of collateral. From this pool the rewards are distributed to lenders.
Instead of delegation rewards bAsset owners get the ability to take loans equal to a maximum of 50% of the delegated assets. Let’s say you delegated 100 Luna and minted 100 bLuna, the price of the Luna (and bLuna) is $2000. Now you can take a loan up to $1000 (locking 100 bLuna), in the UST stablecoin, a.k.a. a maximum of 1000 UST. Those who take these loans are called borrowers.
Borrowers also get a bonus for using the features of Anchor, paid out in the ANC token.
The borrowed UST can be used in a variety of ways:
- Deposited to become a creditor, getting a stable guaranteed 20% income
- Traded for Luna and delegated for staking rewards
- You may trade half of it for ANC and provide liquidity to the ANC-UST pool, getting a certain percentage in ANC rewards
- Traded for ANC and staked on the Anchor platform for rewards
- Traded for MIR to take part in the Mirror protocol
All these possibilities may be used separately or simultaneously, diversifying your income.
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