Ordinals are a growing asset class on Bitcoin that can be used for more than just collecting and trading. You can also use your Ordinal inscription as lending collateral to borrow bitcoin on the lending platform Liquidium.
Read on to learn how you can borrow BTC by depositing your Ordinals as collateral.
What Are Ordinals & Why Use Them as Collateral?
Ordinals are Bitcoin-native assets that rely on inscribing data onto individual satoshis (the smallest unit of bitcoin) to create unique digital assets. As such, Ordinal inscriptions are essentially NFTs on Bitcoin.
Generally speaking, borrowing bitcoin (or any other asset) requires the borrower to put something up as collateral in case the borrower defaults so that the lender’s risk is reduced.
Thanks to the Bitcoin-native P2P lending platform Liquidium, you can use Ordinal inscription as lending collateral to access bitcoin liquidity and improve your personal finance.
So, users who want BTC but don’t want to sell their Ordinals can lock them up as collateral to access BTC until the loan is repaid and then get their inscriptions back.
What is Liquidium & How Does the P2P Lending Platform Work?
Liquidium is a peer-to-peer (P2P) lending platform offering BTC borrowing and lending while using Bitcoin Layer 1 assets, including Ordinals, Runes, and BRC-20 tokens as collateral.
Borrowers can choose from existing loan offers on the website, filtered by the asset they have, then agree to the terms and initiate the loan. Lenders, on the other hand, can create their offers, set terms such as interest, repayment time, etc., and then have to approve the loan once a lender initiates. This way, the whole process is completely peer-to-peer, with no need for a centralized third party to intervene.
How to Secure a Bitcoin Loan Using an Ordinal as Collateral, Step by Step
Using Liquidium to secure a Bitcoin loan is simple, and we’ll guide you through it in detail.
Access the Liquidium App
To start, you need to access the Liquidium app in your web browser.
Connect Your Wallet
Next, you need to click the Connect button at the top right of the screen to connect your wallet to the lending app.
Currently, you can choose from Xverse, Magic Eden, UniSat, Leather, Phantom, OKX, and Wizz Wallet.
Find Your Ordinals
Next, you’ll need to find the Ordinals you want to set up as collateral in the Ordinals list under the Borrow tab.
You can’t choose Ordinals that aren’t on the list since Liquidium puts them through a vetting process and only approves those it deems suitable.
Choose Loan Terms
When you find the Ordinals you have, you can click on Borrow, then choose the terms you want.
You can also find Alternative Offers right from the Borrow popup window if you want to fine-tune your terms from a longer list, but the Liquidium blog states that “While borrowing via the ‘Borrow’ button, you will always select the best offer(s) by default.”
Alternatively, click on Offers right below the Ordinal name to see what’s currently available.
Wait for a Lender to Accept Your Offer
Once you’ve initiated the loan, all you need to do is wait for the lender to accept the offer. They will be notified via the app and any other contact they’ve entered, depending on their settings.
When they accept, you’ll also be notified; keep in mind you can add your Telegram or email to notification settings.
Receive BTC
The funds will become available to you after the transaction is confirmed on the Bitcoin blockchain.
Repay Loan
When the loan term draws to its end, make sure you repay the loan in time so your Ordinals return back to you. Go to your Portfolio page, select the Borrowing option to see the loan, and then click on Repay.
Once the loan is repaid, click on the Unlock option, select the fee you’re willing to pay, and then wait for your Ordinals to return to your wallet.
The Bottom Line
Ordinals are a popular asset class on Bitcoin, and with Bitcoin lending apps like Liquidium, their utility goes beyond collectibles.
You can use your Ordinals to borrow BTC or use your BTC to become a lender and, potentially, in case of a loan defaulting, receive Ordinals, all while earning interest on your loan.
But whatever you do, always do your own research and never risk more than you can afford to lose.
