## Using an Idea to Change Your Thinking and Make Money: Low-Interest Borrowing + High-Interest Lending Arbitrage Game

Recently, an interesting phenomenon has appeared in the market—some leading DeFi lending protocols offer USD1 stablecoin loans with an annualized interest rate of only 1-3%, while mainstream exchanges' stablecoin investments yield 18-22%. At first glance, this 15-21% interest rate spread seems like a gift from the sky.

But is it really that simple?

### Why does this interest rate inversion occur?

The underlying logic is quite clear. DeFi and centralized exchanges operate on different principles—DeFi lending markets are still in the exploration stage, and platforms often subsidize interest rates to attract users; meanwhile, exchanges need a continuous flow of stablecoins to support trading, so they are willing to pay higher interest to attract funds. The pricing mechanisms of the two markets are temporarily not aligned, leaving arbitrage opportunities.

Simply put, borrow cheaply from Platform A and lend at a higher rate on Platform B.

### Sounds perfect, but are there really no risks?

Let's start with the main risk—the smart contracts in DeFi always carry unknown security vulnerabilities. Plus, in extreme market volatility, the liquidity of such strategies may face challenges.

Thinking further, interest rates are not set in stone. Platforms may change their incentive policies at any time to adjust user structure. If borrowing interest rates rise or deposit interest rates fall, the entire arbitrage space could quickly shrink.

### A painful fact

This profit opportunity essentially proves that market efficiency is still not high enough. Once more people discover this trick, participation will surge, increased borrowing demand will push up interest rates, while intensified competition in deposits will lower investment returns—by then, the interest spread will melt away like ice cream. So if you plan to try it, speed is indeed crucial.

In the crypto market, entering early always has an advantage over being a slowpoke.