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Anchor Protocol

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Discover Anchor Protocol's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Anchor Protocol?

Anchor Protocol (ANC) is a decentralized finance (DeFi) protocol built on the Terra blockchain. It offers a savings ecosystem with low volatility, allowing users to lend, borrow, and earn interest on their digital assets. The protocol uses an over-collateralized architecture to ensure principal safety and provides stable returns through its money market and liquidation mechanisms. ANC tokens are used for governance and incentivizing users to participate in the protocol.

How is Anchor Protocol used?

Anchor Protocol (ANC) is a decentralized lending and borrowing protocol built on the Terra blockchain. It allows users to benefit from a high annual percentage yield (APY) of nearly 20% by depositing UST stablecoins. Here's how to use Anchor Protocol:

  1. Wallet Setup: The easiest method involves using the Terra Station browser wallet, which connects users to applications on the Terra blockchain. Install the wallet, access the Anchor Protocol, and choose the "Connect Wallet" option. Scan the QR code and link the wallet.

  2. Governance Token: The Anchor Token (ANC) is the governance token, which allows holders to create governance polls and vote on proposals. ANC tokens can be bought or sold on several high-profile exchanges like Binance and KuCoin.

  3. Staking and Rewards: Users who stake ANC tokens receive rewards in proportion to their stake. This incentivizes users to participate in the governance process and improves reward conditions.

  1. Buying ANC: ANC tokens can be purchased from exchanges by creating an account, depositing funds, and buying ANC at the available price. The tokens can be held in the exchange, a crypto wallet, or moved to the Anchor Platform.

  2. Passive Income: Anchor Protocol offers a way to earn passive income through its stablecoin-based lending and borrowing system. Users can deposit UST and earn interest, while borrowers can request loans by blocking collateral in cryptocurrencies.

  3. Decentralized Governance: The protocol is decentralized, meaning there are no intermediaries involved. Users can participate in governance and earn rewards without the need for KYC or geographical restrictions.

Overall, Anchor Protocol provides a decentralized savings solution with high yields and low volatility, making it an attractive option for those within the Terra ecosystem.

How do I store Anchor Protocol?

To store Anchor Protocol (ANC) tokens, you can use the Terra Station wallet. Here's how:

  1. Create a Terra Station Wallet: First, create a wallet on Terra Station by following their sign-up process. This will allow you to manage your ANC tokens securely.

  2. Deposit ANC Tokens: Once you have your wallet set up, you can deposit your ANC tokens into it. You can do this by transferring the tokens from an exchange or another wallet to your Terra Station wallet.

  3. Add ANC Tokens to Wallet: If your ANC tokens are not showing up in your Terra Station wallet, you can add them manually. Go to the wallet, click "Add Tokens," and then select the ANC token to display your balance.

By following these steps, you can safely store and manage your ANC tokens using the Terra Station wallet.

How to buy Anchor Protocol?

To buy Anchor Protocol (ANC) tokens, follow these steps:

  1. Choose a Reliable Exchange: Select a trusted and reputable cryptocurrency exchange that offers ANC trading. Some popular options include KuCoin, Gate.io, and Huobi Global. Ensure the exchange is available in your region, as some exchanges have geographical restrictions.

  2. Create an Account: Sign up for an account on the chosen exchange. This typically involves verifying your email address and identity.

  3. Make a Deposit: Add funds to your account using a debit card, credit card, wire transfer, or Bitcoin (BTC). The deposit method may vary depending on the exchange.

  1. Buy ANC: Use your deposited funds to purchase ANC tokens. Navigate to the exchange's trading platform, select ANC, enter the desired amount, and confirm the transaction.

Additionally, you can also use platforms like Pionex and Kriptomat, which offer a straightforward process for buying ANC tokens. Always ensure you understand the fees and risks associated with trading cryptocurrencies.

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History of Anchor Protocol

Anchor Protocol (ANC) is a decentralized finance (DeFi) protocol built on the Terra blockchain. It was launched by Terraform Labs on March 17, 2021, with the goal of providing a low-volatility savings system for users. The protocol allows users to deposit UST (Terra USD) and earn interest rates as high as 20%.

Initial Success and All-Time High

The ANC token was initially offered through an IDO (Initial Decentralized Offering) on March 16, 2021, at an opening price of $0.05. By March 19, 2021, the token surged to an all-time high of $8.31, indicating strong investor interest.

Challenges and Decline

However, the token's performance was heavily impacted by the collapse of Terra's algorithmic stablecoin, UST, in May 2022. This led to a significant decline in the value of ANC, which eventually dropped to an all-time low of $0.0504 on May 13, 2022.

Delisting and Further Decline

In September 2022, the FTX cryptocurrency exchange delisted ANC from its platform, which initially led to a brief rally. However, the token's value soon dropped again, reaching $0.077 on October 21, 2022.

Current Status

As of November 2022, ANC was trading at around $0.05 and had lost over 39% of its value in the previous month. The token's future remains uncertain due to the ongoing challenges faced by the Terra ecosystem and the DeFi sector as a whole.

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How Anchor Protocol works

Anchor Protocol (ANC) is a decentralized finance (DeFi) protocol built on the Terra blockchain. It offers a savings, lending, and borrowing platform that provides users with high-yield interest rates and stablecoin loans. Here's how it works:

Key Components
  1. bAssets: These are tokenized representations of bonded assets, which are staked assets in the Proof-of-Stake (PoS) consensus mechanism. bAssets are transportable and fungible, allowing users to conduct transactions with them while still earning block rewards.

  2. Money Market: This is where users can lend and borrow Terra stablecoins. The money market is collateralized by bAssets, ensuring that loans are over-collateralized to protect depositors' principal.

