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Anchor community creates alternative plan to prevent UST collapse

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As the market follows the collapse of the LUNA token and the stablecoin UST live, the Anchor Protocol (ANC) has been relatively forgotten. However, the value of the largest protocol on the Terra network fell by 88% last 24 hrs and reached US$ 0.028.

But despite this drop, the community is willing to save the entire ecosystem. This is what reveals a plan created by the Anchor community that aims to save the parity of the UST. The plan was submitted by a user on Terra discussion forum.

Called “emergency measures to restore Earth parity”, the proposal was created by Daniel Hong, a former member of Terraform Labs. Is it over there resembles the plan released by Do Kwon earlier, as reported by the CryptoEasy. However, it has some crucial differences, such as lower interest rates for deposits and UST yields.

Anchor is a decentralized finance (DEFI) platform where most UST betting/loans take place. Its total blocked volume (TVL) has dropped from a high of $18 billion to around $595 million – an 83% loss.

Anchor protocol – restructuring plan

The first measure of the plan is to increase the pool and reduce the recovery period. In this sense, the proposal advocates an increase in the pool from 50 million Special Drawing Rights (SDT) to 1 billion SDT, as well as reducing the period from 36 blocks to just one block.

Anchor is also expected to lower interest rates. The minimum deposit rate would drop to 3.5% and the maximum deposit rate to 5.5%. As a result, the protocol throughput should not exceed 4%, at least temporarily.

In the current model, the Anchor stops about 18% per annum for UST deposits. But with the stablecoin losing its backing in the dollar, users claim that this yield is impossible to afford. Therefore, the new rate aims to adapt the protocol to the difficult time.

“A UST without parity with the dollar can no longer sustain 18% per year”, justifies the publication.

The interest-reduced measure is also intended to protect Anchor itself. Without the reduction, investor mistrust will make withdrawals continue on a large scale. Lowering the interest rate aims to prevent the Anchor reserve from running out and contribute to “stopping the UST’s death spiral”.

Another proposed emergency measure is to increase virtual liquidity for LUNA exchanges by a factor of 1,000. With this, the community aims to prevent the loss of UST parity from being prolonged, which could represent a total collapse.

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