Anchor Protocol UST Interest Calculator and Guide

How much can you earn by depositing your UST in Anchor Protocol?

Artboard
Asset

Terra USD

Ticker

UST

Current Price

$1.00

Rank

#0

Market Cap

$0

= 1000.0 UST
Current UST Price:
1 UST = $1.00
End value:
$2,436.91 = 2436.910 UST
Initial monthly earning:
$16.25 = 16.250 UST
Average earning per year:
$287.38 = 287.382 UST
Overall earning:
$1,436.91 = 1436.910 UST
Current Annual Anchor Interest Rate: 19.5% APY

Price data powered by CoinGecko API.

Month #Asset Value (USD)Asset Value (UST)Monthly staking reward (USD)Monthly staking reward (UST)
0$1,000.001,000.000 UST$0.000.000 UST
1$1,014.961,014.956 UST$14.9614.956 UST
2$1,030.141,030.136 UST$15.1815.180 UST
3$1,045.541,045.543 UST$15.4115.407 UST
4$1,061.181,061.181 UST$15.6415.637 UST
5$1,077.051,077.052 UST$15.8715.871 UST
6$1,093.161,093.161 UST$16.1116.109 UST
7$1,109.511,109.510 UST$16.3516.350 UST
8$1,126.101,126.104 UST$16.5916.594 UST
9$1,142.951,142.947 UST$16.8416.842 UST
10$1,160.041,160.041 UST$17.0917.094 UST
11$1,177.391,177.391 UST$17.3517.350 UST
12$1,195.001,195.000 UST$17.6117.609 UST
13$1,212.871,212.873 UST$17.8717.873 UST
14$1,231.011,231.013 UST$18.1418.140 UST
15$1,249.421,249.424 UST$18.4118.411 UST
16$1,268.111,268.111 UST$18.6918.687 UST
17$1,287.081,287.077 UST$18.9718.966 UST
18$1,306.331,306.327 UST$19.2519.250 UST
19$1,325.861,325.865 UST$19.5419.538 UST
20$1,345.691,345.695 UST$19.8319.830 UST
21$1,365.821,365.821 UST$20.1320.127 UST
22$1,386.251,386.249 UST$20.4320.428 UST
23$1,406.981,406.982 UST$20.7320.733 UST
24$1,428.031,428.025 UST$21.0421.043 UST
25$1,449.381,449.383 UST$21.3621.358 UST
26$1,471.061,471.060 UST$21.6821.677 UST
27$1,493.061,493.062 UST$22.0022.002 UST
28$1,515.391,515.392 UST$22.3322.331 UST
29$1,538.061,538.057 UST$22.6622.665 UST
30$1,561.061,561.061 UST$23.0023.004 UST
31$1,584.411,584.408 UST$23.3523.348 UST
32$1,608.111,608.105 UST$23.7023.697 UST
33$1,632.161,632.156 UST$24.0524.051 UST
34$1,656.571,656.567 UST$24.4124.411 UST
35$1,681.341,681.343 UST$24.7824.776 UST
36$1,706.491,706.490 UST$25.1525.147 UST
37$1,732.011,732.013 UST$25.5225.523 UST
38$1,757.921,757.917 UST$25.9025.904 UST
39$1,784.211,784.209 UST$26.2926.292 UST
40$1,810.891,810.894 UST$26.6926.685 UST
41$1,837.981,837.978 UST$27.0827.084 UST
42$1,865.471,865.467 UST$27.4927.489 UST
43$1,893.371,893.368 UST$27.9027.900 UST
44$1,921.691,921.686 UST$28.3228.318 UST
45$1,950.431,950.427 UST$28.7428.741 UST
46$1,979.601,979.598 UST$29.1729.171 UST
47$2,009.212,009.205 UST$29.6129.607 UST
48$2,039.262,039.255 UST$30.0530.050 UST
49$2,069.762,069.755 UST$30.5030.500 UST
50$2,100.712,100.711 UST$30.9630.956 UST
51$2,132.132,132.130 UST$31.4231.419 UST
52$2,164.022,164.018 UST$31.8931.889 UST
53$2,196.382,196.384 UST$32.3732.366 UST
54$2,229.232,229.234 UST$32.8532.850 UST
55$2,262.572,262.575 UST$33.3433.341 UST
56$2,296.412,296.414 UST$33.8433.840 UST
57$2,330.762,330.760 UST$34.3534.346 UST
58$2,365.622,365.619 UST$34.8634.859 UST
59$2,401.002,401.000 UST$35.3835.381 UST
60$2,436.912,436.910 UST$35.9135.910 UST

