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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Why Terra’s Anchor Protocol Changed Earn Rate To 18% APY

Reynaldo Marquez
Reynaldo Marquez
3 years ago
2 mins read
Terra Luna

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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.

Terra LUNA LUNAUSDT
Source: Anchor Protocol

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.

Bitcoin BTC BTCUSD
LUNA is on an upward trend on the daily chart. Source: LUNAUSDT Tradingview
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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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