Many seasoned crypto traders have fallen into this trap—trying to buy in at low prices by using the collateralized borrowing feature on a major CEX, staking BNB to borrow USDT. It sounds pretty convenient—no need to transfer tokens on-chain, just a few clicks.

I used to do the same until one day out of boredom, I compared the borrowing costs in DeFi. After reviewing the data, I almost fell off my chair.

**The Truth on the Bill**

The borrowing scheme on a major CEX: the annualized interest rate for USDT is variable. When the market slightly improves and more people borrow U, the rate immediately jumps to 8%-15%, or even more outrageous figures. Plus, interest is calculated hourly, with compound interest.

On the DeFi side? Using slisBNB to borrow USD1 is a completely different world. First, slisBNB itself yields about 3% node rewards. Second, the annualized borrowing interest for USD1 stays around 1%-2%. Finally, USD1 and USDT are almost exchangeable at parity, with virtually no slippage.

**Breaking Down the Ledger**

Borrow U on a major CEX: not only do you not get the staking rewards for BNB, but you also pay nearly 10% interest, pushing the total cost up to 13%. Borrow U in DeFi: earn 3% income, pay 1% interest, resulting in a net +2% gain.

With one in and one out, the annualized return is artificially stretched by 15 percentage points!

Here's a concrete example: if you borrow 10,000 U, over a year, this difference amounts to 1,500 U. Think about what you could do with that money?