The Terra-Based DeFi Protocol Anchor proposes lowering UST yield rates to 4%.
As the Terra ecosystem explores steps to safeguard UST’s peg with US dollars, participants in the Terra-based decentralized finance (DeFi) protocol Anchor have advocated decreasing terraced (UST) rates to an average of 4% from the current 19.5 percent.
“Reduce minimum interest rates to 3.5 per cent and maximum deposit rates to 5.5 per cent, with a target interest rate of 4 per cent,” according to the continuing proposal. At the time of writing, 244,000 anchors (ANC) tokens have been utilized to cast votes for “yes.” Anchor Protocol’s governance token is ANC, which users may deposit or stake to initiate new governance polls or vote on current pools formed by users who have staked ANC.
Anchor is a Terra-based saving, lending, and borrowing platform that lets users can earn interest on UST deposits and borrow against holdings. Critics have previously claimed that its “stable high-interest rate” – as advertised on its website – is unsustainable due to the large sums of money necessary to keep such rates steady.
Anchor has been operating as expected for several months and has grown to become Terra’s largest DeFi application. However, UST’s sudden decoupling from the dollar has thrown the protocol’s lofty goals into disarray.
On Wednesday, UST plummeted to as low as 22 cents due to significant withdrawals from Anchor and LUNA, sparking a negative spiral. UST has now recovered significantly, but the long-term outlook is uncertain. “A debugged UST can not preserve 18 percentage APY,” remarked Anchor author Daniel Hong in an associated discussion board post.
“While a few can also additionally declare that better hobby charges help with much less circulating deliver of UST, for the reason that stablecoin has already misplaced public accept as true with because of a [two]-day depends, humans, can also additionally need to get away anyhow.”
“One key driving force for ultra-modern debug turned into the discharge of Terra’s balance reserve into the Anchor reserve every time it turned into exhausted, bringing freshly minted UST that turned into now no longer intended to be there into circulation,” Hong said, explaining the UST rate drop on Wednesday.
Hong, on the opposite hand, emphasized that the “very aggressive” shift could be reversed whilst needed, implying that the 4% hobby charge may upward thrust withinside the destiny if marketplace situations worsen.