How to Earn Passive Income From Lending on DeFi For You
DeFi For You gives lenders the opportunity to earn passive income, which can then be reinvested into income-generating assets, including more loan packages on the platform.
This guide exists to help you put your crypto assets to work as quickly and simply as possible.
Note: If you get stuck on any of the steps in this guide then please use our integrated chat support and our technical team will be happy to assist you.
Setting up your account
You don’t have to have an account to issue loans on DeFi For You. However, you may wish to create one so our technical team can assist you more effectively if anything goes wrong.
You will need an account to open a pawnshop on DeFi For You. A pawnshop requires using the platform’s backend and therefore an account is necessary.
Connecting your wallet
You must connect your crypto wallet to use DeFi For You. This allows you to send crypto assets into loan offers or collateral packages via secure smart contracts.
To connect your wallet, simply press Connect in the top menu. There are three options to connect different wallets.
1. Metamask: This wallet is integrated into your internet browser. To connect, simply select this option and the Metamask browser extension will open. Enter your password if need be and then press Connect. That’s it!
2. Binance Wallet: The Binance Chain Wallet is also an internet browser extension. You can connect your Binance Chain Wallet using the same steps as Metamask. Simples!
3. Trust Wallet: The Trust wallet is a mobile app and requires additional steps to connect.
a. Press Connect and then choose ‘Get WalletConnect QR code’
b. Open the camera on your phone and aim at the QR code.
c. A push notification will appear on your phone — press ‘Open in Trust’
d. It should say ‘DeFi For You. Wants to connect to your wallet’ — Press Connect.
e. If it’s successful, you’ll be told to go back to your browser on your computer.
f. That’s all!
Creating your first loan package — Plus tips for beginners
Now your wallet is connected, you can begin making loan packages. Go to defiforyou.uk/pawn and press on Lend.
- Fill in the maximum amount you’re willing to lend
Note that you’ll only be able to choose coins you have in your connected wallet. It’s recommended you don’t put all your eggs in one basket.
- Fill out the duration of the loan
This is how long the borrower will have to pay you back. Most lenders choose between 3 and 12 months.
- Choose the collateral you’re willing to accept
You can choose multiple cryptocurrencies as collateral — you should aim to choose ones you’re confident won’t fluctuate greatly.
- Press Search to view collateral packages that could match your request.
Note that you can add in collateral options or more loan currencies to increase the number of borrowers you get in the results.
- Choose a borrower from the list to send them an offer.
You can come back here and choose multiple borrowers to send offers to. They will have to accept your offer to create a contract, so the more offers you make, the better results you’ll get.
- You’ll now have to fill in additional details about your loan offer, such as your desired interest rate per annum, and your LTV (loan-to-value).
Most lenders choose an interest rate of around 10% — 20% per year.
Most lenders choose an LTV from 50% to 75%, depending on how stable the collateral cryptocurrency is.
For example, you might offer 75% LTV for BTC collateral, but only 50% LTV for ETC collateral.
Setting your liquidation threshold: Your liquidation threshold is the max. LTV you’re willing to accept before the borrower’s collateral is liquidated.
It’s recommended that you put this no higher than 85%. If the LTV is 85%, then the liquidated collateral you receive will be greater than the loan given by 15%.
You don’t want a Liquidation Threshold of, say, 95% (unless you are very generous).
Imagine you’re asleep, and during your sleep, your borrower’s BTC collateral is liquidated due to the market crashing. If your Liquidation Threshold is 95%, then the market only has to go down another 5% before you’re losing money. If it’s 85%, then you have 15% to work with.
Think of your Liquidation Threshold as your ‘sleep soundly’ policy.
- Repayment currency: This is the cryptocurrency the borrower will pay the interest in. There are only ever two options for this:
- The loan currency
- DFY tokens
- Press Send Offer. Then press Approve. Then press Create to finalize the offer.
- The borrower can then accept or reject your offer or suggest alternate terms.
- Once loans are activated, they’re secured by smart contracts and can no longer be tampered with.
Interest invoices will be created by the system and sent to borrowers for each instalment. Interest from loan repayments is deposited into your crypto wallet. Records of how much you’ve earned are stored in DeFi For You and can be viewed via your account.