(Redirected from Anchor)
From CoinDesk (28-7-2020):
"Decentralized finance (DeFi) platform from Terra, Cosmos, Web3 Foundation and Solana. Anchor is a two-pronged platform for PoS token holders. The system offers savings accounts and a lending platform."
- Based in: Korea
- Founded in:
- Version 1 is going live in October (28-7-2020).
- Mainnet release: in the end mainnet on 17-3-2021
- According to the website of Solana, on which it is mentioned as part of its ecosystem:
"Anchor is a savings protocol that aims (15-10-2020) to produce a simple and convenient savings product with broad appeal to everyday users."
Audits & Exploits
- Bug bounty program can be found here (22-7-2021) 100K+ and active. Update (11-1-2022): Immunefi launched their Anchor Bug Bounty program offering bounties up to $1,050,000.
- Scored a 75% on DeFi Safety (22-7-2021):
"Cryptonics published a Anchor Protocol audit report on March 8th 2021.
Note: Anchor Protocol was launched on March 17th 2021.
Note 2: Most fix recommendations were implemented."
- After UST got depeged stories emerged about Anchor having been exploited (29-5-2022):
"#LUNC oracle price after the launch of #luna2 went to $5 and someone deposited around 20mln #BLuna, which was considered as $100mln by @anchor_protocol and took a loan of $40mln #UST. #LUNA $800k for someone lucky enough."
- From their docs (16-3-2021):
"Development and maturization of Anchor Protocol is driven by the Anchor community through democratic governance. Anchor does not contain any admin keys with privileged access. Anchor governance is configured to be the sole authority allowed to apply protocol changes or upgrades.
Following the initial deployment of Anchor smart contracts, the Anchor Gov contract is set as the owner of all Anchor Protocol contracts. Further modifications and improvements to Anchor contracts can only always be made through the governance poll creation process."
However, the bLuna docs show whitelists. It does not mention how validators can get onto the whitelist or how they can be delisted. Which would hint towards some form of centralization:
"The bLuna contract keeps a whitelist of validators, only permitting delegations to those included in the whitelist. This is crucial since all bLuna tokens equally share slashing risks, and delegations to low-performing validators could negatively affect all holders."
- The reasoning why whitelists are needed goes as followed (23-3-2021):
"This is due to fungibility. If different bLuna tokens have different validators underneath them, then that means each bLuna tokens will have a different risk of slashing, disallowing bLuna tokens to be fungible with each other. Simply put, if slashing risk is not shared then bLuna tokens with delegations to high-performing validators will be valued higher than tokens with delegations to low-performing validators. I don't think there's a project that contains the entirety of 3 features: 1) Reward-accruing, 2) Fully fungible, 3) Ability to accept any arbitrary validator. Actually the whitelist management is soon to be replaced with a governance-controlled one."
When asked which governance would replace it (Terra, Anchor or Lido?) the answer was that there is "Not much info on this as of now", and asked where the 'soon to be' came from, the answer was "The Lido team?".
- From DeFi Safety (22-7-2021):
"a) Contracts are clearly labelled as upgradeable b) Ownership is clearly indicated (Gov Contracts is OnlyOwner) c) The capabilities for change are indicated in each contract subsection.
A similar function to Pause Control is explained and documented."
- The launch had some issues with, according to Do Kwon, a DDoS attack and bots trying to jump ahead. Do decided to 'fuck with the attacker a little bit' (17-3-2021);
"We funded the ANC-UST pools at an exchange rate of 5M UST to 1 ANC - the bots proceeded to chew up the pools to the tune of 600-700k UST. I then proceeded to withdraw all liquidity and raise the price to 10M UST to 1 ANC - similar price-agnostic buying behavior. We waited until the buys stopped."
- From their docs (16-3-2021):
"Further ANC tokens are set to be released over a period of at least 4 years, increasing total supply until it reaches 1B. The final distribution structure will be:
- Investors: 200M (20%) tokens are allocated to investors of Anchor, with a 6-month lockup period. Afterwards, a 1-year linear vesting schedule is applied.
- Team: 100M (10%) tokens are allocated to the creators of Anchor, with a 4-year vesting period. Tokens are to be released at every end-of-year.
- LUNA staking airdrop: 50M (5%) tokens are airdropped to LUNA stakers on launch.
- LUNA staking rewards: 100M (10%) tokens are linearly distributed to LUNA stakers over a period of 2 years. Tokens will be distributed every 100,000 blocks (approximately every week) starting from block 2179600. Snapshots are taken every 100,000 blocks to determine distribution eligibility.
- Borrower incentives: 400M (40%) tokens are linearly released to be used as borrower incentives over a period of 4 years.
- ANC LP staking rewards: 50M (5%) tokens are linearly distributed to the ANC-UST pair liquidity providers over a period of 1 year.
- Community fund: 100M (10%) tokens will be reserved for the Anchor Community Fund."
- Governance token and yield (16-3-2021);
"The Anchor Token (ANC) is Anchor Protocol's governance token.
ANC is designed to capture a portion of Anchor's yield, allowing its value to scale linearly with Anchor's assets under management (AUM). Anchor distributes protocol fees to ANC stakers pro-rata to their stake.
