I've been hearing a lot about Anchor Protocol and the app with the same name, from the Terra blockchain.
I decided to test it and see how is the process of working with it.
I like UST a lot as a stablecoin, maybe because it has the traits of HBD, but it has a much higher liquidity and holds the peg very well for an algorithmic stablecoin. Some goals to seek for HBD as well.
At the same time, on Anchor, one can earn almost 20% interest on its UST, compared to 12% HBD has on Hive.
From what I understood (from Leofinance AMA, actually), this APY doesn't vary based on the amount of total UST deposited (like it does on most stablecoins farms). The only limitation is the fund set apart for paying out this interest. Once this runs out, there's no more incentive. All this I learned from the AMA, and I didn't look into it passed that.
The fact that on the page I included as a screenshot says "current annualized deposit rate" makes me think this varies based on other factors, including - possibly - human decision.
On Hive, the interest rate for HBD is decided by witnesses (block producers) and there isn't a fund it's drawn from. HBD represents debt, and the only limit is the max-debt level (currently set at 10%, but talks are to increase it), after which no more debt (HBD) is printed, including interest.
So, after testing it, I can say on Anchor one would currently receive 19.5% APY on UST, without pooling it with another token, without varying APY with liquidity "in the pool", without locking, and with some small fees.
That's a great interest for a stable coin.
Why would I compare it to UST/OSMO LP on Osmosis? That's not a pool of stable coins, so it shouldn't be comparable. You will see why as I describe it.
Osmosis also has a stablecoins-only LP, but with a less known coin EEUR. And the best interest for the EEUR / UST LP is 11.15% at 14 days bonding.
But let's get back to UST/OSMO LP.
How much did I say you earn for UST on Anchor? 19.5%.
Well, on UST/OSMO, the 14 days bonding option gives investors a 125.92% APR. And it was higher. Yes, OSMO price dipped, and probably will continue to do so given the situation in Ukraine and the economic crisis in general, but at the same time, there are some additional bonuses to consider:
- That is APR, not APY, so the rewards you receive every day can be compounded either in the same LP or give them a different use
- There are no fees on Osmosis (important for compounding)
- LP investments on Osmosis are often criteria for airdrops on Cosmos
- "superfluid staking" is coming very soon on Osmosis (could be as soon as by the end of February). What does it mean? The OSMO part in the LPs on Osmosis will receive staking rewards as well, on top of the LP rewards. As one of the major LPs on Osmosis, UST/OSMO will likely be among the first to have that option enabled.
UST/OSMO is only half-stable, so that's a reason some would choose to deposit UST for a 19.5% APY and no impermanent loss. There is also the 14 days bonding, which doesn't exist on Anchor. You can of course bond your LP positions for 1 or 7 days, but at a lower APR. And shorter duration bonding will not be eligible for superfluid staking rewards.
Overall, I still prefer the LP. But when my positions will start to grow, if an opportunity like deposits on Anchor will still exist at those interest rates, I wouldn't say no to moving some UST there when markets go south.