Lending & Borrowing

The SUBFROST APP is currently in development and its interface is subject to change.

The Lending feature lets you lend out your tokens to earn interest or borrow tokens against collateral — directly on Bitcoin L1. It's peer-to-peer: you set your own terms and match with another user. There are no pools, no middlemen, and you keep control of your funds until a match happens.

Highlights:

• Lend or borrow any supported token pair, on your terms (interest rate, duration, collateral)
• Posting an offer is free and instant — you just sign it; nothing goes on-chain and no fee is charged until someone takes it
• Settled on Bitcoin L1 in a single transaction the moment your offer is matched
• Fixed-rate, fixed-term loans — you know the exact repayment up front
• You hold your own funds the whole time; there's no custodian

How it works

Lending has two sides, and you can be either one:

• Lenders post a loan offer: "I'll lend X token at this rate, if you put up Y collateral."
• Borrowers post a loan request: "I want to borrow X token and I'll put up Y collateral."

When someone takes the other side of your offer, the loan is created on-chain in one transaction and becomes active immediately.

Posting an offer is free and instant

When you post an offer, your wallet signs it, but nothing is sent to the Bitcoin network — so:

• No network fee to post.
• No on-chain footprint and no waiting for a block — your offer shows up in the order book instantly.
• Your funds stay in your wallet. A posted offer is a pre-signed instruction that, by design, cannot be broadcast on its own — it only becomes a real transaction once a taker accepts and adds their side.

This means only the taker pays a network fee (the fee to settle the loan on-chain). As a maker, posting and cancelling offers costs nothing.

Matching settles the loan on-chain

When a taker accepts your offer, a single Bitcoin transaction is broadcast that:

1. Hands the borrowed token to the borrower,
2. Locks the borrower's collateral, and
3. Creates the loan.

Once that transaction confirms, the loan is active and the clock starts on its term.

How to lend

1. Open the Lend / Borrow page and pick the token you want to lend and the token you'll accept as collateral.
2. Switch the form to Lend.
3. Enter the amount to lend, the collateral you require, the APR, and the duration (in blocks).
4. Click Lend and approve the signature in your wallet. Your offer is now live in the order book — no fee, no broadcast.

How to borrow

1. Pick the token you want to borrow and the token you'll post as collateral.
2. Browse the order book for an offer you like (sorted by APY), or switch the form to Borrow and post your own loan request.
3. To take an existing offer, click Borrow — you'll see a summary (what you provide, what you receive, the APY, the total repayment, and the deadline). Confirm and pay the network fee to settle.

The life of a loan

Once a loan is active, here's what can happen:

It gets repaid (the normal path)

• The borrower repays the principal plus interest before the deadline. In one click ("Repay & reclaim") they repay the loan and get their collateral back.
• The lender then claims the repayment (principal + interest).
• The loan is fully closed. Both sides got what they expected.

It defaults (borrower doesn't repay in time)

• If the deadline passes without repayment, the loan is defaulted.
• The lender can claim the collateral (one click does the default + claim together).
• The borrower keeps the tokens they borrowed but forfeits the collateral.

You can always see your loans and their status — Active Loans, Closed Loans, and your open My Offers — at the bottom of the Lending page.

Choosing your collateral — read this

Collateral terms are fixed when the loan is created and enforced exactly as agreed. There are no margin calls and no automatic liquidations beyond claiming the agreed collateral on default. That has an important consequence:

If you're lending, you must be comfortable receiving exactly the agreed collateral — even if its price moves so much that it's worth less than the loan you made. If a borrower defaults and the collateral has dropped in value, claiming it is your only recourse; the protocol won't top you up.

So set your collateral requirement based on your own risk tolerance. Common sense:

• Higher collateral protects you better if prices move against you — but it makes your offer less attractive, and a borrower may never take it (they have to lock up more).
• Lower collateral is easier to fill and friendlier to borrowers — but leaves you more exposed if the collateral's value falls.
• Pick the level where you'd be genuinely fine ending up with that collateral instead of being repaid.

Borrowers face the mirror image: the more collateral you post, the more you have at risk if you can't repay, but offers asking for less collateral may be scarce.

Managing your offers

Your open offers appear under My Offers. From there you can:

• Edit an offer — change the terms (this re-signs a fresh offer and cancels the old one).
• Delete an offer — remove it from the order book.

Both are free and off-chain, just like posting.

Tips

• Start small to get a feel for the flow before posting larger offers.
• Think about default before you lend. Price the collateral and rate for the scenario where you're repaid in collateral, not cash.
• Right-size your collateral ask. Too high and nobody takes it; too low and you carry more risk.
• A loan can't be repaid after it defaults — once the deadline passes, the lender's path is to claim the collateral.