SPECIAL NOTICE: TERRA HAS FALLEN

Ok I’m staked, now what?!

So you’ve [delegated some of your LUNA] (/posts/terra-now-what/now-what-01-on-staking/) amongst a few worthy validators and in doing so you are earning yourself some more LUNA. Which means you have also made yourself eligible for current and future Terra network airdrops, and are supporting the engines of the Terra network. A great start. 🥩 on the grill, or in the oven, or on the pan, or… But you got some undelegated LUNA and you want to start saving! Very sharp. The modern financial world has taught us that saving is hoarding. But that is not what saving is at all. Saving should reward you. And that’s the cool thing about saving on Anchor - it feels a lot like earning.

A Level Set

The various “protocols” on Terra, such as Anchor, can be confusing. There’s also a lot more [coming] (https://twitter.com/SmartStake/status/1387811667548020739?s=20)! What is “Anchor” vs “Terra”? Think about “Terra” as the foundation, and all other protocols such as “Anchor” are just an extension, built on top of, and playing by the rules of, Terra. The naming convention is quite clever. Terra = Earth. Everything in Earth’s domain is it’s own economy. And the Moon is up there watching over us, it’s gravity holding it all together. Everything else is… tertiary.

Anchor

Anchor is a savings platform built on top of the Terra network which enables you to earn real savings in a variety of ways. It can be a bit extensive as you can use your LUNA and/or your UST on Anchor, and do a few different things, so we’ll break it up into two parts and be as straight to the point as possible in the name of simplicity. Any questions about the intricacies of the procedure - we’d be happy to answer in our telegram or twitter. You can also find us in the Terra network discord and telegram communities.

On Saving (with LUNA)

So let’s start with what you can do with your LUNA on Anchor. First step, you would head to the “Bond” tab and choose the “mint” option to create some Bonded LUNA or bLUNA. bLUNA is simply LUNA that has been specially marked as collateral that you can use to take out loans. The value of bLUNA is engineered to be equal to the value of LUNA. Your LUNA belongs to Anchor now, and your bLUNA belongs to you. And now you are in Anchor.

What is actually happening here, is you are delegating your LUNA to the network via a group of whitelisted validators (the Anchor protocol is doing this). These validators are pooled together for this process so validator selection is pretty much irrelevant to you.

The tradeoff for minting bLUNA instead of keeping it as LUNA, however, is you do not receive the rewards of delegating the LUNA yourself (Anchor does), you are only eligible for at most 50% of the LUNA value, and you run the risk of liquidation, losing your provided LUNA. The reward is that not only do you get extra capital to use in the Terra ecosystem, you get paid to do so! The current APR is paid out ~50% per year in the form of the Anchor protocol’s native token: ANC.

In order to use any of the extended protocols in the Terra Network you will first need to download a browser extension for your Terra Station wallet to connect to said protocols. This is a straightforwad process but don’t hesitate to reach out if you are having difficulty.

After you have minted your bLUNA, the next step is to head over to the “Borrow” tab. Here you will choose the “provide” option to initiate your bLUNA as collateral for a loan. After providing the bLUNA, you will then choose the “borrow” option to receive UST. On the “Earn” tab you will see your UST. You can then choose to deposit your UST (which we will get into the next section), or you can use your newly borrowed UST throughout the Terra ecosystem as you wish! During the duration of your loan you will earn ANC on the borrowed amount which you can check and claim periodically on the “Govern” tab. Thus you get paid to borrow!

You get to choose how much UST you can borrow. Keep in mind that you must keep a minimum of 200% of the borrowed amount in collateral, the recommended amount is 300%. You risk losing your precious LUNA due to liquidation should LUNA price take a dip and your bLUNA value goes below 200% of your borrowed aUST value! You can maintain your collateral during the course of the loan by either providing more bLUNA or repaying as much of the loan as necessary

Whenever you want to reclaim your bLUNA you simply return to the “Borrow” tab on Anchor, select the “repay” option to and pay back your outstanding balance. Then select the “withdraw” option on the now unprovided bLUNA. After that, you head back to the “Bond” tab then select the “burn” option to convert your withdrawn bLUNA back to LUNA. After you have done this, you will then choose the “claim” option and initiate the 21 day unlock period to receive your LUNA!

It may be a little overwhelming and oversimplified, but the process follows a logical progression. Bear in mind it is not a “set it and forget it” strategy though. If LUNA price goes up you can withdraw some of your bLUNA, or borrow more, since the collateral value will have increased against the stable loan value. And on the reverse if LUNA price goes down you will need to further collateralize your loan to make sure your bLUNA remains safe. This is a great way to make your LUNA work for you! While you don’t get to receive the full value of your LUNA, you don’t have to sell your LUNA and can retrieve it any time. A great way to capture the carry on any price increase while still having UST to use throughout the Terra network!

Come back for “On Saving (part b)” to see what you can do with your UST on Anchor!

For more in depth of what is going on behind the scenes of the Anchor protocol check out this fantastic article from esteemed community member Archon.