SOLV Protocol wants to offer interest on $ 1 trillion on Bitcoin

SOLV Protocol is a Bitcoin-oriented strike platform that launched an interest rate job for institutional investors. That all sounds very exciting, but it comes down to offering interest on Bitcoin.

The question is how they do that, because Bitcoin is not naturally not producing asset. It does not generate a cash flow, dividend or interest such as bonds or shares.

So how do you get interest on your BTC via something like SOLV protocol?

Interest on your bitcoin?

The ‘interest’ that you get is not a magical return, but a reimbursement for risk and liquidity. With SOLV Protocol (and comparable Defi-platforms) this happens roughly:

1. You deposit BTC (often in a wrapped form such as WBTC) on the platform.
2. SOLV bundles these assets in a ‘Vault’ or ‘Fund’ – often together with Stablecoins or ETH.
3. This BTC is lent to other parties, such as Market Makers, Defi projects or centralized institutions (sometimes also CEFI parties).
4. Those parties pay interest because they can use your BTC for trading, arbitration or liquidity provision.
5. That interest is shared with you, minus a fairy for the protocol.

Ultimately, there must always be a risk somewhere to get interest. Interest without risk does not exist. Even American government bonds ultimately also include risks.

Using Stagnant Bitcoin

“Bitcoin is one of the world’s most powerful forms of collateral, but his interest -rate potential remains underhanded,” said Ryan Chow of SOLV.

In the meantime, his protocol has already secured Bitcoin for more than 2 billion dollars on the blockchain. That is a lot less than the total market cap of approximately 2.3 trillion dollars.

In that respect, there are still enough bitcoin for SOLV protocol to convince.

Incidentally, SOLV protocol is not the only one that focuses on these types of products. For example, the XBTO investment firm works together with Arab Bank Switzerland to offer Bitcoin interest products that generate returns by selling BTC options and collecting premiums.

The fund focuses on a return of around 5 percent on the Bitcoin.