Reflection Tokens Give Safer Stablecoin APY than Terra Luna – Here’s How

The most popular DeFi project on the old Terra Luna network was – by far – the Anchor Protocol.

Unless your WiFi has been down since April, you'll know what happened to it.

There was more than $14 billion deposited in Anchor Protocol before the Terra Luna collapse. The deposits into Anchor made up over 75% of the total TerraUSD market cap.

And it's easy to see why – Anchor offered an APY of 19-20%.

But within the space of a few days, the market cap of the central Terra Luna stablecoin collapsed from $18.6 billion to under $1 billion.

A Terra Luna stablecoin portfolio on Anchor of $1,000 would have turned into $20 by the end of May in 2022.

In Terra Luna's wake, the DeFi protocols offering a fixed APY in the Celsius and Voyager platforms also froze withdrawals or went bankrupt.

Below, we'll look at the problems of Anchor Protocol and why reflection tokens like EverGrow offer a safer mechanism for stablecoin passive income.

Why Anchor Protocol was unsustainable

The problems are Anchor Protocol was twofold:

1. The Terra Luna stablecoin (TerraUSD) was an algorithmic stablecoin at risk of depegging from its $1 price

2. The high 20% APY on Anchor Protocol was unsustainable

The Terra Luna collapse practically ruined the hopes of another algorithmic stablecoin to survive. Stablecoins that still set their $1 price based on incentivised arbitrage – rather than real dollar assets – have all backed up their peg with tangible assets since May.

Assuming you're not going to bet on another algorithmic stablecoin for the time being, we move onto the APY.

Such a high 20% APY was incredibly attractive to crypto investors – especially when traditionally banks often offer no more than 0.7% APY interest on deposits in high-yield savings accounts.

But the problem was financing the APY. The Anchor Protocol in the Terra Luna ecosystem financed TerraUSD payouts through loan repayments and a yield reserve.

But at the height of Anchor Protocol deposits ($14 billion) the total borrowed amount was only $3 billion. There was no way this total borrow could finance 20% APY – and the yield reserve wouldn't last forever.

In March, Terra Luna investors voted to reduce the unsustainable APY down to 16%.

But this still wasn't enough.

There was no way Anchor Protocol could remain sustainable with deposits far outweighing borrowing. While other protocols like Celsius found a different mechanisms to finance fixed APY payments, investors have become wary of any DeFi protocol offering high-interest yields on stablecoin deposits.

How do reflection tokens work?

Reflection tokens can offer stablecoin income – but the mechanism is completely different.

Below, we'll look at the example of EverGrow.

Like all reflection tokens, EverGrow charges a transaction tax. Here's how it works:

• Anytime you buy or sell EverGrow you pay a transaction tax of 14%
• This 14% tax is split into 8% rewards, 2% for liquidity, 2% for buyback and burn and 2% for marketing and development
• Every 6 hours the rewards are deposited into all existing wallets holding EverGrow

Unlike other reflection tokens, EverGrow pays rewards in the BUSD stablecoin.

Since launching in September last year EverGrow has paid out more than $37.5 million in BUSD – however since the BUSD rewards depend on trading volume, there is no fixed APY promise on your investment.

How do I calculate EverGrow BUSD rewards?

The EverGrow website comes with an unofficial EverGrow rewards calculator. It can help to get a grasp on expected stablecoin income.

Let's take a look using an example of a $2,500 investment.

After paying the 14% transaction tax, your $2,150 would buy you 13.4 billion $EGC (at a price of $0.00000016).

With the daily trading volume at an average of $200,000 in August 2022, your BUSD rewards are expected to be just $177 in a year.

That's an APY of 8.2%. Not bad – but we're in a bear market in August 2022.

The average daily trading volume in EverGrow between October last year to the end of July was $3,618,179. If you plug that figure into the daily trading volume you can expect annual BUSD rewards of $3,195.

That's an APY of 149%. Even better – it's an APY you earn without selling any of your underlying EverGrow investment.

While not having a fixed APY promise can make investing complex, some simple math can make for some exciting prospects with EverGrow.

Where do I buy EverGrow?

EverGrow is still a small cap cryptocurrency of just $90 million in August 2022.

The token is a newcomer and has not yet got a listing on the Binance crypto exchange. However, you can easily purchase EverGrow by swapping BNB on PancakeSwap or swapping BNB or BUSD directly on EverGrowSwap.

Whereas on PancakeSwap you need to set your slippage tolerance to 12% to account for the 14% transaction tax (and then set your requested EverGrow amount to make sure you have enough BNB to pay for the tax) on EverGrowSwap the process is easier.

All you need to do is connect your wallet (Trust Wallet or MetaMask are the most common) and then make a purchase.

Voila!

Your EverGrow is in your wallet. By connecting your wallet to the EverGrow dashboard you can view your total BUSD earned and any pending rewards.

Will EverGrow's daily trading volume keep on growing in 2022?

At peak daily trading volume, more than $62 million was bought or sold in EverGrow in a 24-hour period.

When the crypto market picks up there is every chance for EverGrow to gain such a high trading volume again.

Here are three more ways that EverGrow is seeking to attract more trading volume:

• LunaSky NFT. EverGrow is about to launch an NFT marketplace on the BNB Chain, with much lower mint fees and the potential to compete with leading existing marketplaces for digital assets.
• Crator. EverGrow will also launch a content subscription platform, which will be the first to allow both crypto and fiat subscription payments and bring more new users into crypto.
• The Abstract. EverGrow will become the native token of The Abstract – the world's first VR gaming arcade streamed on the cloud. The platform is expected to attract many of the 50,000+ VR headset owners in the USA alone who lack sufficient computing power for high-quality VR gaming at home.

With one of the most exciting roadmaps in crypto, and strong existing fundamentals, there is every chance that EverGrow could take reflection tokens to the top spot in safe stablecoin passive income.