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Anchor Protocol solves the mystery with semi-dynamic earn rate

Updated: Jul 25, 2024
Published: Mar 25, 2022
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The issues surrounding the 20% yield rate of Anchor Protocol have been going on for weeks and it seems that the final conclusion is upon us. As revealed by the official Twitter handle of the DeFi protocol based on Terra Network in a series of tweets, the solution to a long sustainable yield for investors is a semi-dynamic earn rate.

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Anchor Protocol implements a more sustainable semi-dynamic earn rate

Anchor Protocol is known for providing a 20% yield rate to investors who lock their assets into the platform. As per data from DefiLlama, the current TVL of the protocol is around $17.19 billion. 

The tweet from the official handle revealed that there are two sides to the Earn side of the protocol. First is the frequency at which the rate changes and the next is the numeric value of the rate. So when it comes to the frequency, the Earn rate adjustment frequency will be 1 month and each month the rate will change as per the performance. 

Next, the cap on rate adjustments is set at 1.5%, so the most it can increase or decrease each month is 1.5%. Furthermore, "the rate adjustments will be positive or negative depending on if the yield reserve appreciated or depreciated that month," said Anchor Protocol in another tweet

In the tweet below, Anchor Protocol gave an example of the rate adjustment that the protocol will follow:

Note: Changes less than 1.5% in the yield reserve will result in an equal adjustment of the Earn rate.

Long-term sustainibility

Anchor Protocol recently introduced a new governance proposal which passed following which, the protocol has implemented new changes to the platform. 

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.

The co-founder of Terraform Labs, Do Kwon, also predicted that the future of Anchor lies in flexible yield rates.

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