Decrypting DeFi is Decrypt’s DeFi email newsletter. (art: Grant Kempster)

Maybe you’ve already heard of Anchor Protocol, Terra’s most popular DeFi app. You may have even decided to deposit your bag of idle stablecoins and rake in that sweet 19.46% “stable” yield. Or, like many others, you’ve never heard of Anchor (and now you’re too afraid to ask what it is).

Terra has become pivotal to the Terra ecosystem (specifically UST stablecoin). So, first things first: What is it?

Anchor, Terra’s most popular project, is basically a high-interest savings account for TerraUSD (UST) stablecoins, the crypto market’s third-largest stablecoin by market cap. You can earn a steady rate of 19.46% for deposits; borrowing assets costs a variable rate. Anchor also has a native governance token, called ANC, that lets users participate in various governance proposals and votes.  

According to data pulled from DeFi Llama, Anchor holds $16.16 billion in total value locked (TVL). Though Anchor has gone multi-chain by adding Avalanche, activity on that chain represents just $152.03 million of the total sum.

In other words, just about everything Anchor-related is happening on Terra. Indeed, with roughly $16 billion in value on Terra’s Anchor, the project constitutes over half of all DeFi activity for the Terra ecosystem. Across all chains, Anchor is also the DeFi sector’s third-largest app, after the Ethereum staking platform Lido and the stablecoin exchange Curve.

Anchor’s success has critical implications for the ecosystem’s UST stablecoin, too.

That’s because you…

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