DEFI

Anchor's semi-dynamic interest rates officially launched, with APY starting at 15% and the May rate at around 18%.

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Anchor

The semi-dynamic interest rate proposal presented by Anchor Protocol, a fixed income platform on Terra, has officially launched on 5/1, with the current interest rate set at 18%. Any fluctuations in the yield reserve greater than 0.25% in the future will cause a change in the yield rate (1.5%).

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APY minimum 15%

According to a previous proposal, Anchor Earn will dynamically adjust interest rates based on the profit reserve, with a maximum interest rate cap of 1.5% adjusted monthly based on the appreciation or depreciation of the profit reserve, fluctuating the protocol's interest rate between a minimum of 15% and a maximum of 20% APY.

According to the formula, examples are as follows:

  1. Profit reserve appreciation by 1.5%, yield increases by 1.5%.
  2. Profit reserve appreciation by 3%, yield increases by 1.5%.
  3. Profit reserve depreciation by 1.5%, yield decreases by 1.5%.
  4. Profit reserve depreciation by 7%, yield decreases by 1.5%.

The interest rate update frequency is approximately every 388,068 blocks or monthly updates based on block production. Moreover, any fluctuation in the profit reserve yield compared to the previous month exceeding 0.25% will cause a 1.5% change in the yield.

According to the official website, currently Anchor Earn has been adjusted to 18%. Anchor emphasizes that the semi-dynamic interest rate further contributes to the protocol's long-term sustainability, while providing an attractive yield for the stablecoin UST, benefiting protocol users.

Cryptocurrency investor Route 2 FI pointed out on Twitter that after the dynamic interest rate went live, the APY dropped from 19.5% to 17.99%. He believes that this change will certainly achieve greater sustainability but more mechanisms are needed.

Even though the protocol is in a non-profit state, as long as the profit reserve remains above zero, Anchor will provide a 15% interest rate. He mentioned that the key will be whether the profit reserve can be replenished again in June.

On 4/27, Route 2 FI mentioned that the Anchor profit reserve is consuming $5 million daily, indicating that the profit reserve will be depleted within 45 to 50 days.

The Anchor token ANC has dropped by approximately 70% since reaching a historical high of $6.19 on 3/5, and has increased by about 8.91% since the announcement of the semi-dynamic interest rate, reaching around $1.73.