Holding ETH While Farming UST on Anchor Protocol

So you want to keep your exposure to ETH as an asset but Anchor protocol’s 19.5% APY is too hard to pass up? Thankfully you can have the best of both worlds!

To start, let’s assume you have some ETH in your Metamask. The first thing you need to do is go to Lido to stake your ETH, connect your wallet, enter the amount you wish to stake, and approve the transaction. Here’s where you get hit with your first ETH gas fee.

Now you have stETH in your Metamask! If it’s not showing up, be sure to “add token” and search for stETH, it should pop up. But how do you get your 5% APY? Interest accrues by the number of stETH you have in your wallet steadily increasing at a rate of 5%.

If you want out, since your staked ETH is now locked up in ETH2 and can’t be traded, you have to go to an exchange to trade 1 stETH for 1 ETH. This is your way of cashing out. You can trade the two tokens at a liquidity pool on an exchange like Curve Finance (https://curve.fi/steth). But if you want to keep the yield farm train rolling follow along.

Next we want to bond our ETH to the Terra protocol. But we’re first going to need a Terra wallet. When install your Terra wallet, be sure to add the sETH token. After creating your Terra wallet, copy your wallet address so we can work on bridging our stETH over to Terra as bETH via this bridge here.

Take note of two numbers here: the price to convert to bETH (unlock gas cost) and the price to convert back (converting gas cost). These variables, along with the ETH gas fee (gas_e) are what’s going to determine if this investment makes sense in the end. There’s also another transaction fee you have to pay to enable anchor to spend your stETH, so that’s another gas fee you’re paying on ETH. This bridge transaction might take around 10 minutes, so be patient.

You’re also going to need to buy UST to pay for transaction fees on Luna, so grab some by exchanging ethereum for Luna over at matcha.xyz (it finds the best price on all the decentralized exchanges). Once you buy that, bridge your “wrapped UST” (UST on Ethereum) to the Terra chain here. Note: this will incur another transaction fee on ethereum (rip).

Finally, go to Anchor protocol, and deposit your bETH as collateral.

Finally, the moment of truth: go to the top of Anchor protocol and click borrow. This will cost you another Terra gas fee. Note: you’re over-collateralizing this loan. This is because they can’t chase you down and force you to repay like banks can do IRL. Anchor covers themselves by forcing a liquidation (i.e. they take you’re bETH) if ETH drops too low or if you don’t repay. The nice part about Anchor is they show you the price ETH has to drop to for the loan to get called, in this case $2,257.57.