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TerraUSD (UST) Staking Launched on Binance: Anchor Reserves Declining

 


On Wednesday, centralized cryptocurrency exchange Binance launched its new TerraUSD (UST) staking program . While Binance did not name the decentralized financial protocol behind it responsible for the staking rewards, Terra Luna ( LUNA ) co-founder Do Kwon explained that Terra's well-known Anchor protocol is behind the high returns. 



The Terra ( LUNA ) ecosystem is composed of the algorithmic stablecoin UST and the governance/balance token LUNA. The anchor protocol claims it works like a "crypto savings account" and allows users to deposit UST and earn up to 20 percent annual returns. The savings rate is funded by a combination of interest payments by borrowers on the UST loans and the staking proceeds from their collateral.


At the time of writing, there is an imbalance between borrowers and lenders. With deposits worth US$12.4 billion relying on income generated from loans worth just US$3.47 billion . In that case, Anchor must draw on its reserves to pay out the promised annual return. According to data from the unofficial tracking resource Terra.engineer, Anchor holds less than 340 million UST in its reserves. This compares to about 450 million UST last month. Despite the drop in reserves, the Terra development team is counting on injecting more reserve capital and revenue-generating methods to keep the protocol going.nbsp]


Data from the Luna Foundation Guard (LFG) official Bitcoin ( BTC ) address shows that the company bought another 5,040 BTC worth $222 million. This brings the total inventory to 35,768 BTC ($1.577 billion). The LFG was established in January to promote the Terra ecosystem and improve the sustainability of its stablecoins. Do Kwon has previously stated that he wants to build a decentralized FX reserve for UST, using both LUNA and BTC. The LFG plans to increase its BTC reserves to $10 billion and make more purchases thereafter depending on how much UST is minted. 


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