The long-awaited floating interest has finally arrived on Terra, thanks to the Anchor platform. According to reports, the current interest rate is 18 percent, with $209 million in reserves.
Advantages and disadvantages of floating interest
Lending and borrowing services were the most popular options in the cryptocurrency market, and notably in the Defi industry, because they are ideal for gaining short-term exposure to a particular asset or moving funds without having to cash out via exchanges.
While cryptocurrency traders and investors (borrowers) get immediate access to the assets they want, lenders can earn a consistent profit by lending their money. Interest, which can be both steady and floating, determines profits.
The ability of lenders to lock their funds at an above-average rate once the contract is exhausted is the fundamental benefit of floating interest.
The main disadvantage of excessive saturation is that it decreases interest.
We noticed the effect of floating interest with the newly implemented method, as it dropped from 19.5 percent to 18 percent after the contract’s reserves reached $209 million.
Outflows of $30 million were caused by the rate reduction. If a fund’s reserves are to be depleted, the rate will almost certainly rise to attract further liquidity.
The total value locked on the Achor platform, which provides the new solution, is currently about $20 billion UST, with a total deposit of $13 billion and total collateral of $5.6 billion.
Current statistics of Terra
TerraUSD (UST) is a stablecoin designed by Singapore’s Terraform Labs and hosted via the Terra network. TerraUSD is one of several Terra stablecoins that are linked to major currencies. (TerraKRW, which is pegged to the South Korean won, is another example.)
The Terra price is $84.22, up 5.86 percent in the last 24 hours. Terra’s market capitalization is now $61,260,673,783.36 USD, according to recent price action. Terra had a -1.30 percent change so far this year.
Instead of using fiat currency reserves, the coins are all algorithmically fixed to their own currencies. Terra’s governance token luna is used in the algorithm.
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Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/05/02/terra-introduces-floating-interest-lending-services-advantages-and-disadvantages/