Anchor Launch Puts UST in the Stablecoin Race Against DAI
An upstart stablecoin issuer out of South Korea is making a run at MakerDAO’s DAI, the fourth-largest cryptocurrency in this category.
Terraform Labs just launched Anchor, a long-awaited protocol for lending and saving that the Seoul-based firm expects to drive enough demand for its stablecoin, TerraUSD (UST), to top DAI’s circulation. Like DAI, UST maintains its peg to the U.S. dollar in a decentralized manner, but at $1 billion, its market capitalization is only about a third of its rival’s.
To enhance the stablcoin’s allure, Anchor aims to offer returns that outperform other decentralized finance (DeFi) offerings with a combination of sheer yield and predictability. It’s all driven by validation rewards (the equivalent of freshly minted bitcoin awarded to that currency’s miners) from Terra’s own blockchain, and will eventually pool such rewards from other chains.
If Anchor gains traction, it could represent a significant DeFi play that ultimately does not run on the Ethereum blockchain, which basically has a monopoly on that piece of the industry.
“By tapping into a diversified set of staking yields you’re able to produce yields that are highly stable and attractive,” Do Kwon, a cofounder of Terraform Labs, said in an interview.
Since its debut in late 2020, UST has already surpassed the Paxos Standard (PAX) and the Gemini Dollar (GUSD), both of which are backed by fiat currency held in real-world banks and subject to intervention by their issuers.
But DAI remains the top stablecoin for users who prefer a cryptocurrency that can’t be blocked or frozen by a central authority and generally holds its value, with a $2.8 billion market cap.
“If you let Anchor do its run for a couple months, I think we should be there,” Kwon predicted.
“When the market takes a downturn, a lot of those highly volatile crypto assets will be sold off for UST and then staked in Anchor for a savings account,” says Do Kwon, a cofounder of Terraform Labs (Terraform Labs, modified by CoinDesk)
What is Anchor?
Think of Anchor like the savings account your parents set up for you as a kid, but without the anemic returns typical of U.S. bank savings accounts today.
It’s no secret that, over the last year or so, returns in DeFi have been strong to the point of somewhat unbelievable. Still, even on the most mainstream offerings, such as the money market Compound, returns can fluctuate from one week to the next.
Returns for depositing DAI on Compound have ranged from 3% to 12% roughly since the new year. Returns for supplying USDC have ranged from 3% to 14%.
Anchor advertises a 20% return on deposits made in UST, though it’s unclear yet what kind of guarantee is made there.
On the lending side, Anchor will accept as collateral only staked tokens that earn returns. Starting with bLUNA (the token that represents the staked version of the Terra blockchain’s LUNA governance token), a user can borrow half of the value of their staked LUNA.
On certain newer blockchains, the entities that validate transactions stake, or pledge, assets as a way of guaranteeing the quality of their work. This allows the blockchain to use less energy (a hot-button issue of late), but it remains secure because if the stakers are found to validate badly, their assets can be taken or slashed. Each of these blockchains has a native coin that’s used for staking. On Terra, that’s LUNA; on Cosmos it is ATOM, etc.
So a user could stake $200 worth of LUNA to the network, then pledge that much in bLUNA as collateral to borrow $100 from Anchor. While the loan is active, Anchor will earn staking rewards on all $200 worth of bLUNA plus the interest on the loan. The combination of staking rewards and interest should enable Anchor to pay out a higher return to its depositors.
A token that represents a stake, such as bLUNA, is in effect a derivative. Anchor will soon accept as collateral such derivatives for other base layer protocols’ native tokens, such as polkadot (DOT), solana (SOL), staked-Ethereum (stETH) and cosmos (ATOM).
“In the world of blockchains there isn’t any source or yield that you’re going to get that’s more stable than what the base layer is going to give you,” Kwon said. “If we’re going to define a new monetary policy from these blockchains I think it’s going to come from that base layer and that is the staking yield.”
Luna stakers and borrowers in the Anchor ecosystem will get the additional benefit of liquidity mining. They will receive Anchor’s governance token, ANC.
How does TerraUSD stay at $1 without a central authority?
UST is held stable to its peg with the greenback under a seigniorage system. Terra also has stablecoins pegged to track currencies the South Korean won and Mongolian tugrug, along with the International Monetary Fund’s Special Drawing Rights (SDRs).
The supply of each of the stablecoins is regulated by the governance token, LUNA. When demand for UST gets too high, new UST gets issued and it can be purchased for $1 in LUNA. This allows arbitrageurs to buy the UST at a discount to the market price and sell the UST immediately at a profit.
If demand weakens for UST, LUNA will be released to the market and exchanged for UST, to be burned.
Validators on the Terra network have to stake LUNA (which creates bLUNA). These validators are rewarded by collaboratively serving as oracles for the price of the dollar in LUNA. Validators also earn small fees on transactions in UST.
The overall design is fairly similar to that of Basis, the Silicon Valley-backed stablecoin that ultimately closed down, citing regulatory issues, and returned all the funds invested.
