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The HODLer's Guide to

Living on
Bitcoin
without selling it

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* There is always risk. For example: dependency on WBTC protocol or DeFi protocols.

** Historical data shows that Bitcoin price usually falls no more than 80% from it's last All-Time-High price. Except the first All-Time-Low which was more than 80%.

Use Wrapped Bitcoin (WBTC)

  • DeFi (Decentralized Finance) services are not yet available on the Bitcoin blockchain. Therefore, in order to borrow against your Bitcoin in DeFi, you will need to first wrap your Bitcoin into an
    ERC-20 token.

  • The most popular token for wrapping Bitcoin is Wrapped Bitcoin (WBTC). WBTC is a 1:1 Bitcoin-backed token that can be used on the Ethereum blockchain.

  • You can swap your Bitcoin for WBTC on any exchange that supports the pair. You can also buy WBTC directly with fiat currency.

2

Borrow Stablecoin

  • Once you have your WBTC, you can deposit it into one of the biggest and most trustworthy DeFi protocols: Aave or Compound (see also Aave vs Compound).

  • These protocols will allow you to use your WBTC as collateral to borrow stablecoins, such as USDT or USDC.

  • Stablecoins are cryptocurrencies that are pegged to a fiat currency, such as the US dollar. This means that they are always worth the same amount of fiat currency, regardless of the fluctuations in the cryptocurrency market.

3

Spend in FIAT

  • Once you have borrowed stablecoins, you can use them to purchase goods and services in fiat currency.

  • There are a number of crypto-to-fiat debit card services that allow you to do this. These services will allow you to deposit your stablecoins into a debit card account, which you can then use to make purchases just like any other debit card.

4

Keep It Healthy

  • When you borrow against your Bitcoin, you will be assigned a loan-to-value (LTV) ratio. This ratio represents the amount of your loan relative to the value of your collateral.

  • For example, if you have a LTV ratio of 50%, this means that you have borrowed half of the value of your collateral.

  • It is important to maintain a healthy LTV ratio, as this will help to protect your collateral from being liquidated if the price of Bitcoin falls.

  • Safety Margin is the parameter that tracks how far your loan is from the maximum loan-to-value (LTV) ratio and eventual liquidation.

3. FIAT
1. WBTC
2. Borrow
4. Healty
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