Solend stands as a foundational pillar within the Solana DeFi ecosystem, operating as an algorithmic, decentralized lending protocol. Often likened to Aave on Ethereum, it provides a robust platform for users to earn yield on deposited assets or to borrow against them, all facilitated by a system of automated market making and dynamic interest rates.
This guide delves into the current state of the Solend project, its core mechanics, and how you can effectively participate in its ecosystem.
An Overview of the Solend Protocol
Solend is a decentralized money market protocol built on the high-speed Solana blockchain. Its core function is to algorithmically adjust interest rates based on the real-time supply and demand of assets within its pools. Users can deposit supported cryptocurrencies to earn a yield (Supply APY) and use those deposits as collateral to borrow other assets, for which they pay interest (Borrow APY).
A key differentiator for Solend is its inclusion of an isolated "innovation pool" for emerging and higher-risk assets. This provides a venue for trading and even shorting these assets on-chain, while protecting the main liquidity pools from associated volatility.
Furthermore, Solend is integrating a native credit scoring system called Soda. This system generates a neutral信用 score based on a user's on-chain behavior and other credit factors. A high score can grant users benefits within Solend, such as a higher collateral factor, and this data is made available for other protocols to utilize, aiming to create a broader on-chain信用 ecosystem.
The SLND Governance Token
The Solend ecosystem is governed by its native token, SLND. With a maximum supply of 100 million tokens, its distribution was designed to be community-centric:
- 60% to the Community: Half of this allocation was distributed via liquidity mining incentives, while the other half was allocated to the Solend DAO treasury for community-governed initiatives.
- 25% to the Core Team: Reserved for the developers and contributors building the protocol.
- 15% to Investors: Allocated to early venture capital and angel investors.
SLND holders have the right to participate in the governance of the protocol, voting on proposals that dictate parameters like which assets to list, risk parameters, and the future direction of the project.
How to Use Solend: A Step-by-Step Guide
Engaging with the Solend protocol is a straightforward process designed for user accessibility.
Initial Preparation
- Secure a Solana Wallet: You will need a Solana-compatible wallet like Phantom or Solflare to interact with the dApp.
- Acquire SOL for Gas Fees: Every transaction on Solana requires a small amount of SOL to pay for network gas fees. Ensure your wallet is funded with some SOL from a major exchange.
- Choose Your Assets: Decide which assets you wish to deposit. Major cryptocurrencies like USDC, ETH, BTC, and SOL themselves are common starting points due to their deep liquidity.
Supplying Assets to Earn Yield
- Navigate to the 'Supply' section on the Solend application.
- Select an asset and enter the amount you wish to deposit. The interface will display the current Supply APY for that asset.
- Approve the transaction in your connected wallet. Once confirmed, your assets are supplied to the pool, and you immediately begin earning yield.
The Supply APY is paid out in the same asset you deposited and is calculated based on the earnings generated from borrowers in that pool. Additionally, certain pools offer extra Liquidity Mining (LM) rewards in tokens like SLND, which can be claimed on the 3rd of every month.
Borrowing Against Your Collateral
- Navigate to the 'Borrow' section. Your supplied assets automatically serve as collateral, generating your borrowing power.
- Select the asset you wish to borrow and the amount.
- Approve the transaction in your wallet. The borrowed assets will be sent to your wallet, and you will begin accruing interest on the loan.
The Borrow APY is dynamic. For some stablecoins, the borrowing rate can be effectively negative after accounting for SLND liquidity mining rewards, meaning you can potentially earn while borrowing. There is no set repayment deadline; you can repay the loan plus accrued interest at any time.
👉 Explore real-time borrowing rates
Understanding Your Account Health
Managing your borrowed position is critical to avoid liquidation. Your account dashboard displays key metrics:
- Net Value: The total value of your supplied assets minus your borrowed assets.
- Supply Balance: The total value of all your deposits.
- Borrow Balance: The total value of all your outstanding loans.
- Borrow Limit: The maximum you can borrow based on your collateral's value and its Loan-to-Value (LTV) ratio.
- Borrow Utilization: The percentage of your borrow limit currently in use. Keeping this low is crucial.
- Liquidation Threshold: The point at which your account becomes under-collateralized and eligible for liquidation—an event that incurs penalties.
Solend uses a dual-oracle system (primarily Pyth with Switchboard backup) for price feeds to ensure accurate and robust liquidation calculations.
Claiming Your Rewards
Accrued liquidity mining rewards can be viewed by clicking the "Pending Rewards" button on the application's interface. These rewards become available for claim on the 3rd of each month (UTC).
Frequently Asked Questions
What happens if I get liquidated?
Liquidation occurs when the value of your borrowed assets exceeds your liquidation threshold due to market movements. A portion of your collateral is automatically sold at a discount to repay your debt and ensure the protocol remains solvent. This results in a net loss of funds for the borrower, so it's vital to monitor your borrow utilization.
Is Solend safe to use?
As a well-established protocol on Solana that has operated since 2021, Solend has undergone multiple audits and real-world stress tests. However, all DeFi protocols carry inherent smart contract and algorithmic risk. It is always advised to only risk capital you are prepared to lose and to start with smaller amounts.
Can I borrow without supplying collateral first?
No. Solend, like most decentralized lending protocols, requires over-collateralization. You must first supply assets to generate borrowing power before you can take out a loan. This mechanism protects the protocol from insolvency.
How are the interest rates determined?
Interest rates are entirely algorithmic and market-driven. They adjust dynamically based on the utilization rate of each asset's pool. High demand to borrow an asset will cause its Borrow APY to increase, which in turn raises the Supply APY to attract more depositors.
What is the advantage of a credit system like Soda?
A信用 system like Soda aims to move beyond pure over-collateralization. By granting users with strong on-chain信用 histories better terms (like higher LTV ratios), it can improve capital efficiency for responsible users and pave the way for more sophisticated financial products in DeFi.
What's the difference between the main pool and the innovation pool?
The main pool contains established, high-liquidity assets with conservative risk parameters. The innovation pool contains newer or more volatile assets. It is isolated, meaning its risks are contained and do not affect the main pool, but it also allows for trading and speculation on these emerging assets.