How to use Anchor Protocol to make money (2022)

What functions does the Anchor Protocol have? How to make money with Anchor Protocol? Let’s find out with the tutorial article below.

Anchor Protocol Overview

What is Anchor Protocol?

Anchor Protocol Savings Protocol is a working on saving protocol that allows users to deposit stablecoins and receive volatile returns with low volatility. Anchor also acts as a bank, in addition to sending money to receive interest, you can also borrow after depositing collateral.

Anchor’s interest rate is guaranteed by a variety of assets such as staking rewards from PoS Blockchain, so the ratio is quite high and stable. The project has ambitions to become one of the most stable and high yielding protocols in the market.

Highlights of Anchor Protocol

Anchor Protocol is the top project on Terra’s ecosystemTerra ecosystem is booming strongly with TVL up to 19 billion USD, of which Anchor contributes more than 9 billion USD, accounting for 49.61% of the entire ecosystem, enough to show the importance of the project.

The interest rate for stablecoins on Anchor is quite high (current APY is 19.47%), much higher than the bank interest rate.

In addition to LUNA stake, you can also stake ETH (take bETH) as collateral to borrow, this helps you diversify ways to optimize your capital.

The operation to use Anchor Protocol is quite simple, the transaction fee is cheap, the transaction speed is quite high.

Preparation before using Anchor Protocol

Download and install Terra Station

Anchor is a big piece of the Terra ecosystem and to skin in the game with this ecosystem you will need to prepare a Terra Station wallet. You can use the following versions:

After you finish downloading and installing the wallet, you need to create a new Terra wallet or import an existing wallet with a passphrase.

Brother, please remember well Backup passphrase is very important and should never be disclosed to anyone. After you have a Terra wallet, the next thing you need to do is prepare UST and LUNA (if necessary).

Prepare UST or LUNA as gas charge

The gas fee will be calculated by the original token/coin in the corresponding chain, for example as follows:

• On Binance Smart Chain will be paid in BNB (BEP20).
• On Ethereum will be paid in ETH (ERC20).
• On Avalanche will be paid in AVAX -C Chain (ARC20).

Gas fees on Terra are a bit more special when you can use both UST (or other stablecoins) and LUNA as gas feebut if you use LUNA (1.2x) as a fee, it will be cheaper than using UST (2.5x).

If you do not have UST or LUNA, you can go to CEX/DEX exchanges to buy and then send it to your Terra Station wallet. Currently, there are about 100 different CEX/DEX exchanges (Binance, Coinbase, Kucoin, …) supporting LUNA, UST transactions, you can choose at will. After buying, you go to Terra Station to get the wallet address and send the token to this wallet address.

Once you have LUNA and UST, you can start experiencing Anchor Protocol’s products.

Instructions to use Anchor Protocol to make money

Earn

This is the simplest form of making money with Anchor Protocol, you just need to deposit UST and receive interest. This form is like a bank deposit, but with a higher interest rate and is decentralized.

Step 1: After accessing the homepage of Anchor Protocol, you select the tab Earn to deposit UST token.

Step 2: At tab Earnchoose Deposit. Anchor does not limit the maximum or minimum deposit, so you can load as much as you want.

Step 3: Enter the amount of UST you want to top up. Choose Proceed.

Step 4: After confirming the transaction in the Terra Station wallet. Enter the wallet password in the Confirm with password field, then click Submit. The system will display a message to confirm the transaction was successful.

With just a few steps, you have completed the deposit of UST tokens. In the Earn tab, it shows you the estimated income by week, month, and year based on the amount you deposit. After depositing UST, you will receive aUST representing the amount deposited.

Bond

The next feature of Anchor Protocol is borrowing UST by offering bLUNA as collateral. But to receive bLUNA, you need to stake LUNA first, so I will show you how to earn bLUNA in the Bond tab first.

Step 1: At the main screen, you choose tab Bondthen select item Mint.

Step 2: Enter the amount of LUNA you want to bond, then choose one of the validators.

Note: Choosing a validator directly affects your assets, so you need to consider before “giving” your assets to these validators. Should choose validators with high reputation and reputation.

Step 3: After selecting the validator, click Mint and confirm the transaction in the Terra Station wallet.

Step 4: Enter the wallet password in Confirm with passwordthen click Submit.

