Welcome to this post, where we’re going to take a look at how Solend, the leading lending platform on the Solana network, works.
If you are looking for a platform similar to AAVE to borrow or deposit your cryptocurrencies as collateral on the Solana network, Solend is the best choice. Being the largest and most liquid money market within Solana currently.
Let’s see how it works, and the aspects you should take into account before using solend, so you don’t make any mistakes.
What is Solend
Solend is a decentralized, algorithmic protocol for lending and borrowing in Solana.
Lending and borrowing has proven to be key in a DeFi ecosystem. However, current products are slow and expensive. In Solana, Solend can scale to be 100 times faster and 100 times cheaper. Solend aims to be the easiest to use and most secure solution in Solana.
If you’ve used AAVE, Solend’s operation is very similar, but in this case on the Solana network. Solend was the first or one of the first money markets to appear on the Solana network, and has made it possible to borrow using collateral on the Solana network. Whereas before, we only had decentralized exchanges, but no lending platform.
With over $1 billion (US) deposited in Solend and $400 million in loans, Solend is one of the platforms with the highest LTV or total locked value within the Solana network. And it is not surprising, as we have seen the importance of this type of platforms in each network, where when they appear, they get quite quickly and easily a lot of liquidity.
Although we have seen other lending platforms in Solana, Solend is currently the main and most used, and has captured the most liquidity.
To use Solend we must use a wallet compatible with the Solana network, being Phantom the most used and intuitive one. With the wallet connected on the top right we can start interacting with the platform.
The first thing you will find is the dashboard, where you can see the main pool and turbo SOL Pool in the menu. We will focus on the main pool, since the operation is the same as in the other pool and it is the most used by the users.
In the main pool we will see very relevant information that we have to take into account. The first thing is the global view, with the LTV locked inside the platform and the amount in loans, with the difference of liquidity available.
In all assets we can see the different cryptocurrencies that we can deposit and borrow, with quite a variety, where we find SOL, UST, USDC, ETH, BTC, stSOL and many more.
Next to each cryptocurrency, you will see the LTV, which is the loan to value, the amount you can borrow with respect to what you have deposited before being liquidated. For example, if you deposit 100 USDT, and the LTV is 75%, you will be able to borrow a maximum of $75 in value of any cryptocurrency, for example 75 UST.
Further to the right we find the total amount deposited, and further to the right the annual % we will receive for depositing our cryptocurrencies in Solend. In some cryptocurrencies you can see that they have incentives and if you place the mouse over it you can see how the annual % you receive is divided between Solend and the incentive.
The same happens further to the right with the borrow part. Where we will find the total amount that has been borrowed and the annual % that we will have to pay for borrowing. For borrowing we will receive as a reward the native token of the SLND platform. If you hover your mouse over it you will see the annual % you must pay and the annual % you receive in reward. The APR you see is the % you must pay subtracting the annual % you receive for borrowing.
It is very common for platforms to give incentives for borrowing with your token, in order to encourage more users to use their platform. Therefore, you will even see negative APRs, where they are paying you for borrowing. They don’t usually last long, though.
Before we go into more detail on how the basics work, one of the main advantages and interest that Solend has is stSOL and mSOL. Aside from its function as a lending platform, by being able to deposit these two forms of liquid Solana staking, it allows many users to borrow while getting interest from their Solana. Or even if you don’t want to borrow using your Solana in liquid staking, increase the annual % you can get with staking, by getting a % also here for depositing both stSOL and mSOL. This is one of the great advantages that liquid staking has, and that allows you to interact with different DEFI platforms, instead of having your cryptocurrencies locked in staking without being able to use them.
To deposit funds, it is as simple as clicking on the cryptocurrency you want, indicate the amount and below you will see the information. Aspects such as your limit to borrow with that deposit in $, the annual % you will receive and the current usage of that deposit.
Click on supply and confirm the transaction in your wallet. This way, you will already have your cryptocurrencies deposited generating an annual %. And you will be able to borrow with the collateral.
In the withdraw tab you can withdraw your cryptocurrencies at any time, as long as you have paid your loan in full if you have used this option. If you have only deposited to receive the annual %, simply in withdraw you will be able to indicate the amount and withdraw it at any time.
In borrow the operation is very similar to supply, but with the difference that we can only borrow the maximum LTV or loan to value of our deposit. Here, take into account the volatility of the cryptocurrency you have deposited and the one you borrow, since, if it reaches 85% of its value, your position will be liquidated. And, therefore, what you have deposited as collateral for the loan will be sold.
Solend allows a maximum LTV of 75%, but it is highly recommended to use a lower %, as a small movement of 10% and your position can be liquidated. So keep this in mind before borrowing, bearing in mind the risks involved.
With this clarified, indicate the amount, click on borrow and confirm in your wallet. And that’s it, this way you will have the cryptocurrencies you have borrowed in your wallet.
To repay your loan, we will go to repay, and indicate the amount we want to pay back. Either the total amount, or pay back a part of it to avoid being liquidated.
The cTokens are an interest-bearing depository receipt. It means you can convert USDC to cUSDC to get a liquid token that also earns interest through Solend. You can keep this token in your wallet to keep earning interest, or you can send it to someone else, and they will earn interest. It is the same operation as the liquid staking, but it represents a deposit in Solend. So you will get the annual % with your cToken that is appreciated with respect to the token you have deposited.
With the main difference that you will be able to exchange this token, in case of any problem if you could not withdraw your cryptocurrencies. Being an exchangeable token you could go to an Exchange and sell it for the cryptocurrency you have deposited.
The cTokens give a world of possibilities for developer integrations. Because cTokens are normal SPL tokens, they are very compatible with almost anything.
Here, simply select the cryptocurrency you want to deposit, indicate the amount and click on mint. Confirm in your wallet and you will have the cToken, for example if you have deposited SOL, cSOL in your wallet.
In redeem you can do the same process in reverse. Where you will pass your cTokens to the tokens you have deposited.
I hope it has helped you to know how Solend works, and the aspects that it brings as a lending platform to Solana. Remember, if you don’t have an account with Binance, you can create one just below.