独家优惠奖金 100% 高达 1 BTC + 180 免费旋转

Solend Deep Dive

If you’re already an expert on Solend’s Main Pools, skip…..

This is going to be your one-stop primer on Solend, fresh and updated.

Things you might need to know before hand:

Wall Street

In the modern economy, we have banks. Think HSBC, HDFC (etc.) While they have a 100 different functions (payments, savings, investments, insurance (etc.)), their core function is still lending and borrowing. They keep people’s deposited money and give them interest for it while taking a cut. They then use this deposited money and lend it out to people. People need money to buy a home, open a business or pay for hospital bills (and so much more). The bank charges these people interest and take collateral from them, basically something with value like their house/gold/money. While this seems simple enough, there have been issues. Banks have been known to over-lend people’s deposits, give it out inefficiently and be corrupt.

2008, when the banks messed up.

When you see the word Solend, think Solana-lend, it’s basically that. Solend is a protocol that lends people the money that they need, all done on Solana. However, Solend is not a person. This money is given by lenders, people who have money and deposit it on Solend. They do this because they get interest from the borrowers. Borrowers then get the money that they need and pay interest to lenders for giving them that money. All of this happens on a decentralised platform, where no person/group controls the money but it is executed and secured by maths, coding and cryptography on the Solana blockchain. The Solend website line for all of this is: “Solend is an algorithmic, decentralized protocol for lending and borrowing on Solana”.

In the next part, I am going to use my own money to quickly show you how these services work and how you can use them (10 points for dedication please)

Main pool, dashboard, 23/02/2022

Lend

Supplying on the Main Pool

This is me supplying 1 SOL on Solend. I simply click on a token, this shows up, I put in how much I want to lend (1 SOL) and then press SUPPLY. I quickly confirm this on Phantom (It’ll pop up) and DONE! I can earn interest now.

A lending diagram (Done by Yours Truly)

Borrow

etc.

This is where a lender can also be a borrower. Lenders borrow money using their deposit as a guarantee (collateral). This allows them to have more money than they had before to trade on the market. They can then bet on whether an asset price will rise or fall. This is called a leveraged long and a leveraged short respectively (more on this below).

Borrowing on the Main Pool

I can borrow 75% of my collateral, 0.75 SOL for 1 SOL, I have to pay 3.58% of 0.75 SOL for 1 year of borrowing but I get 5.14% of this as SLND rewards (to incentivize using Solend). Small fee, almost irrelevant. I can repay my loan and withdraw my collateral, as seen above.

A borrowing diagram (Done by Yours Truly)

Lending and borrowing, simple Leveraging (Done by Yours Truly)

Leveraged long

This a trading/investing strategy that allows you to make bigger returns on a price movement. Suppose you have 100 dollars and you put it into SOL tokens. If the price goes up by 5%, you now have 105$. Great! But what if you wanted more returns. If you were sure the price of SOL was going to go up, you could use leverage to increase returns, while importantly also increasing risk. You could lend 100$ of SOL tokens on Solend and borrow up to 75% of the amount you have lent. To be safe, lets say you borrow 50$ and then put that into SOL. You now have 150$ worth of SOL tokens. Now, if the price goes up by 10%, you don’t just make 110$ but 115$. This doesn’t sound like a lot but its a 50% profit increase, which is huge! If you put 1 million dollars in and do the same, your profit goes up from 100,000$ to 150,000$! You simply return the borrowing + interest and fees and go home with your profits. This isn’t all gain, there are risks involved. if the value of SOL goes down a lot, you are exposed to liquidation(more on this below), where your collateral is sold to get a part of your loan back. This can make you lose a chunk of your collateral and can be pretty harsh. Only do this if you are confident of a specific price movement and are an experienced trader/investor.

Longing an asset using Solend (Done by Yours Truly)

Leveraged short

Think of a short as the exact opposite of a long, it is a bet that the price of the asset is going to go down. Importantly, it allows you to make money in a bear market, when just holding an asset can lead to losses. So, how does this work. Suppose you believe that the price of SOL is going to go down. You have done your market analysis (or your friend has) and the market is crashing. You take 100 USDT and you supply it onto Solend. You then use this as collateral to borrow the asset that you think will go down, in this case 50$ worth of SOL. You take this SOL and you sell it for more USDT on an exchange and you wait. Now, the price has gone down by 10% and you think it won’t go down anymore. You can now buy that 50$ of SOL for 45$ because it is 10% cheaper. You can then return the SOL amount you borrowed on Solend, pay the interest and get your collateral back. You make a profit of 5% and walk away with 105$ dollars, which in a bear market is pretty great!

