Note: This article is not financial advice. Hubble Protocol does not endorse any tokens or platforms mentioned in this article.
Decentralized finance (DeFi) is like a crypto adventure. Users can hold SOL or NFTs and do nothing with them, or they can join the adventure by participating in DeFi to earn yield.
This article will explain why some users borrow USDH and give examples of how USDH can be used to participate in DeFi on Solana. Users will also find step-by-step instructions for borrowing USDH.
🎮Earn Yield in DeFi with USDH
👉 Imagine Hubble as a token machine in an arcade.
- Users insert an asset (SOL instead of a paper bill)
- They get tokens (USDH instead of shiny metal discs)
- These tokens can be used in tons of machines (DeFi instead of pinball) in the arcade (Solana).
🧠 Some of the strategies are riskier than others, but if users manage their risk and pay attention, they can get back their tokens and more. Unlike an arcade, though, when users decide to check out, they can take their USDH tokens back to the smart contract and get back what they deposited.
If USDH falls below $1.00, users can buy cheap USDH from a DEX to repay their loan. For example, if USDH falls to $o.98, that saves borrowers 2%, and if USDH somehow falls to $0.90, they save 10%!
When USDH is priced below $1.00, it means there is too much supply and not enough demand on the market. When everyone starts acquiring USDH from the market to repay loans, the price goes back up to $1.00.
As a collateralized debt position (CDP) stablecoin, USDH is designed to rise back to $1.00. Borrowers always have to repay their USDH loans to get back their SOL, so a focal point can be reached in the market.
What Can Users Do with USDH?
When users borrow USDH, they can do anything they want with it. They can pay their bills, or they can buy a boat—or users can participate in the great DeFi adventure to earn yield from multiple different strategies.
What users don't want to do is lose their ability to repay their USDH loan. Here are several use cases for USDH graded by their exposure to risk.
🕺 Less Risky DeFi with USDH
These strategies are the least risky. They involve participating in DeFi with stablecoins, which should remain pegged at $1.
⛷️ Riskier DeFi I
These strategies are riskier, because they involve increased smart contract risk. Users may also have some exposure to market conditions as they are not 100% stablecoin strategies.
- Leverage Kamino positions with kTokens on Hubble
- Leverage Kamino positions with kTokens on Solend
🎲 Riskiest DeFi
These strategies expose users 100% to the market. If users borrow USDH to participate in these strategies, it's possible they might not be able to repay their loan if something goes wrong.
- Buying NFTs
- Swapping USDH for other non-stable assets
- Looping: Borrow USDH with SOL >> Buy SOL with USDH >> Deposit on Hubble >> Borrow more USDH >> Repeat (leveraged trading)
Getting Started: How to Borrow USDH from Hubble Protocol
- Go long or leveraged on these blue-chip crypto tokens with USDH:
- Earn yield from lending with Solend cTokens:
- Earn yield from providing concentrated liquidity and leverage up to 20x with Kamino kTokens:
Step 1: Connect a wallet.
Step 2: Choose a vault. Click "Borrow."
Step 3: Choose what tokens to deposit.
Users can deposit more than one kind of token at the same time by pressing +.
Hubble accepts a wide range of tokens as collateral. Choose a token to borrow against.
Step 4: Decide how much USDH to borrow.
This is a personal decision every user must make for themselves. The crypto market can be incredibly volatile, so it's always a good idea to borrow at a safe loan-to-value (LTV).
Note: Users keep the USDH they borrowed if they are liquidated, and some of their deposit is returned to their wallet.
Examples of Unsafe and Safer Borrowing Limits
- Deposit 1 BTC and borrow USDH at a 75% LTV
- The loan will be liquidated if BTC falls by 6.25%.
- Think BTC will fall by 6.25% while you're borrowing?
- Borrow less USDH until things look more positive.
Step 5: Borrow USDH
Once a user has decided on a comfortable LTV and how much USDH to borrow, they can click the "Borrow" button and approve the transaction.
That's it. Users will then be directed to the Loans page, where they can view and manage their loans.
Mint USDH and Explore the DeFi Adventure
There are many opportunities for earning yield in DeFi, and USDH can be used as a tool to help users seek those opportunities. For users who are interested in learning more about DeFi, check out Hubble's blog. There is plenty to read about USDH, stablecoins, and DeFi:
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