Make 2–6% lending BTC on Proton Loan, with no added risk

Disclaimer: This is not financial advice. I am sharing for DeFi educational purposes and for education on how to use the Proton Loan platform. % yield is variable and adjusts based on utilization of the lending pool.

Table of Contents

Lending & Borrowing Back BTC

Maintenance

Yield Analysis

Lending & Borrowing Back BTC

• Send $BTC to your Webauth wallet. (WebAuth > BTC > Receive)
• Login to www.protonloan.com

• Go to the Portfolio page.
• Click Lend under BTC market.

BTC Lending Market on 4/14/2023

• Enter your $BTC deposit amount and authorize transaction.

Wow such loan health!

• Go to Portfolio page and click the “i” next to “Loan Health.” Check your “borrowing power.” This is how much you can borrow.

We can borrow almost $500 in BTC

• We can borrow a maximum of almost $500, but to keep a cautionary buffer, we want loan health at least 10–15%, so we will borrow less than $500.
• Click Borrow on the BTC Market

• Borrow back $BTC, but keeping loan health above 10% at least.
• Leave the $BTC in you wallet. Using it by trading, selling, etc, heightens your risk significantly.
• Since your borrowing power ($BTC) will raise and fall at the same rate as your lending power (also $BTC), your loan health will only be affected by accrued interest.

Maintenance

• Review your loan health periodically.
• Borrowed amount will gradually grow and drop your loan health %. This is because borrowing receives $LOAN rewards but accrues interest in $BTC as seen below.

Borrow BTC: Pay 1.36% BTC and earn 7.64% LOAN

• To pay off interest you can take a few strategies

1. Convert all $LOAN rewards into BTC and pay off interest + borrowed amount.
2. Convert enough $LOAN to cover the BTC interest only, then do whatever with the rest.
3. To find the percentage of $LOAN rewards that will cover your BTC interest only:

%int = (BTC interest rate) / (LOAN earnings rate) *100

from example: %int = 1.36/7.64 * 100 = 17%

Yield Analysis

If lending $1000 in BTC, we can borrow up to $700. Let’s say $600 for a buffer.

BTC Lending Market on 4/14/2023

At the above rates, we can earn

1. 0.7% APY on our $1000 BTC through lending ($7 in BTC)
2. 6.28% APY on $600 BTC borrowed back ($37.68 in BTC)

Total Yield = $44.68 in $BTC

Total Yield % = $44.68 / $1000 = 4.47%

Wrap-up

We did it! With a little crafty moves, we have added no-risk borrowing, amplifying our yield by over 600% from 0.7% to 4.47%!

Come ask questions and chat about this article in our telegram — https://t.me/ProtonCommunityDAO