Shorting an asset using Solend (Done by Yours Truly)

Liquidations

This is not all fun and games. Using leverage exposes you to the risk of liquidation. If the price moves the other direction of what you bet it will, you can face a liquidation, where the protocol sells your collateral to get back the money.

Let’s go through this. You have supplied 1 SOL to Solend and have borrowed 75$ USDT to use. This is 75% of your loan and is the maximum you can borrow in the case of SOL .

If SOL price swings down, the value of your 1 SOL that you have supplied also decreases. If this goes down by 15%, the value of your 1 SOL is now only 85$. Since the loan you have is still 75$, its value relative to SOL has increased to 88% of the total collateral. There is a risk here, if Solana’s price keeps falling, there is a chance that the borrowing will be more than the collateral and suppliers will not get their money back. So, to protect everyone’s money, Solend third-party liquidators sell 20% of your loan worth of your collateral, taking a 5% additional fee for doing so and reimburse the loan. Since 20% of your 75$ loan is 15$, they sell this and also the 5% fee, which is 3.75$. This means they sell 18.75$ worth of SOL from your collateral, leaving 71.25$ worth of SOL. You also owe 20% less now since it has been paid for you, taking your borrowing amount to 60$ (75–15). Your loan to value ratio is now below the threshold. If another price drop happens, the process repeats until the price recovers or you repay your borrowing. This is done to ensure that lenders do not lose their money and the network stays safe. Before you reach the withdrawal limit, however, Solend sends you notifications to top up your collateral to prevent liquidation, you cannot miss this. Still confused? The diagram below might help you.

Liquidation (Done by yours truly)

There are different thresholds for each asset depending on their risk profile.

Orca, a volatile asset, has a far lower LTV ratio and liquidation threshold to minimise losses to lenders amid big price swings.

So, just be aware of these liquidation risks when leveraging. Do your own research, be confident of a price movement and then make it rain. You don’t have to know exactly how liquidations work, just know that you have to be careful.

……till here

Basics done. Good job getting this far, take a walk if you need.

Now what are cTokens and Isolated Pools, how do they work and how you can use them. Let’s dive in.

cTokens

Main Pool vs cTokens

As seen earlier, you have to provide collateral to borrow an asset. When you provide 1 SOL of collateral, you can get up to 0.75 SOL borrowing to use, or 0.75 SOL worth of USDT (etc.) to use. What are the drawbacks with this?

This is where cTokens come in.

cTokens allow you to take a 1:1 token on your deposit. If you deposit 1 SOL, you get 1 cSOL (collateralised SOL) that you can use just as you would 1 SOL.

What is a cToken exactly?

Think of the cToken not as leverage but just a representation of your collateral. You are free to use the cSOL where you want, and it will always be worth 1 SOL, so a major price swing has no effect on it. SOL could drop by 50%, from 100$ to 50$, but your 1 cSOL is still redeemable for 1 SOL, it’s just worth a lot less. This only works because you cannot borrow alternative assets, and so the 1:1 ratio always remains. So a cSOL, or a cUSDT, is just a RECEIPT of that same asset that is now in the Solend pool. You can redeem your cSOL for 1 SOL at any time you want, essentially getting your DEPOSIT back immediately. Therefore, think of your collateralised token, your cToken, as your placeholder of your actual token. You can use this cToken as you would the normal token, in spending, saving and lending etc.

cToken basics (Done by yours truly)

Why don’t I just use the token itself?

