How to earn more 20% interest on deposits - Part 2
The power of DEFI is rapidly coming mainstream, here how you can take advantage
In my last post, I described how you can leverage the power of DEFI through a trusted website to earn 8-9% on your USD savings. This post is a description of one of my favourite DEFI protocols Anchor and how you start earning 20% a year whilst being insured.
Anchor is a savings protocol that leverages the Terra payments platform which is trying to power e-commerce transactions globally in a fast and cheap way. Terra is built on the Cosmos protocol, one of many competitors to Ethereum that offer a programmable blockchain for Defi and payments. It aims to be faster and cheaper than Ethereum and has been gaining a huge fan following.
Anchor offers a savings and lending product. Borrowers put up collateral in the form of coins. Against this, they can borrow 45% of the collateral value. If the loan to value (LTV) drops to 60%, the collateral is automatically sold to protect the lenders money.
When a lender gives collateral to Anchor they use these tokens to stake them and earn a return and they also earn a return from the borrower. These two sources of income are passed on to the lenders in the form of interest. We will talk more about lending in the next part.
Step by Step Guide to earning 20% interest rate
I am going to assume you have a way to buy cryptocurrency, if not there are plenty of places you can learn about that.
Add Terra Station to Chrome (link)
Create a Terra Wallet from within Terra station and remember to backup your Seed phrase. Use 1password and write it down securely and put it away somewhere safe. If you ever lose your computer you can always get your wallet back with the seed phrase
Go to an exchange to swap your cryptocurrency into UST. Kucoin seems to have the most liquidity so its the best bet here. I actually used OSL to go from fiat to USDC (Coinbase’s stablecoin), transferred that to Kucoin to buy UST (Terra’s stablecoin) and then moved that to my Terra wallet.
To move tokens to your Terra wallet, simply transfer them to your wallet address which is visible when you click your chrome extension Terra wallet. Remember whenever you send crypto to a new wallet, send a small amount first to see if it arrives.
Now you are ready to loan the money to Anchor. Go to Anchor and connect to the web app and connect your Terra Wallet on the top right and click the deposit button and that’s it!
There are two main risks when depositing money into Defi protocols. Risks of hacks and the stablecoin somehow breaking the USD peg making your money worth less. The great thing about Anchor is you can insure yourself against both events. At the top right of the Earn page click on “get insurance coverage” and go to Unslashed which is deceentralised insurance cover, where you can buy insurance against such an event. The insurance coverage costs 4.39% a year and moves with the supply of dollars for the insurance contract. The contract is priced in ETH so make sure you occasionally increase or decrease the cover depending on what ETH is doing.
In the next post I will talk about how you can borrow at a negative interest rate and juice up your returns to over 20%