Borrow

Learn how to borrow against your Bitcoin collateral on Libre's decentralized lending platform.

Overview

Libre offers a permissionless way to borrow USDT against your Bitcoin collateral. Unlike traditional lending platforms, Libre ensures your Bitcoin remains segregated and untouched until your loan is repaid or liquidation occurs, with no rehypothecation and no taxable events.

How Borrowing Works

Step 1: Deposit Bitcoin Collateral

1. Connect your wallet to the Libre platform at defi.libre.org

2. Setup a vault for your collateral

3. Deposit collateral into your dedicated vault

Your Bitcoin is stored in a dedicated address controlled by the Crosslink MPC TSS nodes of the chain, where it remains untouched until you repay your loan or liquidation occurs.

Step 2: Choose Loan Terms

1. Select the loan duration (e.g., 30 days, 90 days, 365 days) - loans will auto-renew as long as there is capital available

2. Choose the amount of USDT you wish to borrow (up to 50% of the collateral value)

3. Review the interest rate, which varies based on the loan duration

4. Confirm your loan terms

Step 3: Receive USDT

Once your loan terms are confirmed, the USDT is immediately transferred to your wallet. You can use these funds for any purpose while your Bitcoin remains in your vault as collateral. You can go look at it every day.

Step 4: Monitor Your Loan-to-Value (LTV) Ratio

The LTV ratio is calculated as: (Borrowed USDT + Interest) / (Value of Bitcoin Collateral)

Libre implements a fair warning system to prevent sudden liquidations:

• At 70% LTV: Your loan enters a pre-warning state

• At 80% LTV: Your loan enters a warning state, and you have 72 hours to take action

Step 5: Repay Your Loan

To repay your loan:

1. Navigate to the "Borrow" section and find your active loan

2. Select "Repay"

3. Choose to repay the full amount or make a partial payment

4. Confirm the transaction

Upon full repayment, your exact Bitcoin collateral is returned to your wallet.

Liquidation Process

If your LTV reaches 80% and you don't take action within 72 hours, the following occurs:

1. Your Bitcoin collateral is liquidated through the libreDEX at market rate

2. The USDT loan amount, plus interest and fees, is recovered

3. Any remaining Bitcoin is returned to your wallet

Benefits of Borrowing on Libre

• No rehypothecation: Your Bitcoin remains untouched until loan repayment or liquidation

• No taxable events: Unlike wrapped Bitcoin alternatives, there's no token conversion

• Transparent collateral: You can audit your Bitcoin collateral at any time

• Fair liquidation process: 72-hour warning period before any liquidation occurs

• Self-custody: You retain control of your assets throughout the process

• Fixed interest rates: Know exactly what you'll pay from the start

Risk Management Tips

1. Maintain a healthy LTV ratio: Aim to keep your LTV below 60% to provide a buffer against Bitcoin price volatility

2. Set up alerts: Configure notifications to alert you when your LTV approaches warning levels

3. Have USDT ready: Keep some USDT available to quickly reduce your LTV if needed

4. Consider loan duration carefully: Longer-term loans typically have higher interest rates but provide more time for market recovery

FAQ

Q: Can I repay my loan early? A: Yes, you can repay your loan at any time before maturity without early repayment penalties.

Q: What happens if Bitcoin price drops suddenly? A: The 72-hour warning period gives you time to add more collateral or pay down your loan, even if Bitcoin price drops significantly.

Q: Can I borrow additional USDT against my existing collateral? A: Yes, as long as your LTV remains within the safe range, you can borrow additional USDT against your existing collateral.

Q: Is there a minimum or maximum loan amount? A: Minimum and maximum loan amounts depend on current platform parameters and market conditions. Check the platform for current limits.