Luna Foundation Guard (LFG) announced plans to add $450 million to Terra DeFi protocol Anchor’s revenue reserves.
Terra creator Do Kwon’s foundation is helping the DeFi lending protocol maintain its comparatively high 20 percent yield on stablecoin UST for the rest of 2022 — but why is it doing it?
Anchor is at the heart of the Terra DeFi ecosystem as it promises investors a comparatively safe return on their US dollars. At Aave, for example, investors only get 5-10% on deposited stablecoins, while at Anchor they’ve been getting a steady 20% return for over a year. As a result, Anchor has become by far the most important DeFi protocol in the Terra ecosystem and now manages just under UST $10 billion. But the revenue reserves needed to ensure UST’s 20 percent annual return have fallen more than 80 percent in recent months due to a lack of borrowing. The return of 20 percent could not have been guaranteed for much longer and would be up 13-15 percent down.
This is exactly why Luna Foundation Guard has now intervened.