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Don’t Let Your Money Sit Idle — XDEFI Wallet integrates Anchor Earn

Where Did The Yield Go?

The current macroeconomic situation has led to a deterioration of interest rates in the financial markets. This development was driven by the major economic crises in the 21st century (the burst of the dot-com bubble in 2000, the near-collapse of the financial markets in 2007–2008 and an omnipresent market turmoil driven by the Covid-19 crisis in 2020/2021) and the subsequent monetary and fiscal policies enacted by governments all over the world.

Right now, interest rates for bank deposits are close to zero in many countries or even negative in some countries for larger deposits.

A drastic change in this situation and significantly higher yields are not foreseeable right now as a considerable increase in interest rates through central banks is unlikely to happen over the coming years as this would put pressure on liquidity in an economy that has been wounded across the globe due to the effects of the Covid-19 pandemic.

This has triggered a “search for yield”, where in the wake of a fall in bond yields other asset classes become more attractive to investors, driving up prices of equities, commodities and cryptocurrencies like Bitcoin and Ether.

DeFi Brings Back The Yield

With Decentralised Finance (DeFi), people can now access higher yields — if they are willing to use cryptocurrencies and interact with Web 3.0 protocols and face the associated risks.

Nevertheless, the yield offered by DeFi solutions is often highly volatile, unpredictable and comes with high risk across several dimensions, making it unfavourable for many market participants such as mainstream users and risk-averse institutional investors. This has already led to more and more projects in the ecosystem trying to provide some kind of “fixed interest”, e.g. through risk tranching.

Anchor Protocol — A Stable Savings Rate Across DeFi

Anchor Protocol is a decentralised protocol built on top of the Terra blockchain — which is Cosmos-based and was launched in 2018 by Terraform Labs based in South Korea.

Terra offers a highly scalable blockchain with native stable coin support that allows for programmable money and an open, decentralised financial infrastructure built on top of it. It supports a basket of FIAT-pegged, seigniorage share-style stablecoins which are algorithmically stabilised by the native crypto asset, Luna.

The core principle of Anchor is to provide a stable savings rate that can compete with a traditional savings account and that does not rely on leverage while simultaneously reducing risk as much as possible. In order to achieve this, Anchor aggregates Proof-of-Stake (PoS) block rewards from different PoS assets (currently LUNA and ETH) to derive an average return rate on top of a lending rate from Anchor’s own money market. The respective collateralised assets are bonded as so-called bAssets on Anchor (staked through Anchor) so that the protocol can redistribute the block rewards to depositors.

Anchor is utilising block rewards from multiple PoS Assets. Source: Anchor Whitepaper

Additional PoS assets for the future are Solana’s SOL, Polkadot’s DOT and Cosmos’ ATOM making Anchor a multi-collateral system where borrowers can take out loans against multiple assets.

The typical accumulated block rewards generate between 6% and 12% APY. These block rewards are then used to subsidise the lending rates on Anchor’s own money market so that the actual lending rate equals the anticipated Anchor Savings Rate which is currently fixed at 20% APY.

In the future, the Anchor Savings Rate will be set by governance depending on the yield from bLUNA and other PoS assets that will be added to the protocol. The collateral also acts as insurance for the lender’s deposits.

All lenders receive a guaranteed lending rate which currently equals 20% whereas borrowers are exposed to a floating borrowing rate. The protocol has built-in incentives mechanics to stabilise the ratio between lenders and borrowers. For example, if the actual lending rate is below the anticipated Anchor Savings Rate, the lender’s share of the PoS rewards is increased and vice versa. This adjustment happens on a block-by-block basis.

In order for this to work in times of market turmoil, the underlying bAsset collateral needs to be liquidated when loans become undercollateralized (e.g. if the price of LUNA falls) as is common in all lending protocols.

Native Integration of Anchor Into XDEFI Wallet

XDEFI Wallet is all in regarding the Terra ecosystem and has the clear target to be the number 1 Web 3.0 wallet to interact with all Terra dApps.

Additionally, we want to increase the comfort and usability for the end-user and offer crucial functionality directly within our application, so that users don’t have to connect to certain protocols in the first place.

We think that earning a high yield on your idle assets is one of these valuable use cases and therefore we have decided to integrate the “Anchor Earn” product directly within our wallet.

This means that you can now deposit your UST held in XDEFI Wallet directly into Anchor and earn up to 20% APY with just a few mouse clicks and without ever leaving your wallet.

This provides our users with considerable benefits including:

- the whole process is a lot faster and more frictionless — time is money

- better usability as there is no connection pop-up and no transaction signing pop-up

How to Earn Up to 20% APY in A Few Simple Steps

In order to prove how easy it is to make your UST work for you, we did a quick recording of the whole process, which doesn’t take more than 20 seconds!

These are the necessary steps:

1. Have UST (Terra) in your XDEFI Wallet
2. Select UST and click on the “Deposit and earn” action
3. Define the amount you want to deposit and click “confirm”
4. Success! You deposited your UST, currently earning up to 20% APY on it, and received aUST in exchange
5. You can manage your position and withdraw your UST at any time
6. More to Come in the Future

We are already working on improving the deposit process further so that additional assets can be incorporated. For example, the next big milestone for us is to integrate Orion Money, allowing you to deposit multiple stablecoins on Ethereum and Polygon to generate a yield from the underlying Anchor integration.

Upcoming deposit flow via Orion Money for alternative stablecoins

Disclaimer

The information included in this article is accurate as at the date of this article.

None of the information contained within this article constitutes, or should be relied on as financial or investment advice or a suggestion, offer, or other solicitation to engage in or refrain from engaging in, any purchase, sale or any other investment-related activity with respect to any cryptocurrencies, the $XDEFI token or any other transaction.

For the avoidance of doubt this article is not advising you what to do with your money or cryptocurrencies, it is instead solely demonstrating how we have integrated the “Anchor Earn” feature within XDEFI Wallet. If you have any queries on Anchor Earn or Terra then please contact Terra directly.

Before deciding whether to purchase any cryptocurrencies, to carry out any staking or farming activities or to provide liquidity to any liquidity pools, please carry out your own detailed research and due diligence and ensure that you are fully aware of all the risks involved with cryptocurrencies, staking and/or farming cryptocurrencies and with liquidity pools including the concept of impermanent loss.

Please note that we, the XDEFI Wallet team, are not able to provide any financial or investment advice or any kind of potentially price-sensitive information. XDEFI Wallet makes no representations, warranties, or assurances as to the accuracy, currency or completeness of any content contained in this blog or any sites linked to or from this channel.