UST can be found on Solana and Ethereum, but it is native to its own Terra blockchain, which runs on the Tendermint consensus model. Part of the Cosmos ecosystem of blockchains, Terra will eventually move to be interoperable with other Tendermint-based chains sometime after the Inter Blockchain Communication (IBC) protocol is enabled.
The big vision
Terra’s stablecoins were created as a way for e-commerce giants in Southeast Asia to escape credit card fees. Its payments app, Chai, hit two million users late last year.
Mobile-first payments have been huge in China. Kwon saw the potential but realized another facet was needed: a way to make saving money really worthwhile. That’s worked well for Alipay’s money market offering, for example.
Terra raised a fresh $25 million in January on the strength of its product offerings.
Anchor makes the third leg of the stool for UST demand. After Chai, Terraform Labs built Mirror, a marketplace for synthetic U.S. equities, which currently has 1.25 billion UST staked on it. It’s a way to bet on the prices of Apple, Tesla and the like without buying the actual stocks.
Anchor will first be offered on CoinList, a platform mainly for token issuance, but the product is designed to be integrated into other applications, just as the Unicorn startup Stripe has made fiat payments easy to add on desktop and mobile applications. With the Anchor software development kit (SDK), the product can be added to exchanges, wallets and other parts of the crypto market infrastructure.
Techemynt Launches First New Zealand Dollar Stablecoin, $NZDs
AUCKLAND, March 10, 2021 (GLOBE NEWSWIRE) – (via Blockchain Wire) - New Zealand Registered Financial Service Provider Techemynt (https://www.techemynt.com/) today announced the launch of the first New Zealand dollar stablecoin, $NZDs. $NZDs is backed 1:1 by the New Zealand Dollar, merging the flexibility of cryptocurrency with the stability of fiat. $NZDs was deployed on the Ethereum blockchain by Blockchain Labs, using the robust FiatToken framework developed by Centre.
Stablecoins are a type of cryptocurrency backed by a reserve asset, such as fiat currency or gold. They’ve gained traction as a way to pair the instant processing, security, and privacy of cryptocurrency payments with the stability of the underlying asset. The New Zealand Dollar is currently the tenth most-traded currency in the world and commands immense trust globally. As a blockchain-based stablecoin, $NZDs combines the stability and value of the New Zealand Dollar with the intrinsic utility of cryptocurrency to allow arbitrage, remittance, and digital payments, while positioning the New Zealand Dollar as a prominent participant in the global digital asset economy.
“Between the popularity of the New Zealand Dollar and the proliferation of cryptocurrency, Techemynt felt it was an ideal time to fill the gap in the market and lead the creation of a NZD-based stablecoin,” said Fran Strajnar, Executive Director of Techemynt. “After nearly a year of development, $NZDs is now first to fully execute and deliver on the promise of bringing a New Zealand Dollar stablecoin to the world. We’ve worked extensively with our top-tier partners to ensure $NZDs builds upon the best aspects of existing stablecoins while adhering to New Zealand’s legal requirements.”
$NZDs is backed 1:1 with physical New Zealand Dollars in a cash and cash-equivalent treasury. $NZDs will have rigorous governance, management and transparency policies focusing on operations and compliance day-to-day.
Issued by Techemynt, $NZDs will be made directly available to customers who wish to acquire NZ $100,000 (or more) of $NZDs tokens. $NZDs will also be made available on secondary markets including the cryptocurrency exchange Dassetx.com (powered by Bittrex). Techemy intends to integrate $NZDs with other exchanges and on/off ramps in the future. Anyone purchasing $NZDs directly from Techemynt will be required to complete Customer Due Diligence checks in line with Techemynt’s FSP obligations under the Anti-Money Laundering and Countering Financing of Terroism Act 2009 (AML/CFT) of New Zealand.
Users of $NZDs are likely to include forex and crypto traders, crypto funds, investors, and eventually merchants and everyday consumers. Techemy also envisages that $NZDs will be able to be transferred to DeFi platforms to earn yield. Currently DeFi platforms have the potential to provide participants with much higher yields compared to traditional bank accounts.
To learn more, please download the $NZDs White Paper.
ABOUT TECHEMYNT
Techemynt (https://www.techemynt.com/) is a New Zealand Registered Financial Service Provider and the issuer of $NZDs, a stablecoin backed 1:1 by the New Zealand Dollar. $NZDs provides a blockchain-based analogue of the New Zealand Dollar that allows arbitrage, remittance, and digital payments, while positioning the New Zealand Dollar as a prominent participant in the global digital asset economy. Techemynt is led by Fran Strajnar, founder of the digital asset investment firm Techemy Capital and digital asset data infrastructure company Brave New Coin.
ABOUT $NZDs
$NZDs is a stablecoin backed 1:1 by the New Zealand Dollar, merging the flexibility of cryptocurrency with the stability of fiat. $NZDs was deployed on the Ethereum blockchain by Blockchain Labs, using the robust FiatToken framework developed by Centre and issuance by Techemynt. To learn more, please download the $NZDs White Paper.
Company Contact: Media Contact: Transform Group,