You might be thinking, if I am getting the exact same thing in return, why go through this trouble. The answer is very INTERESTing. It’s the same reason that people lend. By collateralising your token, you get the chance to earn APY on it, just as it was explained before. You put your token into Solend, it MINTS (more on this later) a cToken, backing it up with the deposited token 1:1. Your cToken then earns interest, which is REDEEMABLE (more on this later too) when you get to exchange it back for the tokens. This is how the cToken is YIELD-BEARING. If you send someone the cToken, they can earn interest on it too! All they have to do is redeem the token and they get the interest! If you need to give someone 1 SOL but you also want the interest, simple redeem your cSOL and give them the SOL while keeping the interest. Thus, simply by having that cToken, you can earn yield (interest) from the token while also using it, best of both worlds right! You can then use this cToken as collateral in a Solend pool and get another asset, all while getting interest. Or, you can just keep it!

Note: Solend gives us this interest by using our deposit for lending and other activities where interest or yield is generated, and then fund this collateralised interest.

DEVELOPERS REJOICE!

This works well for developers too. Since cSOL are perfectly usable and the same as a SOL token, applications can be built using these cTokens and while earning interest. Just remember, composability and compatibility.

(Ignore all of this if you are not a developer)

cToken Walkthrough

Once again, I am going to use my own money to show you the minting and redeeming process for cTokens on Solend.

Minting

The cTokens page

Choose your token

MINTING cSOL

STEP 3: Choose your token and input the amount you want to collateralise (1 SOL as seen) and press (Mint 0.9924 cSOL). Note, you do not get exactly 1 but 0.9924, think of this as 1 as you will always get 1 SOL back, not 0.9924)

Redeem your token with interest

Step 4: To get your SOL back, simply open the Redeem page (top right), press MAX (mid-left) if you want all of it back or just input how much you want. Press Redeem 1 SOL to get it back with interest. Note. I am not receiving interest on this as it has not been long enough

It is literally that easy. You hold the cSOL, use it as collateral on another page or just as savings. Use it however you would a normal SOL token. If you need to give it to someone, they can take the cToken and hold it till they want to redeem it for the SOL token along with the interest! Or, redeem it to get the interest yourself and pay them with the redeemed SOL token

SOL is not the only one! You have 16 other (and increasing) number of tokens to collateralise. Look at the interest you want and go for it!

The beauty of all this is that Solana has very low fees! On Ethereum, you would be paying a large amount of your lending or borrowing on gas fees (fees to keep the network safe and running). Solana’s tech allows Solend to be very cheap and very fast while also keeping your money safe.

Now you know what a cToken is and how you can use it! Feel free to try it out before we move on to the next and final part of this deep dive, Isolated Pools on Solend!

We are almost there, hang on!

Isolated Pools

As we have seen till now, there are two things we can do on Solend. If we want to lend and borrow different assets, we can use the main pool to do that. If we want to borrow some SOL, we go to the main pool, deposit USDT/USDC and we can borrow some SOL to use as leverage etc. On the other hand, if we want to just use some SOL and don’t mind earning some interest while we do that, we can use cTokens, which is just a 1:1 token that gives us some interest. Crucially, cTokens are not leveraged since we are only getting 1:1 worth of interest and not like the leveraging we have seen above. These cTokens can then be used as savings or collateral for another loan, something you can’t do with the main pool.

These options still have a few drawbacks:

Isolated Pools offer:

You may ask, why doesn’t this just happen on the Main Pool, as seen above. Primarily, this would put the entire pool at risk. The Main Pool is a cross-collateral pool that has a large amount of supply from thousands of suppliers with different assets. This Pool is then used by borrowers to borrow assets that they might want to use or leverage, for collateral. Notably, the amount borrowed is always less than the amount supplied because:

This is why the Solend main pool has to be very careful with how much LTV and which tokens they include. One issue can make a lot of lenders lose money and potentially lead to the collapse of the Main Pool (if lenders stop trusting Solend). Let’s look at an example of what a risky asset could do to Solend’s main pool.

A classic rug pull example in a crypto bank (Note. this also happens in traditional banks with fake/risky collateral)

Isolated pools “quarantine” these assets by not putting them in the main pool but making a seperate pool for them. If an asset sees major price swings or even a collapse (happens for many reasons like bad management/fraud/loss of faith), the pool will collapse but the main pool will keep going! Investors who used the asset do see more RISK and therefore, should use the isolated pools carefully. Note. there are still checks and regulations to prevent such fraud, as well as strong liquidation mechanisms.

