A proposal to cut yield rates on the Terra-based Anchor Protocol (ANC) was overwhelmingly voted against by ANC token holders on Saturday. The cut was proposed by Polychain Capital and Arca Prop, seeking to cut rates by up to 50% to make the protocol more sustainable.
ANC currently offers returns of nearly 20% per annum on USDTerra (UST) deposits. The Polychain proposal aims to gradually reduce returns on higher deposit amounts, to 10% on deposits over UST 500,000.
Voting on the proposal closes on March 16. But so far, almost 72% of ANC token holders have voted, with 55% against the proposal.
Reaction to the proposal has also been largely negative on Twitter, with users speculating that the move would overcomplicate the code and possibly even break the platform.
Anchor Protocol Offers Market-Based Yields
Built by the makers of Terra, ANC currently offers depositors the highest stablecoin yield on the market at nearly 20%. In comparison, returns on the top stablecoins including Tether, USD Coin and Binance USD run as high as 12%.
While the relatively high yield has boosted deposits through February, it also raises sustainability questions, as total deposits are nearly four times higher than the total number of borrowers on ANC.
ANC finances this high return through interest payments from UST borrowers, as well as a return reserve. But this reserve has been dwindling in recent weeks, leading to more Capital increase efforts of the municipality.
ANC, LUNA holders still shocked
Even as ANC token holders voted against the proposed rate cut, prices of ANC and Terra’s native token LUNA reflected some uncertainty. LUNA, which can be used to bet on the protocol, fell 4.4% in the past 24 hours, moving further from the closely monitored level of $100, while ANC fell 11% to $3.42.
Both token prices had skyrocketed in the past month due to the increasing adoption of the Anchor Protocol. LUNA is now the largest DeFi token by market cap, having nearly doubled in value to $34.6 billion in the past 30 days.
ANC is also the fourth largest DeFi platform by total value ($15.4 billion), according to data from DeFi Llama.
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About the author
With over five years of experience in global financial markets, Ambar plans to leverage this knowledge for the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments could affect crypto markets and what that could mean for your bitcoin holdings. When he’s not scouring the internet for the latest news, you can watch him play video games or watch Seinfeld reruns. You can reach him at [email protected]
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