they get a dollar yield on the principal from someone who wants to take a leveraged position
I don't know how to do this part without introducing additional trust assumptions. Bitcoin only knows how many sats are sent in a transaction, now how much they are worth in USD. So if you want to say "you have to send the lender $50 worth of BTC next month" I don't know how to set up a contract where "bitcoin" enforces that, because when the payment is due, bitcoin won't know how much BTC is worth $50. You can fix this by bringing in additional counterparties, e.g. tether corp or an oracle, but then it's not a bitcoin only product anymore -- it's bitcoin plus "trust this third party."
AND make it so there is no intermediate liquidation
I don't know how to do this part without introducing additional trust assumptions. Bitcoin only knows how many sats are sent in a transaction, now how much they are worth in USD. So if you want to say "you have to send the lender $50 worth of BTC next month" I don't know how to set up a contract where "bitcoin" enforces that, because when the payment is due, bitcoin won't know how much BTC is worth $50. You can fix this by bringing in additional counterparties, e.g. tether corp or an oracle, but then it's not a bitcoin only product anymore -- it's bitcoin plus "trust this third party."
That part is already true