Solend has just launched “permissionless liquidity pools” that are sure to turn heads and allow anyone to play banker.
Solend, an algorithmic lending protocol running on the Solana blockchain network, allows users to deposit crypto tokens into a liquidity pool to earn interest and borrow money.
'Be careful'
But in a departure from previous practice, Solend doesn't create the pools, instead letting anyone set them up.
Like a regular liquidity pool, permissionless pools share fees with the creator. Since anyone from the well-meaning DeFi investor to the most degenerate Degens can create a liquidity pool, Solend advises users to “be careful which pool you interact with.”
Liquidity pool creators can walk away with the deposited funds.
“As bad debts accumulate in the pool, users who are the last to exit will not be able to withdraw their deposits,” the Solend team explained in a tweet. To keep spammers away, Solend charged a fee of 100 SLND, about $60, to set up a pool.
The platform was created at the Solana Hackathon in June 2021 and has since raised $6.5 million from Polychain and Dragonfly, among others. To date, Solend has delivered a total of $475 million in assets and borrowed a total of $174 million in assets.
“I believed that it should be possible to create a lending market for any token, allowing the short selling of ANY asset, allowing for better price discovery,” tweeted Rooter, the pseudonymous Solend co-founder. “It was an opportunity to create the product I wanted to see in the world, using lessons learned from previous experiments that I thought could be improved.” Permissionless pools were part of the vision from the start.”
Honeypots
Rooter did not deny the risk. He told The Defiant that people can abuse permissionless pools, “similar to how bad actors have created honeypots on Uniswap with fake tokens or tokens that can be bought but not sold.”
Permitless pools are a fairly exotic and risky venture.
“Lending for long-term assets is, in theory, a large, underserved market. However, in practice we have seen that the risk is difficult to manage at scale,” Messari analyst Dustin Teander told The Defiant. “Furthermore, it damages liquidity, preventing most large borrowers from being enticed to take on additional risk and poorer liquidity. It’s a potentially large market that may well find a niche initially.”
Automated arbitrage and lending aggregator Arb Protocol and Solana stake pool SolBlaze have committed to creating permissionless pools on Solend. According to Solend's @legocactus, many more plan to do the same.
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