The majority of PsyFi’s structured products are fully collateralized with their related underlying assets. While this is great for security, it does create capital inefficiency by tying up assets that could be deployed elsewhere.
That’s why we introduced PsyLend, a platform that lets people instantly mobilize locked-up capital by borrowing against their positions in PsyFi’s structured products. People can use PsyLend to take out loans against PsyVault positions, or to supply capital to borrowers in exchange for rewards.
With PsyLend, you can maximize the earning potential of your capital.
How to Get Started
To borrow digital assets with PsyLend, you must first deposit digital assets. Supported assets currently include $SOL, $USDC, and PsyVault tokens, which are the tokenized representation of PsyVault positions.
You can obtain PsyVault tokens by depositing your digital assets into a PsyVault. After depositing, you will receive your PsyVault tokens when new options are minted, which generally takes place at 09:00 UTC every Friday. You can then use these tokens in the PsyLend protocol.
Supplying and Borrowing Tokens With PsyLend
Since you need to supply digital assets before you can borrow them, the process of supplying tokens on PsyLend is the first phase of the process we will examine.
Here’s how to begin:
1. After you’ve secured your token of choice, visit https://psyfi.io/lending and connect your Solana ecosystem wallet.
2. Before you borrow, you will need to supply your tokens. Click Supply next to the asset of your choice. This will open an in-browser window. Select the Supply tab.
3. Enter your chosen amount, click Supply, and accept the transaction.
If the transaction is successful, you should see your account details updated with the new assets. For more information on rewards offered to suppliers on PsyLend, click here.
If you want to borrow digital assets on PsyLend, continue to the next step.
1. Select the Borrow tab on the in-browser window.
2. Enter your chosen amount, click Borrow and accept the transaction.
PsyLend charges an 0.1% fee on all funds borrowed, which is used by the PsyFi DAO treasury to fund protocol development. The platform also charges a 10% fee on all interest rates paid by borrowers. Half of this goes to the PsyFi DAO treasury, while the other half goes to the protocol insurance fund. Users also need to pay a Solana Rent Fee when they open new accounts on PsyLend, which is fully refundable.
Notes on Borrowing with PsyLend
Importantly, you can only borrow up to the Borrow Limit displayed on the Borrow tab of the in-browser window. You cannot borrow more than you have deposited, so this limit will always be smaller than the value of your collateral. This value is set above the liquidation threshold, so you can borrow without immediate liquidation in the event of sudden market movements.
It’s also important to note the loan-to-value ratio – or LTV – of the products you are borrowing. You will also be assigned your own LTV, which is the sum of all of your borrowed loans, divided by the amount of your supplied collateral. Your LTV is expressed in the Account Health bar on your PsyLend dashboard.
If your LTV is low, and your account is therefore deemed unhealthy, it may be liquidated. The LTV used to determine liquidation for your account is based on the smallest of all the assets you have borrowed. Therefore, it’s important to exercise caution when borrowing a new asset, as you may reduce your borrowing power.
Click here for more information on liquidations on PsyLend.
Learn More About PsyFi
PsyLend is a crucial part of the PsyFi DAO’s mission to provide best-in-class financial tools to the Defi ecosystem. This goal guides all we do – today and in the future. To find out more, visit https://www.psyfi.io/.
This blog is the second installment in a series of PsyGuides: informational posts that teach you how to use each of PsyFi’s products. Check out the rest of the series here.