In a tweet posted early Friday morning, Do Kwon, founder of Terraform Labs, an organization that develops a stable ecosystem for Terra Luna (LUNA) and Terra USD (UST), announced the provision of 450 million UST ($ 450 million) to Protocol Anchor reserves. The proposal was approved by the Moon Foundation’s guards on February 10. Anchor serves as the primary savings protocol for the Terra ecosystem, offering users up to 20% per annum on deposits in above-ground tanks disbursed by borrowers.

Protocol reserves recently fell to $ 6.56 million due to insufficient demand for loans to keep pace with the influx of lenders. When such a failure occurs, the protocol must use its reserves to repay the promised income to the creditors. From early December to late January, Anchor’s reserves fell by about $ 35 million.

At the time of publication, this gap continued to widen. Over the past few weeks, the total amount deposited has increased by around $ 480 million, and the loan amount has increased by around $ 180 million. But since Terra also provides income guarantees to borrowers, in addition to paying interest to compensate lenders, the two figures do not need to offset to achieve a balance.

Developer Terra acknowledged that such crops may not be sustainable in the short term. To solve this problem in the long run, Terraform Labs plans to prepare to use synthesized liquid derivatives as collateral in Anchor v2. Liquid accumulation means that users “double” their cryptocurrencies, ie they put their cryptocurrencies in one pool and use their stacked assets to earn in the pool of liquidity providers. In theory, users’ security increases over time when they borrow money, which causes more borrowers to enter into an anchor protocol to rebalance.

Source: CoinTelegraph