In the current crypto asset allocation, many people overlook a mechanistic opportunity — generating relatively stable returns through interest rate differentials in the lending market. Recently, a method used by many players has been discovered: exploiting the price gap between ultra-low borrowing rates on certain DeFi protocols and the high yields of mainstream exchange financial products to achieve near risk-free arbitrage.

The logic is actually quite simple. Taking USD1 stablecoin as an example, the annualized borrowing rate on some lending protocols is as low as around 1%, while mainstream exchange financial products for stablecoins can reach an annualized yield of about 20%. The difference between the two is a full 19 percentage points. Even after deducting on-chain transfer fees and platform costs, the remaining interest spread is still quite substantial.

How exactly does it work? The first step is to collateralize assets on the lending protocol. Blue-chip tokens like BTCB, ETH, and BNB are of course fine, but a smarter approach is to use assets that generate income themselves, such as PT-USDe or asUSDF interest-bearing stablecoins. This way, you are arbitraging while still earning the original yield.

Once you have collateral, you can borrow USD1. The key is not to leverage to the maximum, leaving a reasonable safety buffer to cope with market fluctuations. This ensures the entire strategy runs smoothly and securely.

The final step is to transfer the borrowed USD1 to an exchange and invest it in the corresponding financial products, allowing the funds to automatically grow. Although the entire process involves multiple steps, the risk is indeed kept at a very low level — as long as the collateralization ratio is managed properly, you are essentially earning profits from market pricing differences.

This type of arbitrage is especially useful for defense in a bear market, as it can create additional income through the lending mechanism while assets are locked. If you're interested in DeFi lending and on-chain financial products, consider starting small and trying out this strategy.