Anchor Protocol: Defi Fixed Deposit Rate Protocol

LeftOfCenter

2021-02-08 14:03

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Balance the interest rate by coordinating block rewards from multiple different POS consensus blockchains.

A Brief Analysis of the Anchor Protocol for Defi Fixed Deposit Rate Protocol

原文来源： LeftOfCenter，链闻

Balance the interest rate by coordinating block rewards from multiple different POS consensus blockchains.

At present, most of the interest rate calculation methods of DEFI loan agreements in the market are based on the algorithm of supply and demand relationship to determine the loan rate. Specifically, the interest rate that both the lender and the borrower pay or earn in a loan agreement is a function of the "utilization of funds," which can cause interest rates to vary widely and to be sensitive to market cycles. The immediate consequence is to discourage people who have never participated in the past of centralized finance, and to discourage the large-scale adoption of DEFI.

For this reason, Anchor Protocol proposes a new deposit interest calculation model, which can provide stable lending rate. So, what exactly is Anchor Protocol? What is the implementation principle? How stable is Anchor Protocol?

In this model, interest rate calculation is no longer based on "utilisation of funds", but is highly correlated with the price movement of ETH. The model assumes that once ETH prices rise, the demand for long positions will increase and stablecoin borrowing will increase. If ETH prices fall, there is less demand for leverage in the market, and ETH debt positions are liquidated, stablecoin borrowing decreases.

简析 DeFi 固定存款利率协议 Anchor Protocol 工作机制

What is Anchor Protocol?

Anchor Protocol hopes to become the reference rate or savings version of Stripe for the entire blockchain market, and hopes to provide stable interest rate gains for cryptocurrency holders to advance mainstream adoption of Defi.

Anchor Protocol, created based on the stablecoin project Terra Money, is a new savings Protocol designed to balance interest rates by coordinating block rewards from multiple different POS consensual blockchains, and ultimately achieve a storage rate of stable yield.

Realize the principle of

So, how does Anchor Protocol achieve stable interest rate gains for crypto depositors?

In the Anchor Protocol system, there is a currency market, which is actually a Terra stablecoin UST asset pool. Depositors who deposit UST into this pool can get stable UST interest rate return. The Lender may pledge the underlying asset tokens of the various POS Consensus Blockchain Agreements to lend Terra Stabilizer UST and pay interest on the loan denominated in Terra Stabilizer UST. At this point, the system will determine the lending rate based on the algorithm of supply and demand.

Since market supply and demand are volatile, and even more so in the cryptocurrency market, it is not feasible to maintain stable interest rates in this way. So, how does Anchor Protocol achieve stable storage rate benefits?

In fact, the interest income of depositors consists of two parts, one is the borrowers pay UST to stabilize the currency denominated loan interest, the interest Rate based on market supply and demand dynamic change, therefore is not stable, in order to maintain stability, the Anchor Protocol are introduced in the system is another source of income, encrypt the lender to the mortgage assets reward earned blocks, and by dynamically adjusting the rewards benefits to the borrowers and lenders, implement Anchor rates (Anchor Rate).

Anchor Protocol wants to converge the deposit Rate of a saver to a relatively stable value, called the Anchor Rate, and Anchor Protocol aims to bring the deposit Rate infinitely close to the Anchor Rate.

In fact, when a stablecoin UST is lent by a lender against a crypto asset in the money market, Anchor Protocol generates the asset bAsset, which represents tokens owned by the pledgers of various POS assets. Like the underlying asset, bAsset also provides block rewards to the holder. But unlike most mortgagedassets, bAssets can be transferred and replaceable, meaning that the bAsset will be more liquid.

In order to maintain stable savings Rate income, Anchor Protocol will automatically allocate the block reward earned by mortgage asset bAsset to borrowers and lenders, and dynamically adjust the allocation ratio based on the current interest Rate changes to stabilize the deposit Rate to infinitely close to the Anchor Rate.

For example, if the current deposit rate is lower than the Anchor rate, Anchor Protocol automatically adjusts the allocation rate of block rewards to allocate more revenue streams to depositors. In contrast, if the deposit rate exceeds the anchored rate, Anchor Protocol will distribute more block rewards to the borrower, thereby reducing the deposit rate.

In short, when the deposit rate is lower than the anchor rate, the block reward will be distributed more to the depositor. Instead, when the deposit rate exceeds the interest rate, the yield will be distributed more to the borrower to reduce the contribution of the block award to the deposit rate.

How stable is it?

So does this implementation provide a more stable rate of interest?

Anchor Protocol wants to converge the deposit interest Rate of depositors to a relatively stable value, which is called the Anchor Rate.

In fact, the revenue from this anchored rate is derived from the block reward rate across multiple blockchains, with the goal of reflecting more market-preferred revenue sources. The advantage of this model is that the composition of collateral assets supported by Anchor Protocol will change as the market's preference for rewarding cumulative tokens changes.

This means that the composition of the mortgage asset that determines the anchor rate is dynamic, and that the anchor rate is forever tied to the deal that rewards the highest yield on the market.

The result would be a much more stable fixed rate than an agreement linked to any single source of income or a package of fixed rates.