Anchor Beyond Trading: Not Your Average Stablecoin

In Insights

Anchor (ANCT) is a stablecoin with a unique proposition: a token that uses the global economy for price stability and protection against market volatility. Liquid customers can trade ANCT against BTC and USD, giving traders a powerful tool to preserve profits. But what’s the story behind ANCT and how does it work? We’ll dive deep in this blog.

How Anchor maintains long-term stability

Anchor achieves and maintains stability through a two-token model and its peg to the MMU, a non-flationary financial index created by an algorithm that tracks a series of macroeconomic indicators to provide the most accurate, available measure of real value that exists in the world today.

Distinguishing itself from other stablecoins, Anchor is not just pegged to a basket of fiat currencies, which would suffer from the same inflation as their traditional fiat counterparts, but instead Anchor is based on a measure indexing global economic growth.

Historical data shows that world economic growth has increased at an average rate of 2.5% per year over the past 25 years despite market fluctuations within individual countries. The top ten most-traded fiat currencies, however, have significantly depreciated in value over the same period (beginning in 1994), with the US dollar losing more than 55% of its purchasing power, the Euro losing 44% and the British Pound 51%.

Anchor’s MMU takes into account the GDP of 190 countries and is further weighted by a dynamic basket of currencies from 10 of the strongest economies, adjusting the basket every year to ensure the top 10 are always represented. The expression of the MMU is updated daily using data inputs from internationally trusted sources such as IMF, Bloomberg, and Knoema.

Even in the midst of a global recession, Anchor will maintain its value peg, providing a more reliable measure of value than any single fiat currency.

Furthermore, a two-token model enables Anchor’s ecosystem to automatically adjust for inflation and deflation:

  • When the ANCT’s value rises above the MMU (inflation), the Anchor system enters into a Contraction Phase in which it incentivizes users to purchase Dock tokens (DOCT), Anchor’s in-ecosystem utility tokens, at a discounted rate.
  • When ANCT dips below the MMU (deflation), Anchor enters into an expansion phase in which DOCT are automatically converted into ANCT in order of token seniority, so the longest-held DOCT will be converted first. If equilibrium is still not met, ANCT will be airdropped to holders until its price returns to the value of the MMU.

Anchor: not just for trading

Anchor’s potential applications extend far beyond the immediate provisions of liquidity and a hedge against market volatility. People sending remittances, freelance workers, international businesses and retirees could all benefit from adopting Anchor as a means of payment and store of value.

For traders

The most obvious use case for Anchor is as a hedge against volatility for crypto traders. As an easy-to-trade stablecoin that is available on Liquid, Anchor can be used immediately by Bitcoin holders to safeguard their investments until the best moment to sell arrives.

Remittances

For many people who work abroad, every penny that can be sent back home to their families counts. Unfortunately, sending remittances can be quite costly, averaging 6.84% of the amount being sent. Anchor provides an easier, more cost-efficient way of sending remittances without fear of the currency losing value over the period it takes to be received before being easily exchanged into fiat currency on Liquid.

Freelance economy

The problem for many freelance workers is that every time they accept a gig through sites like Upwork, Fiverr or Freelancer, a fee is taken out of their payment by the platform. The freelance economy would be dramatically improved by enabling payments using Anchor’s stablecoin, as Anchor will not lose value over time and can be easily converted into fiat currencies.

International business payments

Businesseswith international relationships can benefit from making payments in Anchor. Constantly converting to different national currencies in order to pay employees or partners in other countries is inefficient. By making payments using Anchor, counterparties are provided with a much greater range of choices in transferring the value of the settlement into a specific currency.

Retiree savings

Retirees and pensioners depend on being able to predict how much money they will have each month. The natural trajectory of inflation inherent to fiat currencies can make long-term preparation difficult. Anchor offers a solution with a currency that retains value.

A safe harbor for holdings

Other applications for Anchor’s stablecoin include college savings, monthly payments and day-to-day medium of exchange as a currency. Anchor brings stability to an uncertain economy that has been historically driven by fiat currencies prone to inflation.

Trade ANCT

This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.

WRITTEN BY

Olya Moskalenko

CCO of Anchor