Fixed income refers to types of investments that pay investors fixed interest or dividend payments until a maturity date. At maturity, investors are repaid the principal amount they had invested, typically with a form of fixed interest or dividends.
In DeFi, we’re accustomed to mostly variable rates which we earn by lending assets to pools of borrowers. The greater supply available to lend and less borrowing demand, the lower the lending rates vs the less available assets being lent and more borrowing demand, the higher the variable rate.
Ruler is a newer peer-to-peer DeFi borrowing and lending platform, offering loans that are free of liquidation risk while offering lenders a new pseudo-fixed rate of return. It’s yet another example of DeFi becoming more sophisticated in its offerings and mirroring the utility of popular products in traditional finance.
- First, Ruler allows people to borrow stablecoins without risk of losing their crypto collateral due to price volatility, meaning there’s no risk of liquidation.
- To provide for non-liquidation, Ruler loans have fixed terms, normally one month.
- Ruler incentivizes lenders of USD-pegged stablecoins to provide loans, with both interest and farming rewards of its RULER token.
- Ruler also allows people to invest in the Ruler project itself, by sharing platform revenue with holders of its RULER token, but we’ll focus today strictly on the ability to earn lending interest.
- Today, there’s already over $133M in TVL among borrowers and lenders on Ruler.
Because Ruler truly only has one rule–to pay back your loan on time, it presents an interesting opportunity for lenders seeking higher interest rates that are essentially fixed, or at least able to be anticipated based on when you deposit stablecoins. Alternatively, borrowers can sleep on the fact that their loans won’t be liquidated due to a collateralization ratio drawdown like we’ve seen in other borrowing platforms like Maker, Compound, and Aave.
How to Earn Up to 102% APY Lending Stablecoins with Ruler Protocol
Before we get started, please be aware of a few major risks.
- Smart contract risk is always a risk. Currently, Cover Protocol offers cover for Ruler-based assets but it’s likely this coverage will grow in the coming months, especially with Nexus Mutual likely to add Protocol Cover for Ruler as well.
- There is risk of borrowers defaulting. Unlike other borrowing and lending platforms where one can be liquidated for not maintaining a proper loan-to-value ratio, Ruler only has one rule–pay back on time. Lenders do risk being left with collateral that could be worth less than the loan if the market saw a major drawdown before the loan expiry date.
- Ruler is a newer protocol and hence it is less stress-tested by the markets. Treat it like experimental software.
- As always, this is not financial advice.
Here’s how to earn a fixed return lending stablecoins with Ruler Protocol!
1 – First, go to the Ruler Protocol Markets page.
2 – All the pools expire this month on April 29, 2021 so whatever opportunity to lend will only last until that expiry date before one has to find new pools to lend to, when new pools launch with May expiry dates.
3 – Another thing to consider is which market (or pairing) you prefer to lend stablecoins to based on how high the annualized lending rate shows, the…
Hi! My name is Lark Davis!
I’m a cryptocurrency investor with years of experience and I’ve been making consistent profits in the crypto space.
I’m passionate about helping others do the same, so I run multiple educational channels on crypto investing.
