Anchor Protocol coming to Polkadot (2 yields, 1 collateral)

Anchor Protocol coming to Polkadot (2 yields, 1 collateral)

Anchor Protocol coming to Polkadot (2 yields, 1 collateral)

Polkadot’s DeFi cornerstone Acala recently announced a partnership with Anchor Protocol to make the DeFi platform available on the Polkadot ecosystem.

The company is also working with the Wormhole cross-chain bridge to enable users to move assets between the Terra and Polkadot blockchains.


Two yields, one collateral

Although no timeline for the integration has been announced. Acala co-founder Bette Chen said only that it would happen “sooner than you expect in the next weeks and days.”

Karura, Acala’s EVM-compatible platform running on its Kusama “canary” network, will expand Anchor’s collateral options with the Liquid DOT (LDOT) and Liquid KSM (LKSM) tokens that are issued as virtual promissory notes when Polkadot (DOT) or Kusama (KSM) are staked.

Stakers will be able to access Anchor by transferring their LKSM and LDOT to Terra via Wormhole, providing them as collateral to borrow TerraUSD (UST) on Anchor and earning Anchor ANC incentives for borrowing. They can also deposit the UST on the “earn” side to earn an additional yield.

The announced partnership comes as Polkadot seeks to grow its DeFi adoption and Anchor expands to additional blockchains. The move is expected to further grow the decentralized stablecoin market, already estimated to be over $25 billion in minted value.


About the partners

Anchor Protocol, founded in March 2021 by Terraform Labs, is a lending and borrowing platform that provides high and practically “fixed” yields on stablecoin deposits.

According to Defi Llama, Anchor is currently the third-largest DeFi platform, behind only Curve and Lido, with approximately $17 billion in total value locked (TVL), and by far the largest on Terra. Lenders deposit UST and earn an APY close to 20%, while simultaneously benefiting from the relatively low volatility of a stablecoin pegged to the US dollar.

Wormhole is an interoperability protocol that currently connects eight blockchains, providing a generic environment where all connected chains can communicate freely with each other. In February, hackers exploited a vulnerability in its Solana code to make off with $329 million, although Wormhole was eventually able to restore all funds. A Wormhole spokesperson said their code has been aggressively audited by multiple parties, while a standing $10 million “bug bounty” encourages white-hat hackers to dig for any weak points.

Acala is an application-specific blockchain customized for DeFi applications and stablecoin utility. Since winning the first Polkadot slot auction in November 2021, the company has been extremely busy living up to its namesake, the ancient Buddhist deity known as a remover of obstacles.

In February, Acala launched Acala USD (aUSD), a decentralized stablecoin that’s over-collateralized and minted from a basket of cryptocurrencies to maintain its US dollar peg. Because aUSD is native to Polkadot and Kusama, it can be transferred to any parachain or dApp within the ecosystem with zero trust or bridge risk.

This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

Get insider crypto knowledge and product updates from the world’s leading crypto wallet
Sign me up