Terra-based Anchor Protocol Will Cut Its UST Yield From 19.5% To 4%?

Terra-based Anchor Protocol Will Cut Its UST Yield From 19.5% To 4%?

Contributors to the Terra-based Anchor Protocol have proposed reducing the yield on UST deposits from 19.5% to 4% in order to make the protocol’s yield reserves more sustainable.

The community is currently voting on the governance plan, which comes at a time when the UST stablecoin has been battling to maintain parity with the US dollar. The algorithmic stablecoin is presently selling at around $0.50, less than half of its stated worth.

Users have made massive withdrawals from Anchor because to the UST dollar peg problem. Anchor’s UST deposits have dropped from 14 billion UST to roughly 2.5 billion UST since last Friday.

Anchor’s activities rely on UST, and the falling peg is a key source of concern. The proposal asks for a dramatic reduction in the high yield given on UST to mitigate some of the negative consequences of the depeg.

Terra contributor Daniel Hong submitted the “emergency proposal” on Anchor’s governance forum on Thursday. He said in it that “a depegged UST can no longer sustain 18% [to 20 %] APY.” Instead, he suggested Anchor change its interest strategy to safeguard its yield reserves from depletion.

The voting will close on May 18. If the proposal is approved, Anchor will impose the planned 4% rate on all UST deposits. It will not, however, have a set yield. Rates will vary between 3.5% and 5.5% depending on demand for the service and the quantity of yield reserves.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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