ANC is also used as incentives to bootstrap borrow demand and initial deposit rate stability. The protocol distributes ANC tokens every block to stablecoin borrowers, proportional to the amount borrowed.
ANC tokens generate a buying pressure that increases proportionally with Anchor's AUM. Protocol fees are used to purchase ANC tokens from Terraswap, which are then distributed as staking rewards to ANC stakers."
Liquid Staked Tokens
- From the announcement (6-7-2020):
"One of Anchor’s core primitives is the bAsset (bonded asset) — a tokenized stake on a PoS blockchain. A bAsset is a token that represents ownership of a staked PoS asset. Like the underlying staked asset, a bAsset pays the holder block rewards. Unlike the staked asset, a bAsset is both transferable and fungible. Users can therefore transact with bAssets with the same ease as the underlying PoS asset. bAssets are broadly usable — they can be generated on any PoS blockchain that supports smart contracts. bAssets play a key role in Anchor towards offering a stable interest rate to Terra deposits. For in-depth treatment of bAssets refer to the bAsset protocol white paper."
- Whitepaper can be found here (6-2020).
- Code can be viewed here.
- Built on: Solana, Terra, Lido ("a core staking primitive in Anchor" 16-3-2021). Announced to come to Acala (13-4-2022).
How it works
- From the announcement (6-7-2020):
"A savings protocol on the Terra blockchain. Anchor offers a principal-protected stablecoin savings product that accepts Terra deposits and pays a stable interest rate. To generate yield, Anchor lends out deposits to borrowers who put down liquid-staked PoS assets from major blockchains as collateral. Anchor’s yield is thus powered by block rewards of major Proof-of-Stake blockchains. Ultimately, we envision Anchor to become the gold standard for passive income on the blockchain.
A core building block of the Anchor savings protocol is the Terra money market — a Web Assembly smart contract on the Terra blockchain that facilitates depositing and borrowing of Terra stablecoins (TerraUSD, for instance). The money market is defined by a pool of Terra deposits that earns interest from borrowers. Borrowers put down digital assets as collateral to borrow Terra from the pool. The interest rate is determined algorithmically as a function of borrowing demand and supply, which is encoded by the pool’s utilization ratio (fraction of Terra in the pool that has been borrowed).
Borrowing from the Terra money market is as straightforward as locking up collateral in exchange for a loan. Each account has a borrowing capacity, determined by the amount and quality of locked-up collateral. Anchor defines a loan-to-value ratio (LTV) for each type of collateral, which indicates the fraction of the collateral’s value that can be borrowed. The borrowing capacity determines the maximum amount of debt an account can accrue."
"A concrete example: imagine Anchor has two participants, Bob the borrower and Luke the lender. Bob locks up $220 worth of bLuna, and borrows 100 $UST . The system makes 26.4% p.a. – Luke is happy capturing the 20, and the system is happy taking the 6.4.
$ANC governance will set Anchor’s target yield – it can theoretically be set to any number. If staking reward > target yield, the excess funds are reserved. If rewards < target yield, reserves are used – and ANC incentives increase rapidly to increase borrowing demand."
"It comes from the bLuna that people stake for collateralized loans. To borrow $100 you must stake at least $200 of bLuna as collateral. When you do that you lose the ~12% staking rewards that the Luna would generate. But due to the 2:1 ratio (minimum) it's actually 2 x 12% so 24% of the amount you might borrow. 20% of that is assigned to paying interest on UST deposits, the remaining 4% goes into the Anchor system for other things (I think it is the governance staking rewards). So as long as LUNA pays ~12% staking rewards, and lending collateral is more than 2x deposits Anchor can maintain this. Right now I see we have $107M loaned, but $154M deposited. However the total bLUNA collateral is $322M so actually 3x what has been borrowed. This means the 20% interest on the $154M is more than covered by the staking revenue from bLUNA. Oh, and don't forget there's 30% interest in borrowed UST slopping around the system..."
- From this thread (7-5-2021):
"Even 100% of Luna representing ~$6.6b the maximum this collateral could support is ~$3.3b in loans. Terra and Lido have indicated that they plan to add assets stETH, bDot, bAtom and bSol to Anchor after Columbus-5. This significantly increases Anchors total addressable market (TAM), with the addition of these new assets it will allow Anchors UST deposits to scale.
This is where it gets exciting with Columbus 5 and cross chain integrations.In @d0h0k1 latest AMA he mentioned that after Col-5 Anchor will be able to accept other stable coins such as USDT, USDC, BUSD and DAI. Users will be able to deposit these new stable coins into Anchor while in the background they are swapped for UST and earn the Anchor rate."
- Will have liquidity mining (28-7-2020):
"The new governance token is likely to be named Anchor, like the platform, Kwon said. It will distribute over the course of five years and there will be no pre-mine for Anchor’s creators."
- To borrow UST, users can 'bond' their LUNA with Lido, which issues bLuna back. Lido is in charge of this (23-3-2021), from Discord where one Anchor team member responded:
"bLuna is managed by the Lido team. They've built stETH, which is similar to bLuna but built for ETH. The validator whitelist is also managed by them."
