# Lend (Buy & Bid)

## How to Lend USDT

To lend on Buttonwood Zero, users need to specify:\
a. The asset they would like to lend cash against (ETH, wBTC, & AMPL)\
b. The desired level of risk (A-Tranche is the safest and paid out first)\
c. Whether they want to Lend through **Buying Bonds** on the Spot Market, or through placing a **Bid Order** on the AMM. 

Lenders earn yield by purchasing discounted tranche tokens, which then have an expected redeemable value of $1.00.\
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In the below example, a user might purchase ETH A-Tranche tokens for $0.81 per token, implying a discount rate of \~19%, and an implied return of 23.46% ([See More:](https://docs.prl.one/buttonwood/buttonwood-basics/faq#how-do-you-calculate-the-discount-rate-interest-rate-what-is-the-difference-between-the-discount-rat) Discount Rate vs. Yield).

![Note: In times of low borrowing demand, lenders could be forced to place Bids rather than Buy on spot market.](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2Ftgb5TR4hHX1HjW7qDzr1%2FScreen%20Shot%202022-08-09%20at%206.58.15%20PM.png?alt=media\&token=e6df2a05-b39e-4b64-a099-e73e96004f7d)

### 'Buy Bonds' Flow:

After selecting the desired bond, the next step is to input how much cash (USDT) to lend:

![The Estimated Tranche Output is the number of Tranche tokens users receive based on the inputted borrow amount](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FFGr1bQkodB85VSl4dQOb%2FScreen%20Shot%202022-07-19%20at%206.38.45%20PM.png?alt=media\&token=765bdcc3-99c5-44c2-aa4d-7af8db463cb5)

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2F7MXvPITjVGIdbh6PZOfF%2FScreen%20Shot%202022-07-19%20at%206.38.14%20PM.png?alt=media\&token=6c483ff7-1573-409a-bfec-703a9271cb7c)

![After beginning the process of purchasing the bond users are asked to confirm through their wallet. Currently, the supported wallets include Metamask, WalletConnect, Coinbase, and Authereum.](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FlpGLHd6GkWBfxrxGwjPJ%2FScreen%20Shot%202022-07-19%20at%206.37.42%20PM.png?alt=media\&token=07339315-fdbe-4b84-8baa-8772ae5d6a77)

![
](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2Fb6LSVqzXwlLi6AdQUKzy%2FScreen%20Shot%202022-07-19%20at%206.36.42%20PM.png?alt=media\&token=a211d373-740a-4389-af00-bdb135126625)

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FhGcI2fvkSYjsi3sKuIpe%2FScreen%20Shot%202022-07-19%20at%206.41.32%20PM.png?alt=media\&token=88e846c6-c55c-4937-912c-19b31ac8fb4c)

### 'Bid Order' Flow:

In times of low liquidity or low borrowing demand, it may make more sense for users to place a bid order, rather than purchasing bonds on the spot market. This allows users to lock in their desired rate. <br>

If the liquidity is thin enough, users might only be able to place a bid:&#x20;

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FeegbnfUnT2PG4fyrqcnt%2FScreen%20Shot%202022-08-10%20at%2012.55.51%20PM.png?alt=media\&token=24327139-7db9-4569-af57-2272f86fee04)

After selecting Bid, users decide how much USDT they would like to deposit:

<div align="center"><img src="https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FHQJIMskxn4jIHZpMZ8NH%2FScreen%20Shot%202022-08-01%20at%201.09.54%20PM.png?alt=media&#x26;token=bc183e37-2fa2-49f8-af9c-b748c0f4d656" alt=""></div>

Lenders then need to set their bid price (Note: Bids must be below market price):

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2F4hvSMv4dmXJ7EjFywHrH%2FScreen%20Shot%202022-08-01%20at%201.12.34%20PM.png?alt=media\&token=7f53f0ef-b29a-4e9f-ba30-72ecac35e4c1)

Then, users confirm their bid:

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2F82od0dM1k0XiF9Qz9PHd%2FScreen%20Shot%202022-08-01%20at%201.12.47%20PM.png?alt=media\&token=199b1e28-811a-4eb4-97e1-6d433a29fabb)

Confirm the bid with your wallet:

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FCjS9OppmejSo1NvATxf7%2FScreen%20Shot%202022-08-01%20at%201.13.30%20PM.png?alt=media\&token=fddf0030-576e-44ee-a037-584155a8556d)

\ <br>

![](https://2960531599-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MkOcHevGAkolQq9Te-Z%2Fuploads%2FL2WmelFGfHK5iyymAcEZ%2FScreen%20Shot%202022-08-01%20at%201.14.17%20PM.png?alt=media\&token=4f3cd607-f886-4905-b286-d37e6ed5d286)

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Terms:

* *Collateral Asset*: This is the asset that underlies the tranche tokens. The risk profile of the tranche tokens is related to the changes in value of the collateral token.&#x20;
* *Tranche:* On the spot market, lenders can choose between A-Tranche and B-Tranche to lend against. The A-Tranche is paid out first and therefore receives a lower discount rate in normal market conditions.&#x20;
* *CDR*: This is the current collateralization ratio of the bond. Generally, higher CDR values are safer to loan against because it indicates a larger buffer before tranche tokens begin to lose value.
* *Maturity Date*: This is the number of days until the bond matures. Maturity is the date upon which the tranche tokens are redeemable for underlying collateral tokens.&#x20;