Astute 🦌 spells out:"simple concept really. No magic needed. Let's break it down.
Small print: this example is way over-simplified to show the concept. No animals were harm in the production of this work.
thread below...
1/ Alice deposits $100 $UST, expects 20% yield for invested time, say $20 total
2/ Bob wants to borrow $100 $UST so he puts down $300 worth of $Luna. Let's say this amount is 3 $Luna. He takes out $100 UST as loan. Note: this is only ⅓ of collateral amount, as typical.
3/ @anchor_protocol stakes Bob's 3 $Luna and earns 10%, say $30 for the time.
4/ from this staking earning, $30, @anchor_protocol pays out to $20 on Alice's deposit and divvy out $10 on $ANC stakers
hopefully, w/ example above, you can see basically @anchor_protocol works roughly like a bank would, investing deposits to pay interest to depositors and send dividends to shareholders (stakers), openly and autonomously. This is what #DeFi means.
What about Bob? He forgo stake reward on his 3 $Luna to get a loan for other lucrative @terra_protocol investment opportunities. It seems like he's the loser in all this. Fear not for him, he's making good money w/ the loan himself but that's a topic for another day.
oh, btw, you can be both Alice & Bob, at the same time.
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