What is Anchor Protocol?

Good morning and how are you doing? 

Friday letters are usually dedicated to taking questions from our community. Do you have a question for us? Please feel free to send an e-mail to info@themoneyafrica.com or a DM to any of our social media channels.

Question

Savings or investment, which one can I start with as someone with limited income?

Answer 

You can do both at the same time.

The first thing you need to do is draw up a budget. 

A budget is having a plan to help you make the best of your money. 

It puts the power of your money in your hands. This plan could be weekly or monthly. A good budget includes savings and investment. 

The first thing to do is to calculate your income. This should include all you are earning even from side jobs, not just your salary if you are a salary earner. 

You can then apply the 50:30:20 rule to allocate your income.

50% of your income should go to the things you need, like rent, electricity, groceries and other necessities.

30% of your income can go towards your wants, like hangouts, travelling and so on.

20% of your income can then go into your savings and investment. You can then decide to make it 10% for savings and 10% for investment.

You should, however, be looking at long-term investing so you can experience the power of compound interest. 

Compound interest investment simply means that instead of spending the interest you get monthly on your investments, you reinvest the interest and the capital so that you can earn more in the long run. 

You should also save in a high interest yielding savings account. You can start by downloading ladda on apple store or play store.

Question

What is Anchor Protocol?

Answer 

Anchor protocol is a decentralised money market between lenders and borrowers. 

This is a money market without any authorisation but just smart contracts on blockchains. 

Lenders are looking for fixed yields on stablecoins (20%), while borrowers are looking to borrow those coins against crypto assets they bring.

Imagine a savings protocol with a fixed 20% APY. For example, you put $1m in anchor and get $200k interest in 12 months. Making it a total of $1.2m. 

If you are skeptical about the risk, you can insure your money and get 16.5% interest instead.

If you need a quick fix and don't want to sell your coins, you can also borrow against them on anchor protocol.

This is, however, only supported by the Ethereum and Terra blockchain for now. 

If you would like to document your financial journey in 2022, then our journal would be a great fit for you. It costs ₦7,500 (excluding delivery which is borne by the recipient). Those who sign up for either the annual or premium plan will get a free copy (excluding delivery).

Join our community today and get more information and knowledge about your finances. This also gives you access to a monthly webinar series on different topics pertaining to personal finance. 

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