# BTC-Backed Borrowing & Lending Product

Borrowing and lending is the **first product built on the LiquidSat Financing Layer**.

It demonstrates how native Bitcoin collateral can be transformed into liquid capital — **securely, deterministically, and without custody** — using the infrastructure described in the previous section.

This product establishes the **foundational credit primitive** upon which future Bitcoin-native financial products can be built.

***

### Product Scope

The LiquidSat borrowing and lending product enables:

* BTC-backed credit without selling Bitcoin
* Stablecoin liquidity secured by native BTC collateral
* Deterministic settlement enforced by Bitcoin scripts and smart contracts

The product does **not** introduce new collateral models or custody assumptions.\
It operates entirely within the guarantees of the Financing Layer.

***

### How the Product Uses the Financing Layer

The borrowing and lending product consumes the Financing Layer in three ways:

1. **Collateral:**  BTC is locked natively on Bitcoin using script-based conditions.
2. **Verification:** The BTC lock is referenced and verified by execution-layer contracts.
3. **Execution:** Financial logic (credit issuance, repayment tracking, settlement triggers) runs on supported EVM networks.

The product does not modify or override collateral logic — it **inherits it**.

***

### Lending Models Supported

To serve different liquidity needs and risk preferences, LiquidSat supports two lending models on the same infrastructure.

#### 1. Peer-to-Pool Lending

**Instant, Standardized BTC-Backed Credit**

Peer-to-Pool lending aggregates stablecoin liquidity into standardized pools, allowing borrowers to access liquidity without counterparty matching.

**Design intent**

* Enable instant access to BTC-backed liquidity
* Provide predictable terms and durations
* Minimize coordination and execution friction

Pools are configured with predefined parameters such as maturity and pricing, enabling immediate credit issuance once BTC collateral is verified.

This model prioritizes **speed, simplicity, and consistency**.

***

#### 2. Peer-to-Peer Lending

**Custom, Negotiated Credit**

Peer-to-Peer lending enables bespoke credit agreements between participants.

**Design intent**

* Support flexible loan structures
* Enable negotiated terms and pricing
* Accommodate institutional or high-value financing use cases

Participants rely on the same collateral enforcement and deterministic settlement guarantees while tailoring credit parameters to their requirements.

This model prioritizes **flexibility and customization**.

***

### Unified Risk & Settlement Model

Regardless of lending model, all loans follow the same lifecycle and enforcement rules.

* A single collateral lock mechanism
* A shared on-chain loan registry
* Deterministic settlement paths defined upfront

There is no difference in how BTC is secured, verified, or released — only how liquidity is sourced and priced.

This ensures:

* Consistent security assumptions
* Predictable outcomes
* Reduced protocol complexity

***

### Lifecycle at a High Level

Every loan follows the same abstract lifecycle:

1. BTC is locked on Bitcoin under predefined conditions
2. Credit is issued on an execution layer
3. The loan remains active until maturity
4. Settlement occurs deterministically:
   * Repayment unlocks BTC, or
   * Default triggers predefined settlement

Detailed flows and user interactions are covered in the **Product User Journey** section.

***

### What This Product Proves

This first product demonstrates that:

* Bitcoin can serve as first-class collateral without leaving Bitcoin
* Credit relationships can be enforced without custody or discretion
* Multiple market structures can share a single financing foundation

Borrowing and lending is not the end goal — it is the **proof point**.

***

#### ⚡ 1️⃣ Peer-to-Pool Lending — Instant, Fixed-Rate Access

**What It Is**

Liquidity pools aggregate stablecoins from multiple lenders, offering **instant BTC-backed borrowing** at fixed rates and durations. Borrowers can tap into these pools immediately without waiting for a specific lender.

**How It Works**

1. **Lenders** deposit stablecoins into pre-defined pools (e.g., *7-day, 30-day, 90-day* maturities).
2. **Borrowers** choose a pool and lock BTC collateral via a native Bitcoin script.
3. Upon verification of the lock, stablecoins are released automatically from a specific matched lender.
4. Borrowers repay the lender at maturity to reclaim BTC; otherwise, pre-signed transactions settle collateral among parties.

**Key Features**

* 🔄 **Instant access:** No back-and-forth matching delays.
* 💰 **Fixed-rate yield:** Predictable APR per pool.
* 🧱 **Continuous liquidity:** Funds are reused automatically after settlement.
* 🌐 **Multi-network:** Pools exist across supported EVM networks.

> **Ideal for:** Users seeking quick, predictable borrowing or passive, fixed-income lending.

***

#### 🤝 2️⃣ Peer-to-Peer Lending — Customized Loan Offers

**What It Is**

The P2P module lets borrowers and lenders **negotiate custom terms** — flexible durations, interest rates, or collateral ratios — directly through the protocol’s marketplace.

**How It Works**

1. **Borrowers** create loan requests with custom parameters (amount, duration, APR, collateral ratio).
2. **Lenders** browse available offers and accept ones matching their strategy.
3. Once accepted, borrower locks BTC → lender funds stablecoins on EVM.
4. Repayment or liquidation follows the same verifiable script-based process.

**Key Features**

* 🧾 **Customizable terms:** Duration, rate, collateralization, and asset type.
* 🧩 **Direct negotiation:** Optional off-chain communication or on-chain acceptance.
* 🔐 **Non-custodial:** BTC remains locked in Bitcoin script throughout.
* ⚖️ **Transparent lifecycle:** Offer → Accepted → Active → Repaid / Liquidated.

> **Ideal for:** Institutional lenders, DAOs, or high-value borrowers seeking tailor-made agreements.

***

#### 💸 Unified Risk & Yield Framework

| Parameter               | Description                                           |
| ----------------------- | ----------------------------------------------------- |
| **LTV**                 | Maximum 50 % BTC collateralization; negotiable in P2P |
| **Interest Type**       | Fixed per pool; negotiable in P2P                     |
| **Liquidation Trigger** | Automatic when Collateral Value < LTV                 |
| **Settlement**          | Pre-signed Bitcoin transactions; on-chain enforcement |

All pools and P2P loans share the same **on-chain risk engine** that monitors collateral health and executes deterministic settlements.