Luna Foundation Guard (LFG) is investing around 450 million TerraUSD (UST) in the revenue reserves of the DeFi protocol Anchor Protocol (ANC).
On Feb. 10, Luna Foundation Guard (LFG) announced it would add $450 million to the revenue reserves of the Terra DeFi protocol, Anchor Protocol.
Terra creator Do Kwon's foundation is helping the DeFi lending protocol maintain its comparatively high 20 percent yield on stablecoin UST for the rest of 2022 — but why is it doing it?
Anchor Protocol is at the heart of the Terra DeFi ecosystem as it promises investors a comparatively safe return on their US dollars. At Aave, for example, investors only get 5-10% on deposited stablecoins, while at Anchor Protocol they've been getting a steady 20% return for over a year. As a result, Anchor Protocol has become by far the most important DeFi protocol in the Terra ecosystem and now manages almost $10 billion worth of UST. But the revenue reserves needed to ensure UST's 20 percent annual return have fallen more than 80 percent in recent months due to a lack of borrowing. The return of 20 percent could not have been guaranteed much longer and would have fallen to 13-15 percent .
This is exactly why Luna Foundation Guard has now intervened.
The temporary cash injection of UST 450 million is intended to give Anchor Protocol more time to develop a sustainable economic model. At the current pace of development, the cash injection should help the protocol make ends meet for almost nine months.
The DeFi protocol is now planning to expand its service to other blockchains, including Avalanche, Solana, and Atom, to increase its revenue.
In a governance discussion , an employee at Hashed, a venture capital fund close to Terra, commented:
We believe that sufficient revenue reserve ensures UST's growth and benefits all stakeholders. The goal is to ensure that Anchor achieves mass adoption while essentially “remaining decentralized and self-sustaining
Terra Community Invests $40M to Boost DeFi Adoption
Just a few months ago, Crypto.com bought the naming rights to the Lakers Stadium in LA for marketing purposes . Terra is now following suit and has signed a five-year sponsorship deal with the Washington Nationals baseball team.
The first steps towards this agreement began in January. Do Kwon, co-founder of Terraform Labs, the company behind the Terra Blockchain, announced at the time that funds would be raised for a partnership with a yet-to-be-named professional sports franchise.
In line with Kwon's original proposal, around $40 million will be invested in a deal with the Washington Nationals.
In addition, as part of the agreement with various strategies, the adoption of DeFi on Terra is to be promoted. For example, the two partners plan to be able to pay with UST at the baseball team's exclusive Nationals Park Club .
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