Liquid staking solved a real problem: you can stake LUNA and still hold a tradable token. But most people who hold ampLUNA or bLUNA end up doing nothing with it. It sits in a wallet, accruing, illiquid in practice because selling it means giving up the position.
Borrowing against it is the middle path. You keep the stake, keep the exposure, and get spendable stablecoins out of the same capital.
Here is how it works end to end.
Step 1 — get a liquid staking token
If you hold plain LUNA, you first need to convert it to a liquid staking token. The two that matter on Terra2 are:
- ampLUNA, issued by Eris Protocol. Auto-compounding: the token's redemption value against LUNA rises over time rather than the balance growing.
- bLUNA, the bonded-LUNA receipt from the Lido-lineage contracts. Value-accrual behaviour differs; check the current mechanics before you assume.
Both are cw20 tokens. Both represent LUNA that is bonded to validators and earning staking rewards. Both trade on Astroport if you would rather buy than mint.
The key property for a borrower: the underlying stake keeps earning while the token is locked as collateral. You are not choosing between staking yield and liquidity. You get both, which is exactly why liquid staking derivatives make better collateral than the raw asset.
Step 2 — deposit as collateral
Connect a Terra2 wallet (Station, Keplr, Leap all work) and deposit into the protocol's custody contract for that asset. Two things happen:
- Your tokens move into custody and are marked as collateral.
- Your borrowing capacity appears, based on the oracle price of your deposit and the loan-to-value ratio governance has set for that asset.
Depositing alone does not create debt. You can deposit and borrow nothing — that is a perfectly reasonable state, and it is what you want if you are just parking collateral in advance of a market move.
Step 3 — decide how much to borrow
This is the only decision in the flow that actually matters, so it is worth being slow about it.
Your loan-to-value (LTV) is your debt divided by the value of your collateral. If you deposit $1,000 of ampLUNA and borrow $400 of SOLID, your LTV is 40%.
Every collateral asset has a maximum LTV — the ceiling the protocol will let you mint to — and a liquidation threshold, which is where your position starts getting sold to repay itself. The gap between where you sit and that threshold is your entire safety margin.
A practical way to think about it:
| Your LTV | Collateral drop before liquidation | Comfort |
|---|---|---|
| 20% | Very large | You will sleep fine |
| 35% | Substantial | Reasonable for volatile collateral |
| 50% | Moderate | Watch it |
| Near max | Small | One bad candle |
LUNA is a volatile asset. A 40% drawdown is not exotic. Borrowing at the maximum the interface allows means you are one ordinary bad week away from a forced sale — and forced sales happen at the worst possible price, because that is what a crash is.
Most experienced borrowers sit far below the ceiling and treat the headroom as the point of the position, not as unused capacity.
Step 4 — borrow, and know what it costs
Minting SOLID against your collateral creates debt that accrues interest over time, denominated in SOLID. Your debt grows slowly whether or not you touch the position, which means your LTV drifts upward even in a flat market.
Two consequences worth internalising:
- A position you opened and forgot is not static. Interest accrual alone can walk a 50% LTV up toward the threshold over a long enough horizon.
- Collateral that appreciates works in your favour twice — it lowers your LTV directly, and liquid-staked LUNA's accrual adds to the collateral side as well.
The current borrow rate is a live protocol parameter driven by utilisation. Check it in the app rather than trusting any number written in an article.
Step 5 — manage the position
You have four levers, and you should know all of them before you need any of them:
- Repay — return SOLID, burn it, reduce debt, lower LTV.
- Add collateral — deposit more, raise the denominator, lower LTV.
- Withdraw collateral — allowed only while you stay under the maximum LTV.
- Close — repay in full, unlock everything, walk away.
Set yourself an LTV you consider unacceptable before you open the position, and decide now what you will do when you hit it. The single most common way people lose money in collateralized lending is discovering their plan during the crash.
What this is good for
Liquidity without selling. The obvious one. You want cash, you do not want to end your LUNA exposure, and you do not want to realise a taxable disposal.
Yield-carrying collateral. Your collateral is a staking derivative. It accrues while locked. That accrual is a permanent tailwind against your interest cost — it does not eliminate the cost, but it changes the arithmetic materially compared to borrowing against a dead asset.
Optionality. A funded position with low LTV is a standing line of credit denominated in your own collateral. When something worth buying appears, you already have the facility open.
What this is bad for
Leveraged directional bets on the same asset. Borrowing SOLID to buy more LUNA to deposit as more collateral is a loop, and the loop amplifies drawdowns exactly as much as it amplifies gains. It is a real strategy that real people run, and it liquidates real people every cycle.
Money you need on a schedule. Liquidation risk does not care about your timeline.
Anything you cannot afford to lose. Overcollateralized borrowing is safer than most things in DeFi. It is not safe.
FAQ
Can I borrow against LUNA directly, or do I need a liquid staking token?
The protocol's core collateral set is built around liquid staking derivatives such as ampLUNA and bLUNA rather than raw LUNA, because they keep earning staking rewards while locked. The current accepted list is shown in the app and is set by CAPA governance.
Do I keep earning staking rewards while my collateral is locked?
Yes. The liquid staking token continues to represent bonded LUNA and continues to accrue, and that accrual belongs to the position. Locking it as collateral does not unbond it.
What loan-to-value ratio should I use?
Lower than the maximum. The gap between your LTV and the liquidation threshold is how far your collateral can fall before you are force-sold, and LUNA moves a long way in short periods. Many borrowers stay well under half the ceiling.
How is interest charged?
Interest accrues continuously against your SOLID debt at a rate driven by protocol utilisation. It is not billed separately — your debt balance simply grows, which raises your loan-to-value over time even in a flat market.
Can I withdraw part of my collateral while I still have debt?
Yes, as long as the withdrawal leaves you within the maximum loan-to-value for your remaining position. The app blocks withdrawals that would push you past it.