Anchor is a savings protocol that aims to deliver low-volatility returns on Terra stablecoin deposits. Its Anchor rate is supported by a diversified flow of staking rewards from major proof-of-stake blockchains, which is expected to be significantly steadier than typical money market interest rates. The project’s view is that a durable and dependable yield source in Anchor could serve as a reference interest rate within crypto.

The Anchor protocol sets up a money market where a lender seeks stable yield on their stablecoins, while a borrower wants to take out stablecoin loans using stakeable collateral. To obtain stablecoins, the borrower locks Bonded Assets (bAssets) as collateral and borrows stablecoins at an amount below the protocol-defined LTV ratio. The diversified staking rewards generated across the pooled collateral are then converted into stablecoins and distributed to the lender as a stable yield.

Deposited stablecoins are tracked as Anchor Terra (aTerra). aTerra tokens can be redeemed for the original deposit plus accrued interest, meaning interest can be earned simply by holding these tokens. Anchor is designed to offer depositors: