Anchor Protocol! 3 Dangers?

Kevin Whitsitt

Click on the link below for more...

https://www.trustthelink.com/is-anchor-protocol-crazy-interest-sustainable-2-reasons/

Hey wutzup, When it comes to crypto there are a lot of different ways to earn money. With something called the Anchor Protocol someone can earn 19.46% interest on a stablecoin.

A stablecoin means it's stable and usually pegged to the dollar. Think about that? That's a crazy interest rate, right? You might be wondering what's the catch right? There are 3 risks with this project that I wanted to talk about.

Everything is risk and reward and knowing both is a good thing. The "largest" risk with this project is the fact it has enough money to pay out the "Anchor" interest rate at 19.46%. You can see how the yield reserves have been slowly going down until you see a LARGE increase.

This large increase is because members voted on filling the reserve with 450 million UST from the Luna Foundation Guard, it's a fund used to support projects on the Terra blockchain that is what this project runs on.

You might be wondering where the money comes from. One source is they sell Luna crypto and they purchased stable coins. The interest will probably go down due to the yield reserve being reduced and also staking rewards being reduced. With Ethereum when more gets staked the yield gets reduced and this will impact how much money the Anchor Protocol earns.

You see to borrow money someone has to deposit Luna or Ethereum and this is staked. The staked income helps pay the interest rate. Plus the fees for when someone borrows. The second risk involves a bug in the smart contract and this does happen at times.

There is a crazy story about Ethereum getting split into 2 where there is Ethereum and Ethereum classic due to mistakes in the code. The rule of thumb is the more complicated something is the higher the chance of something going wrong right?

This reminds me of the first time I tried windsurfing and there are a lot of moving parts with it and man did I suck. If a bug makes you nervous you can actually get insurance with the protocol. Then you can insure either smart contracts or the stable coin (for a fee of course). The third risk is with the stablecoin UST and there is even insurance for it. UST is pegged to the dollar so 1UST is 1 dollar, right? Actually, it's a little more complicated.

UST is paired to the coin LUNA with a mint and burn system. This means 1 dollar in Luna can be converted to created 1 dollar in UST. If UST is trading above 1 dollar then this motivates Luna holders to burn $1 of Luna into $1 into UST and they would earn some quick money. This then drives the price of UST back down to $1. So far UST has been "very" stable, but there is a risk that the value with it drops.

Of course, there are more risks with regulations, but these are the big 3. If you want to learn more click on the link in the description or go to my website trusthelink.com I created a post about the Anchor protocol.

I talk about how to exactly earn the interest and walk you through it. I also talk more about how stable the interest rate is and more ways a higher yield from popular cryptocurrency coins that you may be hodyling or holding now. I hope this video or podcast was helpful. Bye for now.