Simple DeFi Strategy in Practice
In this lesson, I demonstrate the implementation of a very simple strategy in practice. The purpose of this lesson is not for you to just copy it, because over time it will change. Interest rates will change, incentives will disappear. The real purpose is to introduce you to incentives — rewards distributed by protocols to attract and retain users — and to show opportunities through one simple strategy that allows you to earn both from asset growth and from allocating borrowed capital into more profitable instruments.
We begin with the Compound lending market. Recall that in the “Markets” section you can see which instruments are available and on which networks. Today we will use the Optimism network and borrow ETH. Why ETH, and why Optimism? Because if we compare, the borrowing rate across networks is very different from what Optimism currently offers.
Borrowing ETH on Optimism
On Optimism, the borrowing rate is negative. This means we are paid to borrow. We take a loan — and receive rewards instead of paying interest.
This happens because Compound distributes COMP token incentives that fully offset the borrowing interest rate. At the moment:
- Borrow rate: ~6%
- COMP rewards: ~66%
Incentives cover the borrowing cost entirely, resulting in a profitable loan.
These incentives are temporary and will eventually end. But right now, this is the most profitable opportunity to take a nearly free loan and even earn income for doing so.
ETH, BTC, and OP can be used as collateral. We will use ETH as collateral and borrow stablecoins against it.
Getting ETH on Optimism
To supply ETH as collateral, we must get ETH onto Optimism. There are two ways:
- Withdraw ETH from a centralized exchange directly to Optimism
- Use a bridge in the swap aggregator
I connect my wallet, select ETH on Arbitrum, select Optimism, choose the amount (0.075 ETH), and bridge it. The transfer is nearly fee-free apart from gas.
Once the transaction finalizes, the ETH appears on Optimism and is ready to use.
Supplying ETH to Compound
Next, we open Compound, go to the Dashboard, and supply ETH as collateral.
One transaction: deposit ETH as collateral.
Now the platform allows borrowing stablecoins against it. Borrowers cannot disappear with the loan because the system enforces overcollateralization. The collateral value must exceed the loan value.
For ETH on Optimism:
- Collateral Factor: 83%
(You can borrow up to 83% of collateral value) - Liquidation Factor: 90%
(Liquidation occurs if debt reaches 90% of collateral value)
Borrowing Stablecoins
We borrow 7 USDC.
The interface warns of liquidation conditions. I confirm the transaction.
Nominal debt grows because base interest is ~30%, but this cost is fully covered by COMP incentives.
This is temporary — incentives will decline — but it demonstrates what is possible in DeFi.
Allocating Borrowed Funds
Where do we send the borrowed stablecoins?
Since the borrowing rate is negative, any positive deposit yield is profitable.
Options:
- Bridge to Solana and deposit at ~12–13% APY
- Deposit on Aave in Optimism at ~7% APY
(long-term average ~6%)
In this example, we deposit the borrowed 7 USDC into Aave on Optimism.
This creates a spread between:
- Borrowing cost: effectively 0% or negative
- Deposit yield: ~6–7%
Resulting Position
The structure now looks like this:
-
Hold ETH as collateral
- You benefit fully from ETH price growth
- You continue holding the asset long-term
-
Borrow stablecoins against ETH
- Borrowing is currently free or profitable
- Borrowed capital is deployed into yield-generating instruments
-
Deposit stablecoins at a higher APY
- Earn ~5–7% APY (or more on other chains)
This is not the most profitable strategy — it is simply a demonstration.
Expanding the Strategy
Stablecoins can also be used in:
- Liquidity pools
- Concentrated liquidity positions
- Incentivized pools
- Other lending platforms
ETH–USDC liquidity, for example, can produce much higher yields than lending.
This lesson demonstrates a simple entry-level example — maybe 5% of what DeFi allows.
Advanced strategies include:
- Borrowing ETH against BTC
- Borrowing BTC against ETH
- Multi-asset leveraged staking
- High-yield liquidity routing
- Hedged yield farming
- Volatility farming
- Stablecoin diversification strategies
These will be covered in the PRO modules.
Why Even Small Yield Matters
A common misconception:
“6% or 8% APY is too small.”
In DeFi, this is not small because:
- Your main profit comes from ETH appreciation
- Yield is added on top, compounding long-term returns
- Profit can be reinvested into more ETH
- Borrowing weak assets (stablecoins) under strong assets (ETH) increases leverage safely
This is the same principle used in:
- Real estate mortgages
- Dollar borrowing under strong assets
- Institutional long-term strategies
Borrow weak assets; hold strong assets.
Stablecoin Diversification and Risk Management
If you fear USDT may depeg:
- Borrow USDT
- Convert to USDC
- Deposit USDC
If USDT collapses to $0.10, you still repay USDT, not dollars.
Borrowing a weak asset and holding a stronger one is a hedge.
You can also split positions 50/50 across stablecoins.
Main rule:
Borrow weak assets
under strong assets.
Basic vs PRO Modules
Basic tier covers:
- Lending
- Liquidity pools
- Swaps
- Wallets
- Security
PRO modules include:
- Advanced strategies
- Multichain mechanics
- Liquidity routing
- Hedge positions
- Leverage strategies
- Real yield systems
- Professional-grade DeFi management
What you see in basic lessons is only a small fraction of what is possible.
What Comes Next
In the next lesson:
- A complete beginner portfolio
- Asset selection
- Allocation structure
- Long-term balance strategy
- Monthly plan
- How to manage the portfolio in any market phase
- How to start generating yield from day one
These materials are created for educational purposes only and do not constitute financial advice.