RE: LeoFinance - Anchor Protocol Where is 20% APR Coming From?
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Terra blockchain every transaction there is a fee. It is these fees accumulated daily that get distributed to stakers. Anchor earns apart of these fees. The majority of the APR comes from its lending platform. The main issue it is currently having is there is not enough lending hence not earning enough to pay out its investors. This is really a bank but dencentralized. Deposit UST, Anchor will loan it out for a rate close to 15% as we speak, but Anchor gives lenders ANR token that makes it almost zero in interest once borrower converts the ANR to UST. Then on Terra Station there is 8% APR for staking the collateralize bLUNA. Add 15% + 8% is how the 23% comes in. the issue though is if not enough borrowers pay the 15% Anchor can't sustain itself on paying out investors even at 20%. They would have to lower the investor's earned APR, but that may pull money away from the protocol.
In the future Anchor hopes to add new collateral such as BTC and other major tokens which may draw in more interest earn on the platform to sustain high yields on UST deposits. Until then the reserves are being drawn down daily and Anchor will go negative proceeds if it does not make any changes.
Wow, it is its own Ecosystem but you are thinking it may not be sustainable unless they have new collateral. That is fascinating.
Terra ecosystem. Issue is not enough people borrowing while the protocol is providing 19.5% yield to UST stakers. Will have to sit and watch but the reserve is currently down to $51 million.