What is Anchor Protocol?

  • Anchor Protocol is a decentralized finance (DeFi) money market savings and lending platform built on the Terra blockchain.
  • What makes Anchor Protocol so appealing is that at the time of this writing, it allows users to earn a stable yield of nearly 20% APY on deposits of TerraUSD stablecoin (UST). UST is a stablecoin on Terra's network that is pegged 1:1 to the US dollar.
  • Anchor Protocol was built by Terraform Labs, the company that is also behind the core development of the Terra platform and its associated products like LUNA, UST, and Mirror Protocol.

Here are the key features of Anchor Protocol according to Terraform Labs:

  • Principal protection: Anchor uses a liquidation protocol that liquidates borrower collateral when any loans exceed a loan to value ratio (LTV) of 60% to protect depositors principal. Anchor's liquidation protocol means that loans are overcollateralized, so borrowers are required to put up much more collateral than they are loaning out. For example, if an individual puts down collateral in a crypto asset initially worth $2,000 and takes out a UST loan worth $1,000, then when the value of the collateral drops below $1,667 ($1,000 / 0.6), the collateral will be partially liquidated (sold) to cover the value of the loan. This ensures that depositors are protected in the event of a large decline in crypto markets.
  • Frictionless. Anchor Protocol has no minimum deposits, account freezes, or sign-up requirements. You simply connect your Terra wallet to the Anchor application and you can begin earning on your deposits.
  • Instant withdrawals. UST deposits on Anchor can instantly be withdrawn at any time.
  • Stable interest rate. Anchor passes a variable fraction of the staking rewards from the over-collateralized crypto assets on to the depositors to maintain a stable yield that is currently between 19 - 20% APY. Interest paid by borrowers is also used to provide yield to depositors.

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How does Anchor Protocol work?

Anchor Protocol works like a bank that facilitates deposits and loans, except the bank is replaced by an automated smart contract. The protocol's smart contract automatically processes the deposits and loans.

Let's look at the two sides of Anchor's money market.

The Lender side

Anchor incentivizes lenders to deposit their UST into the protocol with its attractive 19.5% yield. While your UST is deposited in Anchor, it will be represented in your Terra Station wallet as aUST (Anchor UST).

Initially, Anchor only allowed UST deposits, but it later partnered with Orion Money to launch the EthAnchor bridge. This allows lenders to earn yield on Ethereum-based stablecoins like USDC, USDT, DAI, BUSD, and even wrapped UST with Anchor. Anchor also has plans to allow deposits in other stablecoins on the Terra network like EUT, KRT, and THT in the future.

The Borrower side

Borrowers can use Anchor to borrow UST by putting up various Proof-of-Stake crypto assets as collateral. After putting up their collateral, borrowers receive “bAssets” or bonded assets which are tokens that represent their collateral like bLUNA or bETH.

Why would anyone want to borrow with Anchor? Anchor incentizes borrowers to participate by rewarding them with Anchor tokens (ANC) when they take out UST loans. At the time of writing, the Annual Percentage Rate (APR) for borrowers is 11.6% and the distribution APR is 9%. This means that borrowers must pay a net APR of 2.6%.

There is no lock-in for borrowers so they can pay off their loan at any time. However Anchor does require a 21 day unbonding period to have access to your collateral.

How does Anchor Protocol provide such a high yield?

You're probably wondering how Anchor is able to maintain a stable yield of nearly 20%.

