The best passive income play on Terra

The best passive income play on Terra

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Jonathan
Jonathan

An editor at Coincrop


15 Apr 2022 | 5 min read
36,129 views

P

assive income has become well known for earning great returns on your crypto tokens, especially on DeFi. What you must be mindful of is some of the best strategies do not last long or depend on a token that has constant sell pressure, which in turn makes your profits go down in value.

The Terra Network has an innovation that we are now able to capitalise on within its ecosystem, this is without being exposed to impermanent loss or devaluation. 

In this guide:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

Anchor protocol

Anchor (ANC) Protocol is a savings, lending and borrowing platform that is built on the TerraUSD (UST) Blockchain. The saving element at the time of writing is offering 20% APR on its savings product, this is achieved by both lending out UST and by earning staking rewards from the deposited assets that users provide as collateral. 

What Anchor does is to incentivise borrowers with ANC token/s, this means borrowers are willing to borrow more. They then deposit the assets that earned the protocol UST on top of what the users must pay for borrowing.

Anchor protocol risks

    • Smart contract risk: DeFi currently has the biggest risks from hacking. However, Anchor has two main ways to protect you. Firstly, from Insuring your deposits, from providers such as InsureAce, Nexus Mutual and Bridge Mutual. And secondly, Auditing of the code which has recently been done by Cryptonics.

    • Treasury depletion and lack of borrowers: For a user on the earn side to get the 20% APR, there equally needs to be users on the borrow side willing to borrow. The risk here is if there’s a big discrepancy, the protocol has to go to its reserves in order to maintain the 20% APR.

    • Is UST depeg risk: This particular risk has been tested out many times as UST is an algorithmic stablecoin. Each time it has been depeged, it has regained the peg. However, you can insure against the depeg risk through Anchor, this insurance is provided by Unslashed.

White whale protocol

The White Whale is an application being built on Terra, it aims is to arbitrage opportunities to everyone in the ecosystem. What Arbitrage means the buying an asset in one market whilst simultaneously selling it in another to profit from the price difference.

In normal circumstances it is only the “whales” who get access to the best arbitrage opportunities and retail customers are cut out. With White Whale you can participate in these low-risk opportunities whilst it is also maintaining the health of the whole Terra ecosystem. The protocol’s mission is “to decentralize the enforcement of the UST peg”.

Summary

In the last year there have now become many ways to earn passive income from DeFi, but what you need to do is to differentiate your options by looking at what strategies can offer low risk and good rewards. With the UST Vault on White Whale offers a single asset deposit, that mitigates many of the risks you often get when providing liquidity. 


Jonathan

Jonathan

An editor at Coincrop
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Jonathan is a Crop Crop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.


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