How to Earn Yield on Bitcoin with Mezo: A Guide for Sovereign Savers

Mezo's ecosystem of vaults and pools enables you to maintain your BTC exposure while generating yield. These strategies range from conservative Lending Vaults, which earn interest from over-collateralized loans, to more dynamic Liquidity Vaults that generate fees from decentralized exchange trading.

This guide explains how to earn yield on Bitcoin using the Mezo ecosystem in 2025. We’ll explore the different vault and pool strategies, explain the mechanics behind the APY, walk through the on-chain math you can use to verify your earnings, and provide a step-by-step process for getting started.

The Problem Bitcoin Holders Face (And How Vaults Solve It)

Idle BTC is an inflation hedge, yes, but it’s also dead capital. It doesn't compound, doesn't generate income, and forces you to sell when you need liquidity. Every sale is a disposal event with tax implications, and you lose your Bitcoin exposure forever.

Mezo's approach changes this dynamic entirely. Instead of selling, you can:

• Keep your BTC as collateral
• Borrow MUSD (Mezo’s Bitcoin-backed stablecoin) at a fixed 1% APR
• Deploy that MUSD into yield strategies through managed vaults
• Maintain full control over entry and exit with no lock-ups

Vaults handle all the complexity — route selection, position sizing, and harvesting — so you don't need to manage loops, hedges, or incentive claims manually. Mezo's first native vault is managed by August, an institutional-grade on-chain prime brokerage handling $7B+ monthly volume.

The Complete Mezo Vaults & Pools Lineup

Before diving into specifics, let's clarify what "Target APY" actually means. For vaults, APY comes from underlying routes (DEX fees, loops) minus fees and gas. For pools, it's purely trading fees ÷ your liquidity.

1. MUSD Yield Vault

This is Mezo's flagship vault, and it's where most users start their yield journey.

How it works: Takes your MUSD and allocates it across Tigris liquidity pools, selective loops (like Gearbox), and saver-rate buckets. You earn base strategy yield plus Mezo rewards, Upshift Points, and tBTC incentives.

APY: 30%

Liquidity: $1.06M total deposits. Withdraw anytime — 25-hour cooldown period.

Best for: Users wanting professional management with multiple reward layers

2. Upshift BTC Vault

Upshift's vault offers a different approach through their Vault-as-a-Service platform.

How it works: Accept tBTC/cbBTC/wBTC on Ethereum pre-mainnet, receive uptBTC receipts, and liquidity routes to Mezo. Early depositors could boost earnings via Pendle markets on uptBTC. The strategy targets a 0.00% Max Daily Drawdown, designed to prioritize capital preservation on a daily basis while aiming for its target yield.APY: 15%

Liquidity: $17.79M total deposits. Withdraw anytime — 3-day cooldown period.

Best For: Yield farmers, DeFi power users, and investors seeking professionally managed, zero-fee strategies.Important note: Upshift blocks U.S. and U.K. users per their terms of service

3. UWI Vault

How it works: The UWI (YC S22) vault is Mezo’s first real-world asset (RWA) vault. Deposited MUSD is allocated to Express Building loans that finance pre-sold affordable housing in the Philippines and Indonesia. Since 2022, Express Building has originated 700+ loans with a 0% default rate, offering stable, predictable cash flows.

APY: 10%

Liquidity: $2M cap with a 3-month lockup, limited to 200 depositors. Exclusive rewards are available for commitments of $10,000 MUSD or more.

Best for: MUSD holders seeking stablecoin yields backed by real-world financing, with higher certainty from short-duration, pre-sold housing loans.

4. Liquidity Pools

For those who prefer direct exposure to trading fees, Mezo Pools offer three core pairs:

• BTC/MUSD Pool (Volatile Pair)
  • Earns 0.30% on every swap. Higher APY potential during high volume.
  • Risk: Impermanent Loss. If BTC's price moves significantly, the value of your liquidity position may be less than if you had simply held BTC and MUSD separately.
• MUSD/mUSDC & MUSD/mUSDT Pools (Stable Pairs)
  • Earns 0.05% on every swap. Provides lower but more predictable returns.
  • Risk: Minimal. As all assets are pegged to the US dollar, the risk of impermanent loss is extremely low.

All pools have zero lock-ups — add or remove liquidity anytime.

Understanding Vault Strategies

Let me break down how these strategies actually generate yield, starting simple and getting more advanced:

Lending Vaults

Where yield comes from: Borrowers pay interest on over-collateralized loans. Think of it like being the bank — you provide liquidity, borrowers pay fixed rates.

Protection mechanisms: Strict loan-to-value caps, automatic liquidations at 110% ICR (Individual Collateral Ratio), multi-venue spreading to reduce concentration risk.

Liquidity Vaults

Where yield comes from: DEX trading fees plus protocol incentives (mats tokens, partner rewards). Every trade in your pool generates fees proportional to your share.

Protection mechanisms: Hedged exposure strategies, minimum depth thresholds, automated exit bands when conditions deteriorate.

Ready to start?

1. Open a Vault position for a professionally managed, multi-reward strategy.
2. Explore Pool options if you prefer to earn direct trading fees.

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Frequently Asked Questions

How exactly do vaults produce yield?
The MUSD Vault (managed by August) deploys funds into Tigris pools, selective loops through platforms like Gearbox, and saver-rate buckets. You earn base yields plus rewards layers (mats, Upshift Points, and campaign-specific incentives like tBTC).

What if Bitcoin crashes — am I protected?
If you've borrowed MUSD against BTC, monitor your ICR closely. Liquidation occurs at 110% ICR. Set alerts at 150% for a safety buffer. Pool positions face impermanent loss risk in volatile pairs.

Can I get my Bitcoin back anytime?
MUSD is redeemable for $1 worth of BTC through the protocol. There's a 0.75% redemption fee unless you have an outstanding loan. No lock-ups on vaults or pools.

What about taxes?
Jurisdiction-specific, but borrowing against BTC typically doesn't trigger disposal events. Fee income and reward tokens may be taxable. Consult a tax professional — partner documentation includes relevant disclosures.

Are these strategies audited?
Yes. Multiple audits from Quantstamp, Halborn, OtterSec, and Cantina are publicly available. All contracts are verified and addresses published.

Disclaimer: References to expected yields, APY, or other performance metrics are based on current performance and protocol parameters. Actual returns may be subject to change due to market conditions, protocol governance decisions, and other risk factors. Users are responsible for carrying out their own due diligence before choosing a Vault, and for monitoring any changes made to the Vault over time, particularly those subject to a time lock.