Here is a brief explanation from Anchor's docs:

  • ANC governance sets the “Anchor rate” which is the target yield Anchor seeks to pay out to depositors.
  • Staking rewards make up the “real yield.” Anchor requires borrowers to post only certain Proof-of-Stake crypto assets as collateral. The staking rewards from this collateral makes up the real yield which is the real engine underneath Anchor's hood.
  • The “real yield” is stabilized around the Anchor Rate. Anchor uses its own reserves and borrowing incentives to match the real yield to the Anchor Rate:
    • If the “real yield” > Anchor Rate, the excess yield is stored in a UST denominated “yield reserve”. ANC incentives to borrowers drop by 15% every week.
    • If “real yield” < Anchor Rate, the yield shortfall is drawn down from the “yield reserve” until it is depleted. Additionally, ANC incentives to borrowers increase by 50% every week until the real yield converges to the Anchor Rate.

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Anchor Protocol risks

Remember that all returns carry with them some risk, and higher yields often imply higher risk. Here are Anchor Protocol’s key risks to consider:

Smart contract risk

Since Anchor is a programmed smart contract at its core, there is a risk of hacks or exploits to Anchor's code that could compromise user's assets.

On the flip side, Anchor's smart contracts have been audited multiple times. In addition, Anchor has a bug bounty program that rewards ethical hackers for finding vulnerabilities within the protocol. You can read more about Anchor's security here.

UST loses its peg

UST is an algorithmic stablecoin that is pegged 1:1 to the US dollar using a stability mechanism that depends on arbitrage activities by users with the Terra (LUNA) token.

For example, when the price of UST falls to $0.95 against the USD in secondary markets, users can purchase 100 UST for $95 USD on exchanges, then use the 100 UST to purchase 100 USD worth of LUNA tokens on the Terra platform.

Since it is algorithmic and decentralized, there are no US dollar reserves backing UST.

UST has temporarily lost its USD peg in the past although it was quickly restored to be 1:1. A long term loss of this peg would be disastrous to UST holders.

Anchor yield is not fixed and may not be sustainable

At the time of this writing, the “Anchor Rate” that Anchor provides to lenders is 19.5% APY. This high yield is not fixed and is subject to change by Anchor’s governance system. The “Anchor Rate” of nearly 20% may not be sustainable long term which brings us to our next point.

Anchor yield reserve may run out

If too many lenders and not enough borrowers use the platform, then the “real yield” earned by the borrower’s crypto collateral may fall short of the Anchor Rate, and to make up for the shortfall, Anchor’s yield reserve will need to be drawn down.

This is exactly what is happening at the time of writing, with about 6.2B UST deposited and only 1.5B UST being borrowed. This imbalance is currently causing the yield reserve to be drawn down, and at the current rate, the yield reserve will be depleted in a matter of weeks. In the past, Terraform Labs has provided a cash infusion to replenish the yield reserve, but currently there is no indication of where this would come from.

How to use Anchor Protocol

To use Anchor Protocol, you must first hold UST in your Terra Station Wallet.

There are limited US-based exchanges that sell UST directly. Here is the process that I have followed to purchase UST:

  1. Buy USDC on Coinbase and transfer to Kucoin
  2. Swap USDC for UST on Kucoin
  3. Send UST to Terra Station Wallet

Once you have UST in your Terra Station wallet, you can simply head over to the Anchor Protocol web app where you will be prompted to connect your Terra Station wallet.

  • After connecting your wallet, navigate to the "Earn" tab and then click "deposit" to deposit your UST into Anchor Protocol. Follow the prompt on the screen to complete the transaction with your Terra wallet.
  • Once you have completed the transaction, your funds should show up in your Terra wallet as aUST, and you should see your expected deposit in the "Total Deposit" area on the Anchor Earn page.
  • That's it, your UST is now earning interest daily with Anchor Protocol. You can withdraw the UST from Anchor at any time by clicking "Withdraw."
Current Annual Anchor Interest Rate: 19.5% APY