Solend - Lending and Borrowing on Solana

Nick Sawinyh on 07 Dec 2021

Solend founder on how they went from an idea to mainnet in 3 months, with the lending protocol built on top of Solana.

Hello! What’s your background, and what are you working on?

Hey, I’m Rooter and I’m the founder of Solend. I’m a Software Engineer and I’ve been working with Ethereum smart contracts since 2017. I’ve been super excited about DeFi since before the term was coined! The vision from the start has been to recreate financial products on modern rails in order to democratize access to them for the average person. I find it truly amazing how far we’ve come since then.

I started working on Solend in May 2021. Solend is an algorithmic, decentralized protocol for lending and borrowing on Solana. Think Aave or Compound on Solana. Solend allows anyone with an internet connection to earn interest by lending their assets, and allows them to use their deposits as collateral for borrowing.

Why Solend? Well, over the past couple of years I’ve seen Ethereum go from being an incredible sandbox for innovation to a club for whales and hedge funds. With gas fees as high as they are, it’s inaccessible to 99% of the population, which spoils the vision I had about democratized access to financial products for everyone. It was clear that scaling was needed, and bad. I looked at various alternatives but they were mostly just promises of future scaling. Always coming but never here. But Solana was different. Despite not being EVM compatible and having to learn new tools, Solana was fast and cheap, and already here.

What’s Solend’s backstory?

Solend started as a result of conversations with the founders of Raydium and Orca, who sold us on Solana being a suitable platform to build on. This timing coincided with the Solana Season Hackathon, which we entered and won 1st place for the DeFi track. From this early win we got tons of interest from users and investors. This validation helped with the decision to double down.

This was also in the midst of a huge market pullback (bitcoin dropped 40%). For some time it seemed like there might be another multi-year bear market. We spoke to investors about raising a seed round to ensure we’d be able to survive no matter what. In the end we got backing from Polychain, Dragonfly, Race, Coinbase Ventures, Solana Ventures, Alameda Research, Stani from Aave, Antonio from dYdX, Balaji Srinivasan, Hart from UMA, 0xMaki, Julian from Ribbon, DCFGod, Petrock, Epsilon Trading, and others. Quite the list!

What went into building Solend?

We had an extremely quick path to launching. Solana labs had published a lending protocol smart contract on their GitHub. We had a choice to make: either rebuild it from scratch or leverage the existing open source code to get to market faster. We knew there were multiple other teams working on lending who started way before us, so time was of the essence. We learned the code inside out, added features, and got the code audited. (The original code was not formally audited.) We went from an idea to mainnet in 3 months, also building a team and raising a seed round along the way.

What’s your business model?

As of November 2021, Solend is generating just over $150K in fees per day for lenders. Separately, Solend charges an origination fee for loans. (Charged when the loan is made, regardless of the duration.) As of November 2021 Solend has generated over $2M (tracked here).

Solend is the biggest lending protocol on Solana (pretty amazing since we started building after most of them!) Solend is differentiated by having the best UI, making security a top priority, and attractive rates. I was adamant on cutting out auxiliary features from the first version (like ctokens), and keeping the site as a single page, showing all important data by default. (I’m also super against having a landing page that requires you to open a new tab to enter the actual app!) These instincts came from years of being a user of other DeFi products. We also worked with hands down the best designers in the entire space, VectorDAO. Solend also tends to have the best rates, in part due to rewards from our liquidity mining program.

We will continue to differentiate by shipping groundbreaking features like isolated pools, LP tokens, and leveraged farming.

What’s your position on the regulatory landscape today?

The US has started looking at lending products, taking action against products like Coinbase Lend and Blockfi. I think there’s an argument that decentralized lending products don’t fall under the same classification since they’re decentralized platforms matching lenders and borrowers, rather than a centralized entity offering a product that promises some fixed annual rate of return. A centralized company promising a return is quite different from a verifiable on-chain algorithm.

That said, lots of discussion around regulation is extremely US-centric. There’s so much more to the world than the US, and crypto is global. We’re also not based in the US, but are keeping an eye out for new developments given their influence.

What are your goals for the future?

There’s a long road ahead of us (we’re very ambitious). We want to enable DeFi for everyone, not just for the top 1%. We want to enable all assets to leverage the utility that Solend provides. And we want to support the rest of the DeFi ecosystem to take things to the next level.

Solend is already a hundred times more affordable than lending protocols on Ethereum thanks to Solana’s amazing technology. We’re excited about the trend of blockchains getting faster and cheaper, and will follow it wherever it goes.

In order to add any asset without compromising on security of the protocol, Solend will be launching isolated pools. When a token is listed on Solend, it instantly gets upgraded with the ability to: earn interest, leverage long, short, use as collateral to borrow stablecoins for expenses, and more. We don’t want these amazing features to be reserved for only a handful of assets. Isolated pools solve this by siloing risk to the isolated pool, preventing it from affecting other markets on Solend.

To support the rest of the DeFi ecosystem, we’re working on making Solend a platform that anyone can easily plug into to build interesting use cases on top. This starts with comprehensive developer tools, and extends to building new primitives that DeFi applications can plug into.

What are your future thoughts for the DeFi market?

DeFi is a natural evolution of the financial system, which is bogged down by decades of legacy processes. Why shouldn’t the money that flows through the modern web run on similarly modern technology?

The New York Stock Exchange was founded before the lightbulb was invented. (1792 vs 1879) While it made sense back then, it no longer makes sense for financial services to be available only during the day. Or for transfers to take multiple days, especially if it’s over a weekend. DeFi fixes this.

A useful framework for thinking about this is “Embrace, Extend and Extinguish.” All financial products can be reimplemented on top of decentralized and 24/7 crypto rails (oftentimes by a single talented developer). This is the Embrace phase. Next, things that were unimaginable can be built on top, enabled by this new technology (e.g. AMMs and lending protocols). Then new ideas spring up on top of those. And so on. This is the Extend phase. Finally, when DeFi does everything and more than the legacy financial system, who will be left using it?

DeFi today is straddling the Embrace and Extend phases. There are still many existing financial products yet to be ported to crypto, and there’s tons of innovation happening every day. In the next few years, I think DeFi will grow by embracing more and more existing products. There will also be a couple of truly innovative products that are unimaginable even today.

I’m excited about how far we’ve come, and even more excited about where we’ll go.

Where can we go to learn more?

About the author
Nick Sawinyh
Nick Sawinyh is an LA-based crypto entrepreneur. After having spent over four years in the blockchain industry, Nick founded DeFiprime in 2019, with the idea to provide information about emerging DeFi ecosystem. He owns modest amounts of various cryptocurrencies.

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