Why Terra’s Anchor Protocol Changed Earn Rate To 18% APY
02 Mayo 2022 - 1:00PM
NEWSBTC
Anchor Protocol, one of the most popular platforms in the Terra
ecosystem, rolled out a change in its Earn Rate. The latter will
begin to operate in a semi-dynamic fashion rather than the
previously fixed 20% annual percentage yield (APY). Related Reading
| Terra Price Continues Moving North; How Soon Will It Cross
$100? With a massive shift in the protocol’s reward
mechanism, the new models aim at making Anchor “more sustainable”.
As a result, users started earning an 18% APY as of yesterday, May
1. The earn rate will be modified each month for the foreseeable
future. The team behind this Terra project said the following via
their official Twitter account: The Anchor Earn rate adjusts
dynamically by up to 1.5% each month based on if the yield reserve
appreciated or depreciated. The floor is 15% APY & the ceiling
is 20% APY. The changes in Anchor’s earn rate are triggered by the
protocol’s yield reserve. A .25% modification in this element will
be followed by an adjustment in the Earn Rate. This shift in the
Terra protocol was approved, via Proposition 20, on March 24 this
year. At the time, Anchor Protocol said: The addition of a
semi-dynamic Earn rate will contribute to the long-term
sustainability of Anchor & will benefit users of the protocol
by enabling yield reserve growth while continuing to provide an
attractive yield on UST. As seen below, the total borrowed versus
total deposits on Anchor shows significant divergence. This is why
the yield reserves on the protocol trend to the downside,
especially in times of bearish price action on larger
cryptocurrencies. Some of the users believe that this trend could
trigger a deppeging event for UST which could jeopardize the entire
Terra ecosystem. The introduction of a semi-dynamic rate is the
first step to avoiding this possibility. Terra Is Not The Most
Attractive Venue For Stablecoin Yield? Some users believe that the
new earn rate might not be enough and have been suggesting the
implementation of investment strategies that can contribute to the
yield reserves. Another part of the community seems focused on
increasing the borrowing rate at Anchor. However, as the chart
above shows, deposits on the Terra protocol have been trending to
the upside at a fast pace. In the meantime, the number of borrows
has been moving sideways with a slight uptick in recent months.
Over the same period, other network launched their own stablecoins
with alternatives to Anchor. NEAR and TRON stand out because of the
hype and the APY that they are offering to their users. TRON seems
to have the largest incentives as it provides depositors with a 30%
APY. Like Terra users with Anchor, many wonder if those rewards
will be sustainable. Related Reading | Terra Users Heads Up,
Why NEAR May Launch Native Stablecoin With A 20% APR At the time of
writing, Terra (LUNA) trades at $83 with a 6% profit in 24-hours.
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