Anchor, the flagship savings protocol of the Luna ecosystem (LUNA), has seen its reserves decrease by 35.7% in the last seven days, according to Terra.Engineer. Since the beginning of December, the amount of Terra USD Stablecoin (UST) held in the smart contract “terra1tmnqgvg567ypvsvk6rwsga3srp7e3lg6u0elp8” has decreased by more than 50%, leaving only $35.7 million.
As a savings protocol, users deposit their UST assets through their wallets and earn up to 20% returns as their capital is lent to borrowers, who pay interest on the loan amount. Borrowers must post collateral to ensure that the lender can recover their money in the event of default. Additionally, Anchor stakes the collateral it receives to generate rewards for depositors.
When there is a shortfall between interest income generated by borrowers, collateral staking, and yield charges paid to depositors, Anchor must draw on the aforementioned TerraUSD (UST) reserves to make up the difference. Last July, its creator, Terraform Labs, injected 70 million UST into the reserve protocol and its value remained relatively stable. But in the last 60 days, the total amount deposited has increased from $2.3 billion to $6.1 billion, while the total amount borrowed has only increased from $1.2 billion to $1.5 billion.
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