There are two primary methods to generate passive income from your Bitcoin holdings: lending and liquidity provision. Both are seamlessly integrated into Sovryn, a decentralized finance (DeFi) platform built on Rootstock. Below, we explore each method in detail, including setup steps and key considerations.
1. Lending Bitcoin on Sovryn
Decentralized Bitcoin lending allows you to earn interest by depositing your BTC into liquidity pools. Here's how it works:
How Bitcoin Lending Works
- Deposit Mechanism: Users contribute BTC (converted to RBTC, Rootstock's 1:1 pegged Bitcoin) to a pool, which borrowers access as needed.
- APY Dynamics: Interest rates fluctuate based on pool demand, size, and market conditions. Sovryn displays historical APY trends for transparency.
- Flexible Withdrawals: Lenders can withdraw funds anytime, provided the pool has sufficient liquidity. Shortages trigger rate adjustments to incentivize loan repayments.
Step-by-Step Guide to Lending
- Convert BTC to RBTC: Use Sovryn’s bridge to swap Bitcoin for RBTC.
- Navigate to 'Earn' > 'Lend': Select the BTC pool and review real-time metrics (e.g., borrowed amount, APY).
- Deposit Funds: Enter your desired amount, confirm the network fee, and finalize the transaction.
👉 Start earning Bitcoin yield today
2. Providing Liquidity on Sovryn
Liquidity providers (LPs) earn rewards by supplying assets to trading pools, enabling decentralized swaps via automated market makers (AMMs).
Key Aspects of Liquidity Provision
- Pool Types: Most Sovryn pools require 50/50 RBTC-paired deposits (e.g., RBTC/USDT).
- Divergence Loss Awareness: Understand impermanent loss risks before committing funds.
- Promotional Rewards: Bonus SOV tokens are distributed weekly for eligible pools.
How to Become an LP
- Select 'Earn' > 'Market Making': Browse active pools and their APY history.
- Deposit Balanced Amounts: Enter values for both tokens (e.g., RBTC and USDT).
- Monitor Earnings: Track rewards and adjust positions as needed.
3. Sovryn Money Market: A New Yield Frontier
Sovryn’s decentralized money market offers a novel way to earn yield:
- BTC Deposits: Lend BTC directly and earn 4.5%–6.5% APY in BTC.
- No Lock-Ups: Withdraw funds anytime (subject to liquidity).
- Overcollateralized Loans: Borrowers must post excess collateral, minimizing lender risk.
Bonus: Participate in promotions for additional SOV rewards.
FAQs: Earning Bitcoin Yield on Sovryn
Q1: Is lending Bitcoin on Sovryn safe?
A1: Yes—Sovryn uses smart contracts and overcollateralization to protect lenders. However, always assess risks like smart contract vulnerabilities.
Q2: What’s the minimum deposit for liquidity pools?
A2: No strict minimum, but network fees may make small deposits impractical.
Q3: Can I lose money providing liquidity?
A3: Yes, divergence loss may occur if paired asset prices shift significantly.
Q4: How often are SOV rewards paid?
A4: Promotional SOV rewards are distributed weekly.
Q5: What’s the difference between RBTC and BTC?
A5: RBTC is a 1:1 Bitcoin representation on Rootstock, enabling DeFi use while maintaining Bitcoin’s value.
👉 Explore Sovryn’s DeFi tools now
By leveraging Sovryn’s lending, liquidity, and money market features, Bitcoin holders can unlock passive income while contributing to DeFi’s growth. Always conduct due diligence and start with small amounts to test the platform.