How to use Anchor Protocol – Save, Lend and Earn

Anchor Protocol is currently the largest DeFi protocol on Terra with almost $20 billion in total value locked. In addition to Terra, Anchor Protocol is presently deployed on Avalanche and will soon be available on Acala. Anchor is known as the protocol that can provide you 20% yield on your stablecoinsTerraUSD (UST). This article is a beginner’s guide on how to use Anchor Protocol.

Prerequisites

At the point of writing, to use the Anchor protocol, you need either to have a non-custodial wallet set up on Terra or Avalanche C-Chain. In addition, you will need to have some $LUNA or $UST for Terra or $AVAX tokens for Avalanche C-Chain in your wallet. These tokens are required in order to pay gas fees for each transaction.

In this guide, Metamask is used on the Avalanche network. However, the same steps apply when using other non-custodial wallets on Avalanche C-Chain or Terra network.

To set up your non-custodial wallet, you can follow the guides below:

NetworkNative TokenNetwork ProfileMetamask Guide
Avalanche C Chain$AVAXAvalanche BlockchainHow to set up Metamask on Avalanche
Terra$LUNA, $USTTerra BlockchainHow to set up Terrastation (coming)
Guides for setting up your Non-custodial wallet

Finally, depending on what type of functionality you wish to use, you will need the corresponding tokens available in your wallet. For the earn functionality (aka Savings, Lending), you need $UST, as it is the only type of asset supported.

  • Terra: You can transfer $UST directly from Centralized Exchanges (make sure your CEX supports direct transfers). Alternatively, you can use one of the Decentralized Exchanges on the network, such as Astroport or Terraswap.
  • Avalanche: You can bridge some using one of the available bridges, or exchange directly on-chain from one of the available decentralized exchanges such as Trader Joe, Pangolin, or Platypus Finance.

Regarding the borrowing functionality, you will need either bETH, bLuna, bAtom for Terra, or sAVAX for Avalanche. Again, you can purchase some from the decentralized exchanges if available or stake your ETH, LUNA, or AVAX yourself in one of the supported liquid staking platforms.

How to stake your UST on Anchor

How to stake your UST on Anchor - How to use Anchor Protocol
How to stake your UST on Anchor

Step 1: Navigate to Anchor and connect your wallet

First, you need to navigate to Anchor protocol’s official website and connect your non-custodial wallet. Then, navigate to the Earn tap, or go directly here: https://app.anchorprotocol.com/earn. Depending on which network you are, you also need to select the corresponding network from the top right corner of the page.

Step 2: Deposit your funds

Finally, as shown on the screenshot above, click on the “Deposit” button, select the amount of funds you wish to deposit, and click “Proceed”. That’s a very straightforward process. Your non-custodial wallet will prompt you to sign the associated transactions.

Note: If you are on Terra network and using UST for gas fees, make sure you leave sufficient funds in your wallet to pay for gas fees

How to withdraw your UST from Anchor Protocol

How to withdraw your UST from Anchor Protocol - How to use Anchor Protocol
How to withdraw your UST from Anchor Protocol

Step 1: Navigate to Anchor and connect your wallet

Similar to the deposit function, first, you need to navigate to Anchor protocol’s official website and connect your non-custodial wallet. Then, navigate to the Earn tap, or go directly here: https://app.anchorprotocol.com/earn. Depending on which network you are, you also need to select the corresponding network from the top right corner of the page.

Step 2: Withdraw your funds

To withdraw your funds, just click “Withdraw”, select the amount of funds you want to withdraw, and then click “Proceed”. Your non-custodial wallet will prompt you to sign the corresponding transactions and you are done.

How to borrow on Anchor Protocol

How to use Anchor Protocol - How to Borrow from Anchor Protocol
How to Borrow from Anchor Protocol

Step 1: Navigate to Anchor and connect your wallet

Navigate to Anchor protocol’s official website and connect your non-custodial wallet. Then, navigate to the Borrow tap, or go directly here: https://app.anchorprotocol.com/borrow. Depending on which network you are, you also need to select the corresponding network from the top right corner of the page.

Step 2: Provide Collateral

Then scroll down the page and you will find all types of collateral supported on Anchor Protocol. sAVAX is available on Avalanche C-Chain, bETH and bLuna are available on Terra. Select the type of collateral you wish to deposit and click “Provide”.

On the pop-up window, as shown in the screenshot above, you need to specify the amount of funds you wish to deposit as collateral and then click “Provide”. Your non-custodial wallet will prompt you to sign the corresponding transactions.

Step 3: Borrow Funds from Anchor Protocol

Once you provide your collateral, then scroll up to where the Position Management section is, and click “Borrow”. On the pop-up window, you need to specify the amount of funds you wish to borrow. The size of the loan is defined by the value of the collateral you provided.

Loans on Anchor are overcollateralized. This implies that you need to provide a collateral of higher value compared to the value of the loan you take out. Anchor allows borrowers to withdraw up to 60% of the value of the collateral deposited.

A change in the value of the staked asset means the total value of the collateral provided by the borrower can potentially dip below the required 60% of the amount borrowed. When this happens, the loan becomes “at-risk” and can be liquidated.

Anchor protocol recommends borrowing up to 75% of the max value you are allowed. This implies that if your collateral’s value is equal to 100 UST, you are allowed to borrow 60 UST, and Anchor’s recommendation is that you borrow 75% of this 60 UST, which equals to 45 UST. If you wish to learn more about Collateral Ratios and Liquidation events, check out Anchor’s documentation.

Once you define the amount of money you wish to borrow, then just click on the “Proceed” button.

How to repay your debt on Anchor Protocol

How to use Anchor Protocol - How to repay your debt on Anchor Protocol
How to repay your debt on Anchor Protocol

Step 1: Navigate to Anchor and connect your wallet

Navigate to Anchor protocol’s official website and connect your non-custodial wallet. Then, navigate to the Borrow tap, or go directly here: https://app.anchorprotocol.com/borrow. Depending on which network you are, you also need to select the corresponding network from the top right corner of the page.

Step 2: Repay your Debt

Then, click on the “Repay” button as indicated by the screenshot above. A pop-up will appear that will ask you to specify the amount you wish to repay. Specify the amount and click “Proceed”.

Step 3: Withdraw your Collateral

Once you repay your debt and you wish to withdraw your collateral, then you can just scroll down where the collateral list is. Find your collateral, click “Withdraw”, on the pop-up specify the amount you wish to withdraw, and click “Proceed”. Sign the corresponding transaction on your non-custodial wallet and you are done.

Wrapping Up

Anchor Protocol has a very simplistic design that makes it extremely easy for anyone to use. Just make sure that you understand all the risks associated with depositing your asset or borrowing from Anchor Protocol.

Aris Ioannou
Aris Ioannouhttps://coinavalon.io
Aris created Coinavalon with the purpose of helping the average person navigate the decentralized web. Aris has been passively in the space since 2017 and full time since late 2020. Before Coinavalon, Aris worked as a Business & IT Architect in the financial services sector. Aris holds an MSc in Advanced Computing from Imperial College London, a BSc in Computer Engineering from University of Cyprus and currently pursuing an MBA degree from CIIM.

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