Three blockchain companies joined forces to create a new savings protocol that offers income powered by block rewards.
The interoperable blockchain networks Cosmos, Polkadot and blockchain payment company Terra, which issues its native stablecoin of the same name, announced on June 6th about its joint Decentralized Finance (DeFi) project. The protocol called Anchor aims to offer passive income payments on stablecoin deposits as a reward for staking.
Excited to announce establishment of the Interchain Asset Association to support @anchor_protocol!@terra_money @cosmos and @Polkadot will be part of the governing body furthering research, development, and support!@zmanian @jackbplatts @NicholasPlatias @tarunchitra
— Terra (@terra_money) July 6, 2020
The Anchor savings protocol will run on the Terra blockchain and allow investors to earn passive income on stablecoin deposits, revealed one of the founders during the special announcement in the Unitize decentralized digital conference this week.
Anchor savings protocol will accept Terra stablecoin deposits, allow instant withdrawals and pay investors a low-volatility interest rate, stated the white paper. This means that when a stablecoin deposit is made, the protocol uses part of it to make stakings across the Proof-of-Stake (PoS) networks. Staking, which in general is the way of holding digital currencies in crypto wallets to receive rewards, then generates payments that are later distributed to the investors as interest for their deposits.
Reportedly, the new DeFi project will be offering a protected stablecoin savings product that pays investors a stable interest rate. The Anchor plans to achieve this by “stabilizing the deposit interest rate with block rewards acquiring assets that are used to borrow stablecoins”.
As stated in the document, the passive income protocol provides the interest rate that is determined by the earnings of the PoS networks with the highest demand. The founders of the project expect it to be between 7% to 9%.
According to Cosmos, Polkadot and Terra that created the Interchain Asset Association (IAA) to research, develop and support the Anchor protocol, the final product is expected to be released on their blockchains by the end of the third quarter of 2020. The creators also plan to scale the protocol to other PoS ecosystems in the future.
The joint Anchor project is announced in the midst of the whole DeFi sector boom. The industry which increased its market capitalization by $1 billion within a few months, is on fire now with leading sectors of cryptocurrency lending services and decentralized exchanges generating impressive profit even during the mid-March market crash.
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