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What Is Anchor Protocol?

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Nov 30, 2022
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4 min read
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This blog post will cover:

  • About Anchor Protocol (ANC)
  • Where did Anchor Protocol (ANC) come from?
  • What are the advantages of Anchor Protocol (ANC)?
  • What are the disadvantages of Anchor Protocol (ANC)?
  • How to buy Anchor Protocol (ANC) on SimpleSwap?

About Anchor Protocol (ANC)

Anchor Protocol is built on the Terra blockchain and designed to generate passive income based on Terra stablecoins. This product pays investors a constant DeFi interest rate determined by the yield of the Proof-of-Stake blockchain with the highest demand.The Anchor protocol is a fully decentralized fixed income tool. Let's look into the main aspects of its functioning.The APY rate that the protocol seeks to pay out to contributors is set by ANC token holders. They vote for the rate they think is fair.Under the hood of the project there is essentially a classic market, but with the difference that the collateral is reserved for liquid derivatives for staking on the main PoS protocols, so rewards are based on real assets.The actual income depends on the real PoS yield. If the real return is higher than the rate, then the excess one is held in reserve. If it is the other way around, then the profit is recovered from it.Anchor Protocol can be divided into the following components:Bond assets (bAssets) - tokenized representations of tied PoS assets (these can be bLUNA and bETH);Money market which connects creditors and borrowers;Liquidation agreement that controls the liquidation of credit positions with insufficient collateral.

ANC is the platform's native governance token that holders can use to create new governance polls for those who have staked ANC. Users who own the ANC token are paid for the protocol in proportion to their stake. Thus, it gives them an extra incentive.

Where did Anchor Protocol (ANC) come from?

Terra built an ecosystem of 3 protocols, one of which was Anchor. The launch of Anchor Protocol happened on March 17, 2021.Terraform Labs was created in January, 2018 and its founders are from South Korea. Judging by how fast the platform is developing and how many features it provides, the developers are very talented and persistent.

What are the advantages of Anchor Protocol (ANC)?

  • Fast transactions
    
    It is worth noting that transactions on Terra occur in a second, and the cost of commissions during interaction with smart contracts is also much lower.
  • Usage rate
    
    It begins to work in a situation where there are more savers than borrowers. Thus, the borrowing rate is lowered to encourage the provision of more loans and collateral to pay back depositors. And it also works vice versa.
  • The project is decentralized
    
    Anchor Protocol has no intermediaries in its work and is considered to be decentralized as well as highly secure.

What are the disadvantages of Anchor Protocol (ANC)?

  • Volatility of returns in the case of a crash or a bear market scenario
    
    In case the price of the LUNA token falls, for example, then the amount of interest that the protocol earns to pay out to depositors decreases as the number of borrowers who pay interest becomes smaller.

How to buy Anchor Protocol (ANC) on SimpleSwap?

In case you are interested in purchasing an ANC token, SimpleSwap will be happy to help you with it. To do this, simply follow the instructions below:

  • For example, you want to swap BTC for ANC. Select the currency you want to exchange (e.g. BTC) in the first drop-downlist. Then enter the amount you want to swap.
  • Select ANC in the second drop-down list. You’ll see the estimated amount that you’ll get after the exchange.
  • Click the Exchange button.
  • Enter the Recipient's Address. ANC will be sent. Be careful and make sure you use the correct address.
  • Create the exchange.
  • You will see the Bitcoin deposit address. You need to transfer the necessary amount of BTC to this address to start the BTC to ANC exchange.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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