From the DeFi Wallet, you can access decentralised lending protocols and deposit your stablecoins to earn a yield. This guide explains how opening a position works, how to read the yield percentage shown in the app and what to consider before you start.
What is on-chain lending?
A lending protocol is a set of smart contracts, programs that run on the blockchain, where people who deposit crypto (you) make it available to people who borrow it (other users), who put up collateral. Borrowers pay a cost; depositors receive a share of that cost as a yield. Everything happens on the blockchain, following rules written into the protocol's code, with no intermediary involved.
In the DeFi Wallet, the available protocols are listed in the Lending section of the wallet page, together with the crypto they accept and their average yield (Average APY). You can deposit USDC, USDT and EURC into the integrated protocols.
When you open a position, your crypto moves from your wallet's available balance to the protocol's smart contract. It remains under the control of your keys, in the sense that only you can request a withdrawal, but while it's in the position you can't send, swap or move it.
Young Platform is not a counterparty, lender, borrower, liquidity provider, custodian, intermediary or adviser in these transactions: it provides the technology infrastructure and the interface for accessing the protocols.
The yield you see in the app
Next to each protocol, the app shows a percentage labelled Average APY. APY stands for Annual Percentage Yield: the annual return you would get if the rate stayed the same over time. The figure shown is the average rate measured over the period you select (one week, one month, six months or one year) and changes when you change the period.
Bear in mind that:
- The percentage describes the past, not the future.
- It changes constantly depending on how much is deposited and borrowed on the protocol, and it can fall, even to zero.
- It isn't set by Young Platform and it isn't guaranteed by anyone: not by Young Platform, not by the protocol and not by those who govern it.
- It isn't the interest rate on a deposit account: your funds aren't protected by any deposit guarantee or investor compensation scheme.
How it builds up and when you receive it
The yield builds up continuously for as long as your crypto is in the position, and is added to the position's balance: you can see it grow on the protocol's detail screen. There's no minimum term: you can request a full or partial withdrawal at any time. Withdrawals follow the protocol's rules and liquidity and aren't instant; from the moment you request one, the crypto being withdrawn stops earning a yield, even before it's back in your available balance. If the protocol doesn't have enough liquidity at that time, the withdrawal may take longer.
What you pay
Opening and closing a position are blockchain transactions, so they involve network fees, payable in USDC, EURC, ETH or YNG depending on your settings in Manage fees. On top of these, Young Platform may charge service fees: on withdrawal, a fee calculated on the yield earned. The exact amounts are shown in the preview before you confirm each transaction and are set out on the DeFi Wallet Fees and pricing page.
If your wallet is locked
Locking of the DeFi Wallet, for example after you change device or log in to the app again, only affects what you can do from the app. Your lending positions aren't affected: they stay open and keep earning a yield until you unlock the wallet and decide what to do with them.
Risks you should know about
On-chain lending exposes your capital to risks that don't exist with a deposit account and that nobody covers on your behalf. The main ones are:
- a bug or vulnerability in the protocol's code can cause the loss, even in full, of the crypto deposited
- a shortage of liquidity in the protocol can delay withdrawals
- decisions by those who govern the protocol can change its rules or rates
- the value of USDC, USDT and EURC depends on the issuer and, for USDC and USDT, on the dollar/euro exchange rate
- regulatory and tax risks: the rules may change, and you're responsible for declaring your yields for tax purposes.
Before opening a position, read the Risk Disclosure and the guide The risks of the DeFi Wallet, which explains them one by one. Only deposit an amount you can afford to leave tied up and, if it comes to it, to lose.