A recent tweet surfaced on Friday, where Do Kwon, the entity behind Terra Luna announced the injection of 450 million UST into the Anchor reserves protocol. The proposal was apparently voted on by the Luna Foundation Guard on February 10. Anchor currently serves as the flagship savings protocol for this ecosystem, where it offers users up to 20% interest per annum on their deposits of UST- that have been paid for by borrowers.
Terra pushed 450 million UST into the anchor
Terra Protocol’s reserves had steadily declined to $6.56 million as there was not enough demand for borrowing, which would help the protocol keep up with the influx of lenders. When such an imbalance occurs, the protocol easily dips into reserves in order to pay lenders the return they have been promised. From early December to late January, Anchor’s reserve funds decreased by approximately $35 million.
Currently, the gap is widening. In recent weeks, total funds deposited have increased by approximately $480 million, while funds borrowed have increased by approximately $180 million. However, since Terra also has a stake in collateral for borrowers to earn returns, as well as interest payments to compensate lenders, the two figures don’t need to be in sync to reach the zone. balance.
The Terra developers have already conceded that such high returns are generally not sustainable in the short term. To fix the long-term issue, the labs plan to use Compound Liquid Staking Derivatives as collateral in Anchor v2. Liquid staking involves users doubling their crypto assets, i.e. staking their crypto in a single pool and using the staked assets to mine returns in a pool of liquidity providers.