Thoughts on Anchor and UST Peg Coverage to Always Sleep Well

Risk Mitigation has arrived!

Let’s quickly recap how the protocol works to narrow down the security concerns. In a nutshell: Anchor promises a stable yield of 20% APY. To accomplish that, it leverages collateral assets using the PoS mechanism. Participants that provide PoS-assets are entitled to borrow against their collateral in UST for an interest. Thus, the UST arrives from everybody that is lending UST to the protocol to earn 20%.

Anchor Protocol Coverage | Nexus Mutual

You can get a smart contract cover for Anchor Protocol on Nexus Mutual. Nexus is a decentralized insurance protocol on Ethereum. The protocol participants share the risk as a community.

Nexus Mutual Claim Process from Nexus WhitePaper

Conditions | Nexus Mutual

Of course, as an insurant party, you want to know the costs. So how much of the 20% APY from Anchor do you want to give away? Nexus defines the cover price by the following inputs: Cover amount, cover period, risk costs, and a margin (fixed on 30% to cover rewards). If there is enough capacity, defined by the value staked in the pool, you can choose three cover periods. It starts with 30 days, up to 90 and 365 days. After that, you pay the cover price in either ETH, DAI, or Nexus Mutual Tokens (NXM). Please find the formula below:³

Walk-through | Nexus Mutual

As outlined above, you have to become a member first to get access to the Anchor coverage. For starters, we are on the Ethereum blockchain. Thus, you can choose to connect a wallet like MetaMask, Ledger, or using WalletConnect. So, yes, time to pay some ETH-gas fee.

  1. Decide upon your cover amount, currency (ETH/ DAI), and cover period.
  2. Decide in which currency to pay the fee and accept the terms and conditions
  3. Generate a quote and sign the transaction on your wallet.
Step-by-Step to get Nexus Mutual Coverage

UST Peg Coverage | Unslashed

Unslashed covers the second part of the risk with their UST peg coverage. Like Nexus, Unshlashed is also a decentralized protocol that relies on the liquidity of Capital Suppliers to cover a plethora of crypto-asset risks. The UnslashedDAO runs the protocol on the Ethereum blockchain.⁵

Unslashed Finance Ecosystem⁷

Conditions and Deep Dive on the UST Cover | Unslashed

So, what is the cost to sleep well with all my UST on Anchor, mister?

Walk-through | Unslashed

Let´s have a look on how to secure your coverage. Before we start, get some Ethereum on an ETH wallet. Yes, again, time for some gas fee. Note: Unslashed supports only MetaMask at the moment.

  1. Add the amount of cover in Ethereum.
  2. Get the coverage providing the “Security Deposit” with “Add cover”.
  3. Receive the insurance token
Step-by-Step to get Unslashed Coverage

Final thoughts

So, what to take from this? I think this is a step in the right direction. As a fan of decentralized applications, I am amazed by the concepts of both protocols.

  • How easily will I be able to claim in case of an incident?
  • How will the liquidity develop on those protocols?
  • Do I want to be dependent on a volatile asset, such as ETH?

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danku_r

danku_r

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#sport & #blockchain enthusiast. #generationY and #europe as my roots. #techsavvy by default. Twitter: @danku_r. YouTube: danku_r