Empire Is Anchor’s 19% APY Sustainable | Weekly Round Up
Mar 11, 2022
Matthew Hepler, VP of portfolio management at Arca, shares insights on the sustainability of Anchor Protocol’s 19% APY and contrasts governance in equities versus crypto. Mike Ippolito, co-founder of Blockworks, discusses the latest market trends, including the implications of Biden’s crypto executive order. Byron Gilliam analyzes recent events in the crypto space, like the LUNA burn and notable DeFi departures, highlighting how these developments affect market sentiment and community engagement in a shifting landscape.
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Governance: Equities vs. Crypto
- Governance in equities has well-defined structures and high voter participation (90%).
- Digital assets prioritize decentralization, offer quicker change implementation, but suffer from low voter turnout (10%).
Anchor's Role and Model
- Anchor, a savings protocol on Terra, bootstraps UST demand by offering high APYs (15-20%).
- Unlike variable-rate money markets like Aave or Compound, Anchor's fixed rate creates an imbalance, with more deposits than borrows.
Anchor's Sustainability Issues
- Anchor's business model isn't sustainable due to the fixed 20% APY and concentrated rewards among large depositors.
- The 'anchor rate,' a normalized DeFi rate considering staked asset earnings, is closer to 10%, highlighting the disparity.