Furthermore, the token may be a very safe asset, like a SOL isolated pool. Why is it isolated then? Because the higher LTV (up to 90%) makes it much riskier since liquidations are possible. So, investors can get much higher borrowings for their collateral, increasing risk but not affecting those on the main pool where the people want the lower risk.

Thus, the RISK is higher, but the options for investors/traders increase as well.

How do I use these Isolated Pools?

Just like before, you open the Solend dashboard and connect your Phantom wallet

The TURBO SOL Isolated Pool

Supplying SOL in the TURBO SOL pool

STEP 2: Just like before, you click on the asset that you want to supply, in this case SOL, enter the amount you want to supply, (I have put 1 SOL), and press Supply 1 SOL. Note the different APY and User Borrow Limit.

Parameters for supplying SOL on the pool, including the LTV ratio and the Liquidation Threshold ++

PARAMETERS — Be aware that while you can take 90% LTV, your liquidation is at 95% with a liquidation penalty fee of 3% (compared to 5% above), the other parameters are not that important right now

Your Pool and Pool Position Overview (P.S. The UI is so clean)

POSITION — Once you have confirmed the transaction in your Phantom Wallet (It will pop up!), you can see your exact Pool position, the Net Value, the Borrow Limit and the Liquidation threshold (when your collateral will see some liquidation). You can see the Assets Supplied and Assets Borrrowed (Note: I have not borrowed anything, that is why it is empty)

Borrowing SOL on the TURBO SOL pool

STEP 3: If you now want to borrow up to 90% of your collateral, open the borrow tab and enter how much SOL you want to borrow. MAX takes it right to the limit, which as seen here is 0.89…SOL, which is 90% of my collateral value. Press Borrow 0.89… and you’re done!

RISK: Be careful of borrowing at your limit, as explained above, a price swing at this high risk loan can lead to liquidations

Repay and Withdraw: When you are done using this pool, simply Repay your loan with the accumulated interest and Withdraw your collateral. This is seen below.

Once you get the hang of supplying and borrowing, the UI is excellent, you can do it in seconds with negligible fees, just with your Phantom Wallet.

Repaying your loan in the TURBO SOL pool

Withdrawing your supply in the TURBO SOL Pool

The BONFIDA Isolated Pool

Final Risk Warning

As mentioned earlier, Isolated Pools can be risky. They give crypto users more options and a chance for higher returns, but of course with HIGHER RISK! They give developers a great tool to integrate with, and they allow for greater usage and interest in tokens in the Solana ecosystem. Before using Isolated Pools, please be confident that you understand the Liquidation risks and possible token risks itself (e.g. Sure that Bonfida ++ is a token you want to hold) and that you can repay the loan along with the interest!

The information above gives you a basic understanding of how to use Solend Isolated Pools, (and Main Pools and cTokens), but there is far more to learn like trading, leveraging and market analysis that helps you use this. Solend is a fantastic tool, but it isnt the entire toolkit or the knowledge of how to use it.

AND

WE

ARE

DONE

!

Congratulations! This was long and complex at times, I am so proud of you for getting through. If you still feel slightly confused, that is okay! Read parts of the article, take breaks, come back here, and most importantly, try Solend out for yourself. The low gas fees and great returns make it easy and cheap to test and you will get a hang of it in no time.

Conclusion

Now that you have reached the end, here is what you hopefully understand and know how to do.

Finally, this was a blast! Thank you so much for reading all of this and getting closer to financial freedom! There is so much more to learn and do in this space, hopefully this is a helpful first step, or second, or third….

Feel free to DM me on Twitter @theyveJ if you have any questions or suggestions. Any mistake in this is solely mine and not because of the reference material. There were a lot of links in here, they are mainly where I got my source material from.

WAGMI

Readings

Add a comment

What is your view?

Send

Related posts:

Lessons from a global pandemic.

Saying that last few months have been eventful will be a huge understatement; what started in a relatively insignificant wholesale food market in Wuhan, China soon engulfed the entire world in form…

Pandemic

History books will paint today We will tell our Grandchildren Of the fear, confusion, frustration and doubt Feuding Politicians, the crazy leading the blind Unfathomable losses and families torn…