Down the Terra Rabbit Hole
Terra (Luna) Network has taken over the Decentralised Finance (De-Fi) world by storm with all it's amazing protocols and developments. But for the untrained eye it can seem pretty run of the mill crypto trading but, once we scratch the surface we begin to see how far we can push the De-Fi envelope that no other protocol or blockchain currently has available.
In my previous post Top ways to invest in Terra (Luna) Network I provided a run down of some of the basic investment opportunities on Terra (Luna) Network and today, we're going to go one step deeper.
You might be thinking that if you went through the steps mentioned above you're maxed out on leveraging your position but this is where things get extremely interesting on Terra (Luna) Network. You can lend out your debt.
Borrow out your debt and earn rewards
Mind blowing stuff right? wrong. It is a common occurrence in the everyday world of banking so it doesn't come as a surprise that on Terra (Luna) Network you can use your debt and make money off it too.
So how does this work?
You would remember in my included article at the top of this article that you can provide Luna as collateral on Anchor which creates bLuna and then you can borrow UST and submit it into Anchor for 20APY. Once UST is deposited into Anchor it becomes aUST. This debt can be again borrowed against without losing the 20% APY so you can effectively double the APY on your deposited amount.
But to truly understand how this works we first have to take a deep dive into Anchor, UST and aUST and what's really happening when you deposit your UST into Anchor.
When you deposit UST into Anchor and get aUST you will notice you will get less aUST unless you did it from the day of inception when 1UST = 1 aUST. This is because the protocol isn't giving you more UST or aUST even though it may look like it if you stake in the protocol and you get these cool daily income numbers.
This is also a misconception when people say that the reserve will run out and the APY isn't sustainable. The fact is that it is solely sustainable unless everyone sold aUST at the same time then just like and other protocol there would be issues.
So if you're not getting more UST than what are you getting?
aUST value is growing. Yup that is right you're not getting an APY in the form of new tokens but the value of the tokens you are holding is growing at the APY rate. So when it comes time to sell you will get more UST than you initially put in.
aUST accrues interest every 6.4 seconds (block time) and the rate is adjusted every epoch which I am guessing helps maintain the price if there are a lot of people buying in or selling.
The information can be located in the Anchor protocol official documentation which now that you know that you're not getting more tokens but your initial investment is growing at a controlled rate due to it being another token. It is time to dig deeper into what you can do with this token that is predominantly purchased with debt if you had of submitted bLuna.
Just so we are clear, if you decide to do something with aUST it will continue to grow in value earning you that APY so long as it remains within Anchor protocol. But you can now also purchase aUST off the many markets as people are able to trade it and that's not all that you can do.
Mirror Finance
Now that you have deposited UST into Anchor and have aUST it is time to head over too Mirror Finance which is a synthetics protocol that enables participants to issue synthetic assets which are pretty much blockchain versions of mainstream stocks but can also include other assets.
Mirror Finance version 2 update enabled the use of more than the traditional UST asset with participants not able to provide aUST, UST and Luna as collateral to borrow against. So yes, now you can take your loan for a second time and buy more assets on Mirror Finance.
Borrow with your borrowed funds
Once you head over to Mirror Finance you can click on the Borrow tab which will give you a list of a large variety of synthetic stocks currently available many of which only tradeable on market days based on US markets.
Here you can mint an asset through provided collateral but you need to be careful as you can be liquidated and doing so will see you lose the aUST and your Anchor APY.
Once you have provided your aUST as collateral you can head over to farm where you are provided with two opportunities longing or shorting the stock. All this means is that Longs are where usuers provided
ust as liquidity in various pools and receive a set amount of APY and alternatively one can short a stock which I believe means just holding it for a lower APY.
You need to be careful as any miscalculations here and getting it wrong could potentially have you lose the lot and no none wants to see that.
Once you move your aUST from Anchor Protocol it will no longer track your APY earnings so you'll need to go to aUST earnings calculator and log in. It will then show you how much your aUST savings have grown by while being used elsewhere.
Just be sure not to lose your aUST and get liquidated or you won't get your US
So there you have it! a way to further deepen you De-Fi positions and earn interest on top of your current loan through utilising Mirror Protocol which truly is taking the De-Fi world by storm.
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