Defi Protocol Anchor to Implement ‘Semi-Dynamic Earn Rate’ Following Governance Vote

On Thursday, the team behind the lending protocol Anchor announced that a proposal has passed and the decentralized money market will “implement a more sustainable semi-dynamic earn rate.” Following the announcement, the value of the protocol’s native token ANC slipped roughly 2% lower during the last 24 hours.

Anchor Protocol Is Changing the Application’s Earn Rate

Anchor Protocol, the decentralized finance (defi) money market and lending application built on Terra, is making some changes to its earn rate. According to a recently passed governance vote, Anchor Protocol will dynamically adjust payout rates.

The earn rate can increase or decrease per period to 1.5% spending on the increase and decreases in yield reserves. The Anchor governance vote’s outcome shows 14.98% voted “yes” to the proposal, while 2.4% voted “no.”

Furthermore, Anchor’s official Twitter account tweeted about the proposal passing on Thursday. “With the passing of Prop 20, Anchor will now implement a more sustainable semi-dynamic earn rate,” the team detailed. The Anchor team added:

In its simplest form, this proposal involves two parameters on the Earn side and we will break down each one: 1. Frequency – How often the rate can change, [and] 2. Cap on Rate Adjustments – How large the rate changes can be.

According to the thread, the protocol’s payout rate will adjust the frequency once a month and the adjustment will be based on yield reserve performance for that month. “The cap on rate adjustments is set at 1.5%, so the most it can increase or decrease each month is 1.5%,” Anchor’s Twitter thread details. “The rate adjustments will be positive or negative depending on if the yield reserve appreciated or depreciated that month.”

Anchor Recently Adds Interchain Support With Avalanche, Anchor’s Locked Value Jumped by 44.59% in 30 Days

Anchor’s project announcement continued by adding that changes that occur that are less than 1.5% “will result in an equal adjustment of the earn rate.” The news follows Anchor’s one-year anniversary and the protocol’s interchain direction. Anchor executive Ryan Park announced on March 17 that Anchor now supports Avalanche (AVAX) via Xanchor (Cross Anchor), which is an “extension to Anchor Protocol.”

“In line with [Anchor Protocol’s] 1st birthday, Anchor has taken its first step to the interchain,” Park said. “Powered by Wormhole, Xanchor brings Anchor’s functionalities to other non-Terra blockchains. First starting with Avalanche. Xanchor is unique with its seamless cross-chain UX – focusing on the fact that most users care [about] which chain they’re on, not what chain their app is on. With only Metamask, users can directly interact with Anchor contracts on [Terra]. No Terra wallet extensions required,” the Anchor executive added.

Terra currently commands the second-largest decentralized finance (defi) total value locked (TVL) and Anchor Protocol is one reason why. While Terra’s TVL is $26.97 billion, Anchor captures $14.4 billion of the aggregate, or 53.39%. Anchor Protocol’s TVL has increased by 44.59% during the last 30 days and just recently, Anchor surpassed Aave as one of the largest defi lending applications in the ecosystem today.

Anchor’s recent announcement also follows the Luna Foundation’s bitcoin (BTC) purchases. The Luna Foundation is leveraging the BTC to back the Terra stablecoin UST’s stability. Anchor’s team believes reconfiguring the earn rate will allow the project to sustain itself long term.

“The addition of a semi-dynamic Earn rate will contribute to the long-term sustainability of Anchor & will benefit users of the protocol by enabling yield reserve growth while continuing to provide an attractive yield on UST,” Anchor Protocol’s announcement concludes.

What do you think about the Anchor Protocol changing to a semi-dynamic earn rate? Let us know what you think about this subject in the comments section below.