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Anchor Protocol Holders Strike Down Proposal To Cut Yield Rate

A proposal to reduce yield rates on the Terra-based Anchor Protocol (ANC) was overwhelmingly voted against by ANC token holders on Saturday. The cut was proposed by Polychain Capital and Arca Prop, and sought to trim rates by up to 50% to make the protocol more sustainable.

ANC currently offers a yield of nearly 20% per annum on USDTerra (UST) deposits. The Polychain proposal seeks to progressively lower yield rates on higher deposit amounts, bringing it as low as 10% on deposits of above 500,000 UST.

Voting on the proposal will close on March 16. But so far, nearly 72% of ANC token holders have voted, with 55% of them against the proposal.

Anchor Protocol Vote

Reaction to the proposal was also largely negative on Twitter, with users speculating that the move would overcomplicate the code and possibly even break the platform.

Anchor Protocol offers market-beating yields

ANC, which is built by the creators of Terra, currently offers depositors the highest stablecoin yield in the market, at nearly 20%. By comparison,  yields on top stablecoins including Tether, USD Coin and Binance USD go up to 12%.

While the relatively large yield has seen a surge in deposits through February, it has also raised questions over sustainability, given that total deposits are nearly four times as much as total borrowers on ANC.

Anchor Protocol Borrowers Ratio

Anchor Protocol Borrowers Ratio

ANC funds this high yield through interest payments from UST borrowers, as well as a yield reserve. But this reserve has been dwindling in recent weeks, spurring more capital raising efforts from the community.

ANC, LUNA holders still spooked

Even as ANC token holders voted against the proposed rate cut, the prices of ANC and Terra’s native token LUNA reflected some uncertainty. LUNA, which can be used to stake on the protocol, was down 4.4% over the past 24 hours, coming further away from the closely watched $100 level, while ANC sank 11% to $3.42.

Both token prices had skyrocketed over the past month on growing adoption of Anchor Protocol. LUNA is now the largest DeFi token by market capitalization, which has nearly doubled in value over the past 30 days to $34.6 billion.

ANC is also the fourth-largest DeFi platform by total value locked ($15.4 billion), according to data from DeFi Llama.

Disclaimer

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

About Author

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
You can reach him at [email protected]

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