Earning Yield on Bitcoin through Lending
If you have Bitcoin (BTC) that is not currently being used, one option to consider is lending it out to earn a yield. This process is quite straightforward: you lend your BTC and in return, you receive interest in BTC. This is a method to generate additional income from your BTC holdings.
Using Ordinals as Collateral
The lending process involves borrowers providing collateral to secure the loan. In this scenario, borrowers use Ordinals as the collateral. Upon successful repayment of the loan, borrowers return the original BTC amount along with the agreed-upon interest.
Yield Opportunities and Risks
Opportunity: On occasions where borrowers fail to repay the loan, the lender keeps the Ordinal used as collateral. This could turn into a significant opportunity if the Ordinal's market value exceeds the loan amount, possibly leading to a substantial gain for the lender.
Risk: However, it's critical to acknowledge the inherent risk in this arrangement. There's a chance that the value of the Ordinal could plummet, resulting in collateral that's worth less than the initial loan amount. This scenario represents the primary risk for lenders operating in this space.
Understanding these dynamics is essential for anyone considering lending their BTC to earn yields. It's a scenario that blends the potential for high reward with a corresponding level of risk.
Disclaimer: This article does not constitute financial advice, and we strongly recommend conducting your own research and consulting with a professional financial advisor before making any investment decisions. We are not liable for any potential losses incurred from applying the strategies discussed. Proceed with caution and at your own risk.