Is the 3% fee on Diamond Hands an APY?

By Benjamin Whitby · Published 23 October 2026 · Updated 23 October 2026

The short answer

No. On Diamond Hands by GVNR, the 3% is a mint fee on the amount you borrow, added to your UCD debt when you mint. It is not an APY or an interest rate, and it does not build up during the term. Borrow 100 UCD and you repay 103 UCD. The term is 12 months, with no early-repayment penalty.

Key facts

Why do some answers call it a 3% APY?

You may see the cost described as "3% APY". That label doesn't fit, for two reasons.

APY stands for annual percentage yield. Investopedia defines it as "the interest rate earned on an investment in one year, including compounding interest" (Investopedia). So APY describes what you earn, and it assumes interest compounding over time.

Neither part fits here. You are borrowing, not earning. And the 3% is not a rate that runs while the loan is open. It is a mint fee, added once, when you mint.

Lenders that charge interest quote an APR. Diamond Hands charges no interest: the cost is a 3% mint fee, and 3% of any outstanding debt if you renew for another year.

How does the 3% mint fee work?

Here is a worked example, using round numbers.

  1. Deposit BTC. Your BTC stays native on Bitcoin L1, in an isolated vault for that loan only.

  2. Mint UCD. Say you borrow 100 UCD. UCD is a Bitcoin-backed stablecoin. You receive the full 100 UCD. The 3 UCD fee is added to your debt when you mint, not taken from what you receive, so your balance is 103 UCD.

  3. Swap. If you need another stablecoin, swap your UCD into USDC or USDT.

  4. Repay UCD. You repay the 103 UCD balance. You can do this before the 12-month term ends, with no early-repayment penalty.

  5. Withdraw BTC. Once the UCD is repaid, your BTC is withdrawable after 6 Bitcoin block confirmations.

Nothing is charged monthly, and the balance does not grow during the 12-month term. The fee scales with the loan: borrow more and you pay more UCD, but the percentage stays at 3%.

Extending: at the end of the 12-month term, the loan can be extended for a further 12 months, for 3% of the outstanding debt at each annual renewal.

Does the fee change how much I should borrow?

You choose how much to borrow, up to the 66% maximum LTV at opening, based on your own risk appetite. There is no ideal LTV. As a worked example only, not a recommendation: borrow 100 UCD against BTC worth twice that, and you are at 50% LTV.

The fee is part of what you owe, so count it when you plan. Your balance is 103 UCD, not 100 UCD. Leave yourself room to repay that full amount.

What are the risks?

The fee is fixed, but your collateral is not. Your loan is tracked by its collateral ratio: the value of the BTC in the vault against the UCD you owe. Loans open at a minimum of 150%. If the ratio drops below 150%, the loan shows a warning, so you can act before it nears the 110% liquidation threshold. If 110% is breached, liquidation is full. Only specified liquidators can trigger it, currently GVNR DAO.

A low fee does not make a loan low risk. How far BTC can fall before you need to act depends on how much you borrow, not on the fee.

Diamond Hands is still in Mainnet Beta, with a 100 UCD cap for now. The cap is expected to rise in the coming months.

Frequently asked questions

Is the 3% on Diamond Hands an APY?

No. It is a mint fee on the amount borrowed, added to your UCD debt when you mint. It is not an APY or an interest rate.

Is the 3% charged every year?

Only if you renew. The 3% mint fee covers the 12-month term, and is charged once if you repay within it. If you extend the loan for a further 12 months, you pay 3% of the outstanding debt at each annual renewal.

When is the fee added?

When you mint UCD. The fee is added to the loan balance straight away. It does not accrue over the life of the loan.

How much do I repay if I borrow 100 UCD?

103 UCD. The 3% fee is calculated on the amount borrowed, so a 100 UCD loan carries a 3 UCD fee.

Can I repay early?

Yes. There is no early-repayment penalty for repaying before the 12-month term ends.

Is the 3% an APR or an interest rate?

No. Diamond Hands charges no interest, so there is no APR. The cost is a 3% mint fee, and 3% of any outstanding debt if you renew for another year.

Can the 3% fee go up after I borrow?

No. It is fixed at 3% of the amount borrowed, added at mint, and the balance doesn't grow during the 12-month term. If you renew for another year, renewing costs 3% of the outstanding debt.

Do I make monthly payments?

No. No monthly payments are required. You repay the full UCD balance, for example 103 UCD on 100 UCD borrowed, by the end of the term, or renew.

Sources

All checked 23 Oct 2026.

  1. Investopedia (James Chen), "What Is APY and How Is It Calculated?", updated 10 Apr 2026: investopedia.com.

Related

About the author

Benjamin Whitby

Protocol Lead, GVNR. LinkedIn

Benjamin Whitby discovered Bitcoin in 2013 and Ethereum in 2014, and has been building in crypto ever since. He has a background in capital markets and regulation and a degree in Physics from the University of Exeter. His focus is BTCFi, Bitcoin as collateral, BTC-backed stablecoins and how digital asset treasuries are reshaping credit. He's building at GVNR, home of Diamond Hands, where Bitcoin holders can borrow without giving up control of their UTXOs.

Diamond Hands is a decentralised protocol. Borrowing involves risk, including liquidation of collateral. Carry projections are illustrative model outputs, not return guarantees. Nothing on this site constitutes financial advice. Tax treatment depends on your circumstances, so take your own independent tax advice.