- From their blog (27-4-2021):
"More than 11% of the total LUNA staked on Terra now in the form of bLUNA."
"@everstake_pool, @CertusOne building the Wormhole bridge to take the Anchor rate interchain"
- From Discord where one Anchor team member responded if future PoS collateral would also be handled through Lido:
"Well there's a lot of things to be decided here but since there are already liquid staking projects on those other chains, we might as well utilize them (e.g. Acala network in Polkadot)."
Their Other Projects
- Can be found [Insert link here].
- From their blog (27-4-2021):
"Launched last month, Anchor Protocol has already locked over $970 million in stablecoin deposits and bLUNA collateral value. With more than 11% of the total LUNA staked on Terra now in the form of bLUNA."
- From this deep dive in Terra (16-7-2021):
"Currently, ~26% of all UST outstanding is deposited in Anchor."
- From Our Network (31-7-2021):
"On Anchor, recent activity has seen the highest number of new accounts registering since the platform debuted in March, peaking at nearly 500 new users per day earlier this month. This has likely been driven by volatility in crypto markets and increased interest on loans from the Anchor Money Market."
Projects that use or built on it
- Angel Protocol (4-2021)
- Harpool Protocol; released public beta for DeFi liquidation on Anchor (24-5-2021).
- Kash App; using Anchor Protocol on the back end — launches for Africa (14-5-2021).
- Orion; a project which allows users to deposit ETH stables on Anchor deployed on Ethereum (12-6-2021). They will also take over EthAnchor development (2-7-2021).
- Pylon Protocol; protocol leveraging Anchor yields for a number of creative use cases (15-5-2021).
- Neptune Finance; announced on 6-7-2021
- Nexus Protocol; risk-minimized vaults for Anchor borrowers and Mirror delta-neutral strategies to maximize yield (28-8-2021).
- SolideFi (4-2021)
- Oxis (4-2021)
- White Whale (2-2022)
- From the announcement (6-7-2020):
"A key limitation of DeFi protocols with savings functionality, such as Compound, Aave and Maker, is the highly cyclical nature of stablecoin interest rates. Anchor solves this by stabilizing the deposit interest rate using block rewards that accrue to collateral assets. Beyond offering low-volatility yield, Anchor is an attempt to give the main street investor a single, reliable rate of return across all blockchains. By aggregating block rewards from all major PoS blockchains, Anchor aspires to set the blockchain economy’s benchmark interest rate."
Pros and Cons
- One of the first protocols which (claims) to offer stable 20% yield on lending.
- One of its critical components (borrowing UST with bLuna) is permissioned through Lido as of 23-3-2021.
Team, Funding, Partners
- Full team can be found [here].
- Aaysuh Gupta
- Matt Cantieri; Crypto Lead at Microsoft’s M12, joins TFL as Anchor’s General Manager.
- From the Orion blog (2-7-2021):
"Considering the importance of EthAnchor to Orion Money and the overall Terra ecosystem, Orion Money will take over the development and maintenance of EthAnchor from the Anchor team. One of the core objectives of Orion Money is to leverage EthAnchor for Orion Saver and integrate it across major Ethereum-based money markets and platforms. To compensate Orion Money for the resources invested into developing, maintaining, and promoting EthAnchor, a minor portion of EthAnchor’s yield will be routed to ORION token Stakers in the form of staking rewards. This is part of the ORION token value accrual."
- The Luna Foundation Guard injected Acnhor with $450M UST to prop up the reserve (8-2-2022).
- From their twitter (7-7-2021):
"TFL will be capitalizing Anchor’s yield reserve with 50 million SDT (~70 million UST) from its Stability Reserve Fund. As a lynchpin of the Terra ecosystem, capturing ~22% of UST’s outstanding supply, this enables sufficient time for the introduction of more collateral types and self-sustainable protocols improvements coming in the next couple weeks and in V2. Assuming a 35% utilization (current) with a 35% average loan LTV, the reserve boost will enable Anchor to support a 20% APY of $500M worth of deposits for an additional period of around 1.5 years."
"Who are the Anchor whales: $20M raise from
@arringtonXRPcap, @Accomplices, @hashed_official, @GalaxyDigital, @PanteraCapital, @Delphi_Digital, @naval, @defialliance, @dragonfly_cap, @jumptrading, @AlamedaResearch @IDEOVC, @RockawayBlock"
- Partnered with Abracadabra.money to bring synergies between MIM and UST (14-10-2021).
- From their blog (13-4-2022):
"Acala is working with the team at Anchor, a savings and borrowing protocol built on the Terra blockchain, to grow the decentralized stablecoin space through a variety of integrations spanning the Terra and Polkadot ecosystems. Acala and Karura, Acala’s Kusama-based parachain, will initially help expand Anchor’s collateral options for the UST stablecoin with Liquid DOT (LDOT) and Liquid KSM (LKSM), Acala’s yield-bearing liquid staking derivatives. The teams will also work together to stand up deep liquidity pools for aUSD and UST on Acala, serving as a gateway into the Polkadot ecosystem for UST users."
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