Anchor protocol, one of the largest decentralized finance (DeFi) protocols on the Terra network, is limiting its functionality. The latest report has revealed that users of the protocol have passed a proposal that limits the functionality of the network to prevent further attacks in the future.
The recent vote by the protocol users comes after the crash of the Terra protocol in early May. Anchor, as a leading protocol on the Terra chain, was affected by this crash, and this affected users who were using the protocol to earn additional income.
Anchor protocol halts earning and borrowing
The latest report showed that a proposal had been tabled that eliminates some of the functions of the Anchor protocol. Some of the operations halted under this new proposal include earning and borrowing.
The passing of the proposal maintained some of the protocol’s basic operations, such as allowing users to withdraw funds or deposit USTC to earn aUST. The limited functionality of the protocol will ensure that while the network is still active, there will be very limited chances where an attack can be conducted.
The proposal also reveals that deposits will still be permitted on the protocol without charging any interest. The deposits will support the Mirror protocol, ensuring that those “using aUST as collateral to obtain aUST when necessary to prevent margin calls. The details revealed by the protocol show that 23.11% of the users had passed the new proposal.
“Anchor has been a mainstay on Terra from the beginning & many in the community want it to live on. The decisions around its future are being seriously debated in the community, so make sure your voice is heard,” the Terra team added.
Issues with Anchor protocol under Do Kwon
The state of the Anchor protocol was largely affected by the collapse of the Terra protocol last month. The epic crash of Terra slumped the decentralized finance (DeFi) sector, and the greatest blow was suffered by protocols running on the Terra chain.
The Anchor protocol was the backbone of the old Terra blockchain, now known as Terra Classic. The protocol played an integral role in the network’s success because of the 20% interest rate. The interest rate attracted many investors that staked tokens on the protocol expecting to generate generous returns.
A recent report by the JTBC said that the initial interest rate designed by the developers of the ecosystem was 3.6%. However, Do Kwon, the co-founder of Terraform Labs, changed the interest rate and hiked it to more than 20% a short while before the project launched.
Like all the crypto apps associated with the Terra chain, Anchor has lost immense value. Over the past two weeks, the protocol has lost more than half of its value. The losses have continued despite Do Kwon releasing a revival plan involving the creation of a new Terra Luna blockchain that went live on May 28.
The crypto community has reacted to Anchor’s developments and the recently passed proposal by the community. The majority of the crypto community has reacted to the news and opined that Anchor cannot be successful without integrating a new stablecoin.
Other community members have also called out the Terra protocol for ignoring the community’s needs amid the Terra crash. UST holders who had staked on the Anchor protocol suffered immense losses because they could not withdraw their tokens despite depegging from $1.
“You ignored the community when you ignored LUNC because everyone is stuck here, they lost everything from here,” one user said.
To learn more visit our Investing in Anchor Protocol guide.
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