A recent tweet surfaced on Friday, where Do Kwon, the entity behind Terra Luna announced the injection of 450 million UST into the protocol of Anchor reserves. The proposal seemingly passed a vote by the Luna Foundation Guard on the 10th of February. Anchor currently serves as the protocol of flagship savings for this ecosystem, where it offers users up to 20% interest per annum on their deposits of UST- which has been paid by borrowers.
Terra Has Pushed 450 Million UST In Anchor
The reserves of the Terra protocol had been going down steadily to as low as $6.56 million as there wasn’t enough demand for borrowing which would help the protocol keep up with the influx of lenders. When such an imbalance takes place, the protocol readily taps into reserves in order to pay lenders the yield that they were promised. From the beginning of December to late January, the reserve funds of Anchor went down by around $35 million.
Currently, the gap has been widening. Over the last few weeks, the total deposited funds have gone up by around $480 million, while the borrowed funds have increased by around $180 million. However, due to Terra also having a stake in the collateral of the borrowers to earn yields, along with the interest payments to compensate lenders, the two numbers do not have to be in sync to reach the zone of equilibrium.
The developers of Terra have already conceded that such high yields are usually not sustainable in the shortest term. To fix the problem for the long term, the Labs has plans of putting through the use of compound liquid staking derivatives as collateral in Anchor v2. Liquid staking involves users double-dipping with their crypto assets– that is staking their crypto in a single pool and using the staked assets to farm yields in a liquidity provider pool.