Bitcoin DeFi is evolving fast, and Ordinals are no longer just collectibles—they’re now unlocking new financial opportunities. For example, Ordinal inscriptions from popular collections can now be used as lending collateral on Liquidium, allowing lenders to earn yield on bitcoin (BTC) against Ordinals collateral.
Read on to learn more about Ordinals-backed lending and how it works on the Liquidium DeFi lending platform.
What Are Bitcoin Ordinals?
Bitcoin Ordinals are unique digital assets created by having data inscribed onto individual satoshis, the smallest units of BTC. This process basically turns satoshis into rare assets on the Bitcoin network.
You can think of Ordinals as non-fungible tokens (NFTs) on top of Bitcoin.
Bitcoin Ordinals can be collected and traded solely because of their rarity and uniqueness. However, they are also becoming a building block of decentralized finance (DeFi) on Bitcoin.
They are now, in particular, being used to enable peer-to-peer lending and borrowing directly on the Bitcoin network using Liquidium.
What Is Ordinals Lending?
Ordinals lending involves lending your bitcoin to borrowers who own Bitcoin Ordinals that they provide as collateral.
When bitcoin is borrowed in this arrangement, the Ordinals are locked up for the duration of the loan. Once the bitcoin loan is paid off, the Ordinals are returned to the borrower. If the loan defaults, you, as the lender, receive the Ordinals as settlement for the loan.
This form of lending is relatively new, and Liquidium is one of the first platforms to make it possible.
How to Earn Yield on BTC, Step by Step
Earning yield on your BTC through the Liquidium lending app is pretty simple. It follows the following steps:
Connect Your Wallet
The first step to earning yield on your bitcoin through Liquidium is to connect a wallet.
Click on the ‘Connect’ button at the top right corner of the screen and then select the wallet you prefer using from a list.
You will be prompted to enter your password to sign into your chosen wallet before accessing the Liquidium app. If you have never used that wallet, you must install and create (sign up) it first.
Choose Your Lending Option
At this stage, you are supposed to find the Ordinal inscription you’re willing to accept as collateral. When you select a particular asset, all the relevant data about it, including the floor price, current offers, different terms, and maximum APY, is displayed to you.
Lend Your Bitcoin
Once satisfied with the Ordinal you want to accept, click ‘Lend’ and set the loan terms. That includes the length of the term, the amount you’re willing to lend out, the loan-to-value (LTV) ratio, etc.
The interest you’re eligible for will autofill in the space just under the amount of bitcoin you are willing to lend out. The LTV amount will be set automatically, but you can use the slider to adapt it to your preferences.
When you’re happy with every detail, click the ‘Create Offer’ button, and you’re done!
After this, you can wait for a borrower to accept your offer.
When this happens, you’ll receive notifications in the app and, depending on your settings, one in your email or Telegram account.
You’ll have to approve the loan manually, as it requires signing a Bitcoin transaction. Once you’ve signed the transaction, the network must confirm it before it goes live.
The entire transaction is completed once you’re either paid back in full or the loan defaults, and you receive the Ordinals that were held as collateral. When the repayment is complete, you also receive the interest on the loan.
Takeaway
By enabling the use of Ordinals as collateral to get bitcoin loans, Liquidium provides a unique opportunity to owners of Ordinals who need to access BTC without having to sell their assets.
Moreover, it allows those who HODL bitcoin to earn up to 380% APY on their BTC, making it one of the Bitcoin DeFi platforms with the highest yields for BTC.
