DeFi Lending Venture Rides Solana’s High-Speed Chain to $100M in Deposits

Solend, a lending platform built on the proof-of-stake blockchain, Solana, has hit $100M in deposits, according to its team. 

Solend has done so without liquidity mining opportunities, but those are coming.

Solend works basically the same way Compound and Aave do. Users can post assets that will earn interest, and they can borrow a certain amount against those assets. If the value of their collateral drops, they get liquidated.

“Our users have been describing Solend as ‘Aave but faster and cheaper,’ and I think when the market wises up to this, the numbers will reflect it,” Solend’s founder, Rooter, told The Defiant.

Lending Protocol

Collateralized lending has been crucial to the decentralized finance (DeFi) market on Ethereum. It lets people hold assets they believe in and still unlock underlying value.

“The appetite for lending on Solana has been incredible, evidenced by our $100M in deposits in a month, all organic,” Rooter said.

Solend’s claim of $100M, however, doesn’t square with where DeFiLlama puts it, $57.4M, as of the afternoon of September 17.

This is no discrepancy, Rooter explained. He’s clear that they measure deposits and not value locked. With a lending protocol, borrowers take assets back from the deposits put in, so the total amount locked up should always be well below the total of deposits.

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As of Friday afternoon, the total deposits on Solend sat at $95M.

Either way, it’s a large amount of assets committed to a protocol on a less known chain than Bitcoin or Ethereum.

Rooter wasn’t willing to share many details about the forthcoming liquidity mining program, other than to confirm it’s going to happen, but he did provide some hints.

Mercenary Capital

“It’ll be similar to Compound’s, but with some improvements. Basically we see Compound’s liquidity mining as v1.0 and we’re doing 2.0,” Rooter said. “Compound’s program was really amazing at attracting a ton of TVL, kicking off DeFi Summer, etc. but we think there are some flaws.”

For example, in his estimation users borrowing funds only to deposit again and mine more did not make the protocol healthier. He also wants to discourage what he calls “mercenary capital,” — well resourced investors who deposit and borrow just to farm and dump the token.

The Solend team believes it can discourage some of these practices with a refined design.But there’s no reason for interested miners to wait.

“We plan to do retroactive liquidity mining rewards, since we want Solend’s token to be widely distributed into the hands of users,” Rooter said.

Solend is very new. It announced its launch on Aug. 13.

Built on Solana

It took Compound and Aave longer to hit similar levels. The oldest record for Compound on DeFi Pulse shows it at $93,000 in total value locked (TVL) as of Sept. 2018. It didn’t break $60M until seven months later.

Aave, another money market and currently the largest DeFi protocol on Ethereum, first broke $60M in May 2020, five months into its existence but several years into the operation of the company behind it.

DeFi was a much newer idea then, and those two projects came up at a time when asset prices were depressed following the initial coin offering boom and the regulatory crackdown that followed.

Chris McCann of Race Capital is a major proponent of the overall Solana ecosystem. He told The Defiant that one of the chief advantages for Solend’s product is the fact that it’s built on Solana.

“It’s easy to borrow for shorter time periods, deposit, move collateral etc. That whole process happens faster and takes less fee, so I can recycle capital more,” McCann said. Lower fees also make it feasible to just test the waters. A person can take out a tiny loan on Solend where on Ethereum the fees for a small loan would be more than the loan. “Less fees allow for more experimentation with these things,” he said.