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Solana’s Biggest DeFi Lender Is Leaning Into 'Permissionless' Loan Markets
These “permissionless pools'' don't have any of the safeguards afforded to Solend’s whitelisted markets. That’s by design.
By Danny Nelson
Updated Apr 9, 2024, 11:22 p.m. Published Aug 17, 2022, 11:40 p.m.
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Solend is giving the same “permissionless” principles underpinning decentralized exchanges’ limitless token listings a try on Solana Network’s cryptocurrency lending market.
The biggest decentralized finance (DeFi) lender on Solana is letting anyone with 100 SLND (around a $70 fee) and some assets to spare spin up their own “permissionless pools” for lending those cryptos out.
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Permissionless pools are troves of user-loaned crypto assets that help keep DeFi moving. Though widespread as liquidity sources for decentralized exchanges, they're less common in lending circles. Only a handful of lending protocols on the market leader Ethereum blockchain use them, and none on Solana.
Already Solend’s 21 whitelisted lending pools supply Solana’s DeFi markets with $471 million in borrowable tokens such as SOL, USDC and wrapped assets like wBTC. Its team vetted those permissioned pools to weed out the inevitable scammers; if something goes wrong, Solend’s treasury insurance fund will back up platform users.
Permissionless pools have none of those safeguards. That’s by design.
“Make sure you trust the pool creator,” Solend’s main Twitter account warned prospective depositors and borrowers on Wednesday.
Free-for-all pools could get wild in a hurry. Data oracles could show faulty prices, deposited assets could have malicious tokenomics, liquidation mechanics could sour and liquidity could dry up, according to the project. It's up to the pool creators (who take 20% of the fees borrowers pay) to set it up correctly, Solend says.
In an interview with CoinDesk Tuesday, core contributor Rooter said users need to do their own research on pool creators before jumping in.
Still, project contributors view the move as essential in pursuing true DeFi. If the team always decides what is and isn’t lendable, then how decentralized can Solend be? “One of the core tenets of DeFi is permissionless,” pseudonymous contributor Soju told CoinDesk in a Discord message.
Solend has grappled with DeFi’s core tenets before. When its single-largest lender nearly got liquidated by June’s crypto market rout, a series of messy governance proposals elicited widespread criticism. Solend soldiered through and remains one of Solana’s top DeFi protocols.
Read more: Solana’s Biggest DeFi Lender Almost Got Rekt. Then Binance Stepped In
In a blog post, Solend’s team said its pools could help projects “bootstrap” lending markets for their native tokens, help influencers “monetize their following” by promoting use of their own asset pool and even support the creation of “unsecured” lines of credit where borrows ride on reputation alone.
Opening the floodgates on lending pools could push more value and users into Solend, Matty Taylor, the head of growth for Solana Labs, told CoinDesk in a Twitter message.
“The big idea is that no asset should just be sitting doing nothing. Currently, a lot of the world's assets are just sitting around, not working to create value. Assets of all kinds could be utilized in a permissionless pool and be generating value for people.”
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