The Solana-based lender says beware of its own bid
In a move that’s sure to turn heads, Solend has just launched “permission-free liquidity pools” that any banker can play with.
Solend, an algorithmic lending protocol powered by the Solana blockchain network, allows users to deposit crypto tokens into a liquidity pool to earn interest and borrow money.
‘Be careful’
However, in a departure from previous practice, Solend does not create the pools, but lets anyone set them up.
Like a normal liquidity pool, pools without permission also share fees with the creator. Because anyone from the well-meaning DeFi investor to the most degenerate swordsman can create a liquidity pool, Solend advises users to “be careful about which pool you interact with.”
Liquidity pool founders can walk away with the money deposited.
“As bad debt accumulates in the pool, users who get out last won’t be able to withdraw their deposits,” the Solend team explained in a tweet. To keep spammers out, Solend introduced a fee of 100 SLND, about $60, for setting up a pool.
The platform was founded at the Solana Hackathon in June 2021 and has since raised $6.5 million from Polychain and Dragonfly, among others. To date, Solend has recorded $475 million in assets provided and $174 million in assets borrowed.
“I felt that it should be possible to set up a credit market for any token, allowing shorting of ANY asset and allowing for better price discovery,” tweeted Rooter, the pseudonymous co-founder of Solend. “It was an opportunity to build the product I wanted to see in the world, learning from previous attempts that I felt could be improved. Permissionless pools were part of the vision from the start.”
honey pots
Rooter didn’t deny the risk. He told The Defiant that people can abuse permissionless pools “much like bad actors have made honeypots on Uniswap with fake tokens or tokens that can be bought but not sold.”
Permissionless pools are a rather exotic and risky proposition.
“Lending against long-tail investments is theoretically a large, underserved market. In practice, however, we’ve seen that risk is difficult to manage at scale,” Messari analyst Dustin Teander told The Defiant. “Furthermore, it breaks liquidity so most large borrowers are not enticed to take on additional risk and worse liquidity. It’s a potentially big market that can certainly find a niche to begin with.”
Automated arbitrage and credit aggregator Arb Protocol and Solana staking pool SolBlaze committed to creating permissionless pools on Solend. According to Solends @legocactus, many more are planning to do the same.
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