Introduction
Anchor is a decentralized finance (DeFi) protocol that provides a savings account interface where users can deposit UST (Terra USD) and earn stable yield. With an average interest rate of ~20%, Anchor blows away traditional savings accounts by a mile.
Anchor's Stable Yield
But how is Anchor able to maintain such a high stable interest yield for depositors? According to the whitepaper, Anchor is a money market that is defined by deposits of bonded assets (bAssets, eg. bLUNA) that earns interest from borrowers. Borrowers put down bAssets as collateral to borrow UST from the lenders' pool. The staking rewards earned by bAssets are collected by the protocol and paid to lenders as interest accrued. Therefore, the interest rate is determined algorithmically as a function of the amount of lend UST that has been borrowed.
Borrowers' Incentives
While a sound fiscal policy is essential, it is not enough to drive widespread adoption of the Anchor money market. To incentivize borrowers to take on risks to provide liquidity to the market, borrowers receive rewards in ANC, Anchor's governance token. ANC rewards are set to exceed the cost of borrowing, therefore attracting a lot of borrowers.
Ecosystem Breakdown
The core of Anchor is like a lever, with the protocol at the pivot, lenders and borrowers are at the opposite sides. Either side is essential to maintaining the stability and liquidity of the market. Like every financial market, the rules of demand and supply applies to Anchor.
Lending on Anchor
The supply end of the market is characterized by lenders supplying UST to the lending pool. Lending on Anchor using the web interface involves a few steps. Before you access Anchor, you have to have a Terra Station Wallet, and some UST to be deposited.
The first step is to visit the Anchor earn page, where a dashboard on everything about lending is presented.
Next, click on Deposit to pop up the modal to begin the transaction flow. Enter the amount of UST you want to lend and click on Proceed.
At this point, the Terra Station wallet will request your password to confirm the deposit.
After successful deposit, you should see the deposit amount reflect on your dashboard.
Anchor Statistics
The success of every money market depends on how widely it is adopted. Adoption is also an indicator of the market's underlying utility because transaction volumes will tell whether there is enough supply and demand (liquidity) to make and maintain a market. Without liquidity, a market becomes stale and may lead to funds getting locked up.
The chart below shows the daily count of new users inflow into the Anchor protocol. 
Source: New Anchor Users
New users are users that have their first recorded transaction against the Anchor protocol. We can see that new users to Anchor range from 100 - 500 daily.
The exhibit below shows the volume of bLUNA being locked up as collateral on a daily basis on Anchor.
Source: Anchor Daily Collateral Deposits
Over the past 14 days, we can see that collateral deposits peaked at 46.2 million bLUNA on July 23, 2021. Two days later, collateral deposits plunged to the lowest troughs under the period of assessment to 16.1 million bLUNA. However, deposits bounced back on July 26, 2021. Collateral deposits are expected to rise steadily amidst peaks and troughs.
The next graph below presents a summary of the frequency of collateral deposits.
Source: Anchor Deposit Count
We can infer from the graph that Anchor is getting consistent traction in terms of collateral deposits with an average daily count of 2,000.
Findings & Conclusion
We have analysed Anchor, a decentralized savings protocol that lives atop the Terra blockchain. Anchor's main proposition is 20% yield on lending supply, and ANC rewards for borrowers which exceed costs of borrowing. Anchor then pays lenders with staking rewards generated from bAssets provided by borrowers.
We also demonstrated how to access savings on Anchor using the Terra Station wallet.
Usage statistics of the protocol showed that, an average of about 200 new accounts use the protocol daily. The protocol sees an average collateral deposit of 15,000 UST. Combined with a daily average deposit count of 2,000, we can project steady inflow of 30,000,000 UST in collateral deposits every day. This constant stream of deposits should be enough to generate rewards to pay lenders' 20% interest rate.
We can conclude that Anchor's operations and fiscal policies are generally sound and the market is expected to experience steady growth in the months ahead.
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