Anchor Revival? (Terra Chain)

A few days ago Do Kwon, founder of Terra chain had infused over $500 million into the yield reserve of Anchor protocol. With that the protocol had bought itself time to extend its nearly 20% APY interest paid out in UST.

With the protocol for now stable we look ahead at what are the potential solutions to sustaining Anchor's survive.

To date Anchor holds half of all assets locked in Terra chain therefore if they fail it would do significant harm to the chain. Coming in second Lido is actually another TVL associated in Anchor in regards to bLuna and bETH. Those two assets are on Anchor as collateral to borrow.

Version 2 update of Anchor will introduce additional collateral that rumor will include bSol and bAVAX. Two different chains that can now provide collateral to borrow UST. If this is to be true it will provide Anchor much needed revenue to sustain itself and providing the +20% yield in UST.

As of now the UST deposited is still rising significantly faster than the collateral provided therefore Anchor is unsustainable in the long run. Version 2 upgrade will need to arrive sooner than later to have potentially reverse the trend and keep Anchor's doors open.

Terra protocols to boost Anchor?

A couple of protocols that have recently started are Mars and Edge protocols. Both are lending and borrowing protocols similar to what Anchor is except that they both are already allowing more than just bLuna and bETH to be used for borrowing and lending. The additional revenue and opportunities provided by such platforms will open the doors to more assets being TVL. This will actually benefit Anchor in the way that not all will want to lock up their UST on Anchor alone. In turn the overall TVL for Terra will be better distributed than being mainly held by Anchor.

https://www.edgeprotocol.io/#lend-and-borrow

Snap shots above are from edge protocol that allows users to lend and borrow all sorts of Terra chain assets.

Conclusions

Terra remain 2nd in the race of the most amount TVL in blockchains. Yet ETH's TVL has steadily drop and continue to do so on a daily basis. In order to Terra to maintain its 2nd position and potentially rise to the top it will have to distribute its TVL much more evenly than to have just Anchor being the support.

As of today UST stable coin has risen to 15th in overall market cap per coinmarketcap.com. This is another reason why Anchor will be important in establishing its existence. The yield earn on UST and the ability of UST to be pegged to the dollar will be important to main Terra's TVL lead and increase in TVL. We now know how important Anchor needs to sustain in order for Terra to remain successful.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!