So you have completed the bonding of LUNA, you can check the number of bLUNA you have in your Terra Station wallet. The system will display a message to confirm the transaction was successful.

On the contrary, to get LUNA tokens back, you will need to burn bLUNA, to do this you choose the tab Burn and you can choose 1 of 2 ways:

Burn: Standard token burn method, will take 21 to 24 days. Please note that slashing events can change the final amount of LUNA received, so choosing a reputable validator is very important.

Instant Burn: Method of burning bLUNA “instant”. This way, you will not have to wait for 21-24 days to receive bLUNA, but the amount you will receive will be less.

After choosing one of the 2 options, in the tab you can get LUNA back in the tab Claim.

Borrow

To borrow UST, next you need to mortgage bLUNA.

Step 1: Back to tab Borrow. Scroll down to Collateral Listselect the property you want to mortgage (here, for example, bLUNA).

Step 2: Click Providethen confirm the transaction in Terra Station.

Note: At this step you need to pay attention to the LTV ratio (Loan-to-value ratio), LTV is the ratio between the loan amount and the market value of the mortgage. With Anchor Protocol this rate is 50%, which means that with $100 deposited, you will get a loan of 50 UST. If your collateral depreciates and the rate hits 60%, your assets will likely be liquidated.

Step 3: Next choose Borrowselect your desired LTV level, then will display the amount of UST you can borrow proportionally.

Anchor recommends setting this LTV ratio at 45% to ensure the safety of your assets.

Step 4: Choose Proceed then confirm the transaction in the Terra Station wallet. Once completed, the system will display a message to confirm the transaction was successful.

In tab Borrowyou can see your loan, in addition there are Net APR.

Net APR = Distribution APR (interest received back in ANC token when using the product) – Borrow APR (borrowing fee).

Govern

In this section, you can stake ANC (Anchor’s native token or use it to add liquidity with UST). In addition, here you can see all information about loans, staking rewards, or claim tokens by clicking Claim All Rewards.

1. Stake ANC

Step 1: At tab Governclick Gov Stake.

Step 2: In the tab ANC Governanceenter the number of ANC tokens you want to stake.

Step 3: Choose Stake and confirm the transaction in Terra Station.

In addition, you can also buy or sell ANC by selecting Trade ANCenter the amount you want to trade and select Proceed. (Note that you still need UST or LUNA as gas fee).

2. Add Liquidity (ANC-UST LP)

Step 1: Click ANC-UST LPselect tab Pool.

Step 2: Enter the number of tokens you want to add. (The UST and ANC rates will have to be equal)

Step 3: Click Add Liquidityconfirm the transaction in the wallet and you will receive LP tokens.

Step 4: Select tab Stakethen stake the received LP tokens to farm ANC tokens.

Farming strategies on Anchor Protocol

With many of the above features, you can combine features together and choose your own farming method. Each way will come with different profits and risks, you can refer to the following ways:

• Method 1: Bond LUNA to receive bLUNA, then use bLUNA as collateral to borrow UST, finally deposit that UST into Earn feature.
• Method 2: Similar to method 1, but after borrowing UST, instead of depositing UST, you can use it to add an account to the ANC-UST pool.
• Method 3: After borrowing UST, you can trade to ANC and stake.

With each option, you should consider the possible risks such as impermanent loss, contract liquidation, …

A few notes when using Anchor Protocol

Gas charges when using Anchor?

As mentioned, gas fees can be paid in UST or LUNA.

What is the liquidation rate?

Anchor’s LTV is 50% and if it’s more than 60%, your collateral will be liquidated in part (if the value of the collateral is more than $2000) or fully mortgaged (if the value is under $2000 ).

Is it safe to use Anchor?

Anchor’s smart contract and token have all been audited by Cryptonics and Solidified, in addition, the project also has its own bug bounty program on Immunefi and its own bug bounty program to call on the community to help the project have the best security.

However, in the crypto market, nothing can be absolutely guaranteed, so you still need to consider and manage your capital closely, in addition to other risks you may also encounter such as IL, asset liquidation. , token discount,…

Can multiple properties be used as collateral?

Yes, Anchor currently supports 2 main types of assets, bETH and bLUNA, and you can use them at the same time as collateral.

summary

Hope the above article has explained & helped you to easily use Anchor Protocol in the most effective way.

If you have questions or problems when using Anchor, don’t hesitate to comment below and join Techtipsnreview’s communities to discuss!