$$$ KPO and CZM $$$: DeFi - Terra (LUNA & UST) & Anchor Protocol (20% Interest)

Saturday, July 31, 2021

DeFi - Terra (LUNA & UST) & Anchor Protocol (20% Interest)

I have blogged about various networks/blockchains (e.g. Ethereum, BSC, Polygon, etc.) and Terra is another network and for simplicity, LUNA is the main/native token like how MATIC is for Polygon. Having said that, LUNA has another utility besides being the average Proof-of-Stake token. It can be burned to mint UST which is an algorithmic stablecoin (1 UST = US$1 although it is not backed by anything).

Anchor Protocol - A picture is worth a thousand words

I can continue to explain but The Babylonians has already written multiple articles in great detail and I do not believe I can do a better job. So if you are interested in finding out more, do check these out:

I knew about Terra and Anchor Protocol but dismissed it because the Aave + Curve strategy on Polygon which I blogged about previously gave a much higher yield (30-40%) and I was not comfortable with the idea of UST being an algorithmic stablecoins. I started exploring other alternatives when the yield dropped drastically at Aave and Curve. At one point in time, I was planning to move my Curve deposit in Polygon to Fantom for higher yield but did not follow through (fortunately!) because there wasn't sufficient liquidity for me to bridge over.

When I came across the possibility of doing delta-neutral farming on Mirror Protocol, I looked more in-depth at Terra and UST and I was sold! Delta-neutral simply means you earn/profit regardless if the underlying asset increases/decreases in price by owning and shorting the asset at the same time. Anyway, it looks/sounds like it is risk-free on the surface, but I decided not to implement/farm due to a huge risk of liquidation. If you are interested in how it can be done, you can refer to these resources:

Anyway, after trying out DeFi across different networks for a few months, yield farming becomes repetitive/boring and there are a lot of clones/copycat/scam farms. At the start, it was exciting chasing those ridiculous high yields but based on most of my experiences, the price of the farming token always start off high and drops gradually, the yield will drop and people will start dumping it and this vicious cycle will result in huge capital loss. Despite the high yield, it is actually quite hard to recover from the capital loss. 

On the other hand, Terra is really unique in the sense that everything is built around its stablecoin (UST) and that means it will increase the demand for UST which will increase the price of LUNA in the long term. Being an algorithmic stablecoin, the biggest risk is the death spiral/losing peg similar to TITAN but because it has such a high utility and is even cross chains/networks, it will always be arbitrage to maintain its peg. One can even buy insurance and get compensated if UST loses peg. Anyway, you can read this for more information - Why UST Is A Superior Stablecoin.

Our Terra Portfolio

Besides depositing UST to Anchor Protocol to earn ~20% interest, staking LUNA with the validators allow us to collect some fees/rewards but the most exciting part is the airdrops that will be given to LUNA stakers for both current and future projects.

In my opinion, buying and owning LUNA now is like buying and owning Ethereum back in 2016. Alright, maybe it is unlikely to become as big as Ethereum so how about buying and owning BNB back in 2019. 

With that, I will be moving most of my money in crypto into Terra (already did). I am planning to split the US$40k leverage into US$30k in UST earning 20% and US$10k in LUNA with monthly DCA and interest from the UST to purchase more LUNA.

The more I read and understand it, the more convinced I become. To the moon! 

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:
The safer approach using stablecoins
Risky approach but more hassle-free
Highest risk and you are on your own
- DeFi apps on Binance Smart Chain (BSC) such as PancakeSwap and PancakeBunny
- DeFi - Terra (LUNA) & Anchor Protocol (20% Interest)

If you are interested in the platform I am using, do sign up using our referral links for some bonus :)
BlockFi: Deposits US$100 or more into your BlockFi Interest Account (BIA), you will earn US$10 in BTC and we will earn US$10 in BTC too.
Celsius Network: Earn US$40 in BTC with your first transfer of US$400 or more and we will earn US$40 in BTC too.
CakeDeFi - Deposits US$50 or more into your CakeDeFi account, you will earn US$30 in DFI and we will earn US$10 in DFI too.
Gemini: We will both receive US$10 of bitcoin after you buy or sell US$100.

On a side note, Futu's moomoo app has made their sign-up bonus even more attractive (one free Apple share + one free Nio share with 5 trades + other benefits) and it has been extended to 2nd August 2021! Take a look at the latest benefits here.

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  1. Hello, fellow $LUNA-tic!
    - kevin

    1. Hahaha. Hi hi, didn't know you are one too!

  2. Hey KPO, thanks for sharing! Do you have a step-by-step post on how to do Anchor protocol in Singapore?

    1. Hi SteFen,

      Unfortunately, I do not. You will need a terra wallet first (either from the browser extension or mobile app). Once you have that, the lazy/fastest (not the most cost effective) is to buy UST using Transak in Anchor itself (not recommended).

      I have been wiring USD to binance which gets converted to BUSD and I will buy LUNA to transfer to my terra wallet. Next, swap the LUNA to UST at terraswap. Yet to explore other exchanges given the binance ban but I am aware that crypto.com and kucoin should be able to do the same.

    2. i did the dbs (wire transfer) -> gemini -> wrapped luna -> kucoin luna (erc20 wallet) -> kucoin luna (terra) withdrawal -> terra station (connected to my nano s ledger hardware wallet).

      no withdrawal fee <10 transaction on gemini
      kucoin withdrawal 0.1 luna (around $4 usd)

    3. How about this?
      Wire USD to Gemini -> Buy UST (using ActiveTrader) -> Withdraw UST(Ethereum Network) to MetaMask wallet -> Use Terra Bridge from Ethereum Network(connect MetaMask wallet) to Terra Network -> Terra Station

    4. Hi Jason,

      As much as possible, I will try to avoid the Ethereum network because of the high gas required. You can give it a try but I am definitely not going to do that. Either do what Dex proposed above or wire USD to FTX and convert to USDT and send to Kucoin.