Anchor protocol explain in under 2 minutes

So Anchor protocol is a lending platform. You have 2 main general functions.

1. Deposit your UST and get rewards.

2.Deposit collateral and borrow UST against it.

So let’s break it down. First of all if you don’t know UST is a stablecoin, that Pegged to the US dollar. On the lenders side when you deposit UST, the Protocol is putting it into a pool, from this pool the protocol provides the UST to the borrowers. In return of providing funds to the protocol, the lender get crypto rewards. We’ll get to that in a moment.

On the borrowers side like any other crypto lending platforms, you have to provide collateral to be able to lend crypto. If you don’t know how the borrowing and lending process is working in crypto that's a story for another day. To borrow UST from Anchor protocol you have to provide crypto collateral, specifically bETH or bLUNA. bETH and bLUNA is basically staked Ether and Staked LUNA meaning that they are interested bearing tokens, Interest bearing token are a tokens that accumulating interest with time. When user provide bETH or bLUNA to borrow against them UST he his paying interest on that UST like any other loan. This in interest that the borrowers pay for their loan is going to the lenders but it’s not ending there the interest that the bETH and bLUNA is creating is also going to the lenders.

So let’s summarize, when you deposit UST to Anchor Protocol, on the other side someone is borrowing this UST and you get payed from 2 sources.

1. The interest he is paying for the loan
2. The interest that the bETH or bLUNA generating.

Now I will be honest with you there is more complicated processes to the Anchor Protocol system.

like how they’re staking Ether and how they and look up period for Luna, etc.

but thats the bottom line of how this ecosystem works. And you get this crazy APY.