  3. Loan Liquidation: This process ensures that deposits are safe by liquidating loans that are at risk of undercollateralization. If a loan's loan-to-value (LTV) ratio exceeds the set maximum, the collateral is sold to repay the loan.

User Roles
  1. Depositors (Lenders): They lend Terra stablecoins to the money market and receive interest and subsidies generated from the rewards of deposited bAsset collaterals. Depositors receive Anchor Terra (aTerra) tokens, which represent their share in the stablecoin pool and can be redeemed for the initial deposit plus interest.

  2. Borrowers: They create bAsset-collateralized loan positions to borrow Terra stablecoins. Borrowers must maintain an LTV ratio below the set maximum to avoid liquidation.

  3. Liquidators: They monitor for risky loans and request loan collaterals to be liquidated if necessary.

Governance and Incentives
  1. Anchor Token (ANC): This token is used for governance and incentivizes users to participate in the protocol. ANC holders can stake their tokens to vote on protocol decisions and receive better earnings within the protocol.

  2. ANC Distribution: ANC tokens are distributed as incentives for borrowers. The distribution is designed to encourage borrowers to maintain a healthy LTV ratio and ensure the stability of the protocol.

Interest Rates and Yield
  1. Anchor Rate: This is the target annual percentage yield (APY) set by ANC governance. The protocol aims to stabilize the real yield around the Anchor Rate through reserves and borrowing incentives.

  2. Real Yield: This is the actual yield earned by depositors, which is composed of staking rewards and subsidies. If the real yield exceeds the Anchor Rate, excess yield is stored in a yield reserve. If the real yield is lower, the yield shortfall is drawn from the yield reserve.

Security and Stability
  1. Overcollateralization: Loans are overcollateralized to ensure that deposits are protected in case of high volatility in the price of LUNA or other cryptocurrencies.

  2. Collateral Liquidation: This process ensures that deposits are safe by paying off debts that are in danger of failing to meet collateral requirements.

Integration and Expansion
  1. Terra Blockchain: Anchor Protocol is built on the Terra blockchain and uses the UST stablecoin.

  2. Interchain Protocol: The protocol aims to facilitate DeFi services across different blockchains, including Ethereum, and integrate with various stablecoins like USDC, USDT, DAI, and BUSD.

Benefits
  1. High-Yield Interest Rates: Anchor Protocol offers lucrative passive income opportunities for depositors, with interest rates up to 19.5%.

  2. Easy Access to Loans: Borrowers can gain access to liquidity without losing price exposure to their bAsset collateral.

  3. Principal Safety: The protocol ensures that depositors' principal is safe and protected through collateral liquidation and overcollateralization.

Overall, Anchor Protocol provides a decentralized and stable savings and lending platform that leverages the benefits of DeFi and the Terra blockchain.

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Anchor Protocol's strengths

The token Anchor Protocol (ANC) has several strengths:

  1. Governance Token: ANC is the governance token of Anchor Protocol, allowing holders to participate in governance decisions and vote on proposals that shape the protocol's future.

  2. Value Accrual: ANC tokens are designed to capture a portion of Anchor's yield, which means their value scales linearly with Anchor's assets under management (AUM). This incentivizes stakers to propose and vote for proposals that benefit the protocol.

  3. Incentives for Borrowers: ANC tokens are distributed to borrowers as incentives, which helps to bootstrap borrow demand and maintain deposit rate stability.

  1. Recognition: Despite its turbulent history, ANC remains a well-known token, which can attract investors hoping for a revival.

  2. Security Audits: Anchor Protocol has undergone security audits by reputable companies like Cryptonics and Solidified, ensuring a certain level of security and reliability.

These strengths contribute to the token's potential for growth and adoption within the DeFi ecosystem.

Anchor Protocol's risks

Anchor Protocol (ANC) carries several financial risks that investors should be aware of. These risks include:

  • High-Risk Investment: ANC is considered a high-risk investment due to its volatility and potential for significant losses. This is particularly concerning for investors who are primarily focused on risk assessment.

  • Dependence on UST and LUNA: The protocol's stability is closely tied to the performance of TerraUSD (UST) and LUNA. Any significant issues with these assets, such as flash crashes, can have a direct impact on ANC's value and the overall sustainability of the protocol.

  • Over-Collateralization Risks: Anchor Protocol relies on over-collateralization to ensure the stability of its lending pools. However, if the value of the collateral assets drops significantly, this could lead to a depletion of the reserves and negatively affect depositors.

  • Governance and Security Risks: As a decentralized protocol, Anchor is vulnerable to potential security breaches or governance issues. If the protocol's smart contracts are compromised or if there are problems with the governance system, this could result in significant financial losses for investors.

  • Market Volatility: The cryptocurrency market is known for its volatility, and ANC is no exception. Market downturns or changes in investor sentiment can cause significant price fluctuations, leading to potential losses for investors.

  • Regulatory Risks: As a decentralized finance (DeFi) protocol, Anchor may be subject to changing regulatory environments. If regulatory bodies impose stricter rules or restrictions on DeFi platforms, this could negatively impact ANC's value and usability.

  • Dependence on Terraform Labs: Anchor Protocol's success is closely tied to the support and actions of Terraform Labs, its developer. If Terraform Labs faces financial or operational difficulties, this could have a direct impact on the protocol's stability and the value of ANC.

These risks highlight the importance of thorough research and due diligence before investing in Anchor Protocol (ANC).

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Anchor Protocol's ecosystem

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Anchor Protocol’s team

  • Anchor Protocol (ANC) is developed by Terraform Labs, the same company behind the development of Terra, with Do Kwon and Daniel Shin as co-founders.

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The fundamental analysis assistant for crypto value investors.

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