While I wait for Bitcoin to get it's mojo back, I've been spending most of my time in DeFi land breaking off an income generating strategy for my portfolio. One project that's really captured me is Terra - here's why:
- You may remember that I'm super bullish on the growth of stable coins, but obviously buying stable coins in hopes that they 100x in value isn't a very good strategy ~ LOL. Instead, I've been looking for ways to profit on their explosive growth and usage.
- One favorite strategy I've found is Terra, a blockchain ecosystem designed with stable coins at its core. To mint Terra stable coins, you burn their native token LUNA, to burn Terra stable coins you mint LUNA. Terra is earth, Luna is moon, they keep each other balanced. It's an elegant solution and easy to understand.
- All the transaction fees generated by the system flow to users who stake LUNA. As more Terra stable coins are minted, more LUNA gets burned thus increasing LUNA's price.
- UST is the primary Terra stable coin pegged to the US dollar, but they also have stable coins for other major countries like Canada (CAT), Australia (AUT), Japan (JPT) and more... This global expansion strategy alone is something other stable coin projects should take notice of.
- There still isn't a "killer" algorithmic stable coin. I always thought it would be DAI, but DAI can only be minted by borrowing against other crypto assets so can only grow as large as demand for loans. Also DAI, is now +55% backed by USDC, a fiat backed coin.
- I love Terra's plan and focus on creating value for LUNA stakehodlers by driving demand for their stable coins (which lowers LUNA's supply) and increasing transaction volume (which increases earnings for LUNA stakers). They're buidling and fudning unique apps you don't see on other blockchains and success of early projects is impressive.
- Chai creates demand for Terra's KRT stable coin by offering a Korean debit card build on Terra. It currently has 70k active daily users doing over $2B of KRT transaction volume per day.
- Mirror creates demand for Terra stable coins by allowing people outside the US to invest in popular stocks like NFLX, AMZN, AAPL, TSLA, etc. and it has impressive early stats like $1B of UST locked in the protocol and is doing $100M in 24hr trading volume (on a good day).
- PayWithTerra creates demand for Terra stable coins by allowing eCommerec websites to accept Terra stable coin payments. Sort of like Stripe or PayPal but built on Terra.
- Anchor creates demand for Terra stable coins by offering a "fixed" savings account offering ~20% yield on Terra's UST stable coin. And Orion bridges Anchor to enable ETH stable coin deposits which are converted into Terra stable coins earning ~15%.
- TerraSwap is their primary DEX which is also built into their Terra Station wallet which works a lot like MetaMask.
- Ozone Insurance will allow you to insure your assets within the Terra ecosystem. It's still in its early stages but will be fully automated unlike other cover products in the DeFi space.
- Tons more projects are in the works and many of them will be airdropping tokens to people who stake LUNA.
- I've used Terra almost every day for over a month now, and the simplicity, speeds and most importantly the yields have been fantastic.
- I hodl a ton of UST stable coins in Anchor. The 20% "fixed" rate is some of the highest stable coin yields of any strategy out there. And it's freakishly easy to do. Just convert stable coins like USDC to UST (I use Curve) and deposit into Anchor. Done. Fixed is quotes, because unfortunately the rate lost its peg when the market "crashed" on May 23rd. We're back to 19.5% now as I type. The lowest it fell was ~16% which is still more than double almost everything else out there.
- Half of my LUNA I bond in Anchor to borrow UST against it. This is a more advanced strategy, but the yields are excellent. Anchor is offering huge incentives for borrowing to help bootstrap the network. Today it costs 15.83% to borrow UST against your LUNA, but the ANC rewards equate to 198.5% meaning they're paying you 182.67% to borrow UST. And the UST I borrow, I just stick in Anchor to earn an additional 20% :) The max you can borrow is 50%, so I keep my loan to value ratio at ~30% to play it extra safe. That means if you had 10k UST worth of LUNA you could borrow 3k UST for safely implementing this strategy. The math would be:
- 3,000*1.8267=5,480.1 in ANC for borrowing
- 3,000*0.2=600 in UST from Anchor Earn
- 5,480.1+600=6080.1/10,000=60.8% overall yield
- The other half of my LUNA I stake directly through the Terra Station wallet to help secure the network which earns network fees in the form of LUNA and stable coins currently yielding ~14%. I also collect weekly airdrops from Anchor and Mirror currently yielding an additional ~7% and ~8.66% respectively bringing staking to a ~30% APY with lots more airdrops on deck which will push that even higher.
If this all sounds interesting to you, I highly recommend this podcast produced by ARK Invest (yeah, Cathie Wood's firm). They do a detailed breakdown of Terra in the first half and interview Terra's founder, Do Kwan, in the second half.
For a shorter and less technical interview with Do Kwan, checkout Kevin Rose's recent podcast interview.
Lastly, when you'r ready to dip your tow into using Terra/Anchor, I wrote this guide to getting started with Anchor.
To the moon 🚀 — @GΞR฿Z Founder & Creator @ BitLift
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I'm not very political and I have no idea what the geopolitical ramifications of all this are. But El Salvador making Bitcoin legal tender, gifting $30 worth of BTC to each citizen and teaching them how to use it is fucking awesome. This is the type of thing Bitcoiners have been working towards for the better part of a decade. Hopefully it's for all for the right reasons.