Solend and Solvent — Giving NFTs Liquidity
This Twitter Spaces interview is an exciting opportunity to introduce the Serum community to an exciting new project in the Defi space. The Solvent and Solend teams are here to discuss how their NFT project and Defi lending projects are combining to disrupt the Web3 economy.
Solend and Solvent Twitter Spaces Conversation
Give us a quick walkthrough of Solvent and Solend.
Solvent is a platform for buying, selling, and trading NFTs. We create index funds that track the floor price of NFT projects so users don’t have to wait for a buyer to liquidate their NFT tokens. They can sell them at any time, for free, and pull their capital out of the NFT project.
Solend is a lending platform on Solana. You can come in with your own assets and lend them out to get yield, or you can use your assets as collateral to borrow. We’ve been around for almost a year now, have almost $1 billion in deposits, and we’re really looking forward to launching this NFT lending project with Solvent.
So, we had another Twitter Space with you guys from the Solvent team just a few weeks back. What have you guys been cooking up since then? What’s new?
Since the last time we had a chat, we’ve been working a couple of things. The first was working on a JavaScript SDK protocol. The second big project was removing the 2% transaction fee. Now, essentially, users can swap their NFTs for free and instantly receive a 2% upside when they trade them on the Solvent platform.
The end goal of Solvent is to be a base layer protocol where financial instruments can be structured around NFTs. And we’re happy to be partnering with Solend to bring new investment instruments like NFT lending. If you have NFTs sitting in your wallet and you’d like to gain some APR on it, you can gain that through Solend by leveraging the liquidity in your NFTs. You’ll also be able to use them as collateral if you wanted to borrow via the integration of Solend and Solvent.
What are some of the things users need to keep in mind when using Solvent?
The first thing users want to keep in mind is that we give out the same number of Droplet tokens for any NFT that’s deposited. As of now, we don’t take rarity into account when giving out those tokens. We want users to be cautious and aware of this because you’re essentially losing ownership of your NFT for a short time by depositing it on Solvent. We wouldn’t want anyone to lose their liquidity of a rare NFT without being aware of this first.
Secondly, as long as you hold 100 tokens you can redeem any of the NFTs that are in the vault. But, there is a chance of losing the NFT a user deposits so that’s another thing we would want users to be really careful about.
So, is there any way for a user to prevent losing the NFT they deposit?
Yes, there is. So, we’re working on some other features that would allow users to not lose the NFT they’ve deposited. The idea is that when we roll them out users will be able to take part in NFT lending with less of the risk.
We’re considering a feature where users will be able to lock their NFT. When they lock their NFT, it unlocks the Droplet tokens but the user will still retain ownership of the NFT.
What are some of the things we should keep in mind before lending on Solend?
So, the main thing you should probably be concerned about is what’s known as liquidation risk. When you use Solend and you want to take a loan, you need to have an over-collateralized position — meaning that you have to deposit more assets than you’re wanting to borrow.
So, for example, you may have to deposit $100 of Droplet in order to borrow $50 worth of USDC. If the value of your Droplet drops to $70, then your account is at risk of being liquidated. Someone could come in, pay off your loan, and seize the Droplet you put up as collateral. Anyone can do this and both parties are eligible for a liquidation bonus or liquidation penalty — depending on which side of the transaction you’re on. Usually the penalty is 5% to 10%.
You’ll want to make sure you don’t borrow too much against your assets. It’s also a good idea to check in every day. People often ask, “how much should I borrow?” The answer depends on your use case. If you’re checking in on the value of your collateral every day, you can be more aggressive than if you’re only checking once a month.
Another thing to keep in mind would be smart contract risk. This applies to all Defi protocols. Essentially this happens when there’s any issues with the smart contracts themselves.
That said, though, Solend has been live for about a year with almost $1 billion in deposits. We also run a “bug bounty” program where we’ll pay you up to $1 million if you find a critical issue with our platform. We actually have paid out close to $1 million in “bug bounties” in the past.
The last risk I’d like to call out is what I refer to as platform risk. So, since Solend is built on top of Solana, it inherits all of Solana’s properties. All of the good properties and all of the bad properties.
Obviously, the good things are that Solana is fast and cheap, but on the downside there can be some network instability at times. As a result, it may be harder to borrow or deposit on Solend during those times. So, it’s just something that’s important for users to be aware of and prepare for.
What are some of the things you guys are excited about building in the next few months?
Some of the things we’d like to build would be around solving the liquidity problem around NFTs. We’d also like to be able to build in features to prevent users from experiencing things like slippage. Ultimately, we’re working on solving the inherent problems around NFTs right now and bringing as much value as possible to the people using Solvent.
What about you guys at Solend? What are you excited about building in the next couple of months?
In the next couple of months, we’ll be launching a lot more isolated pools. Some that we have coming up are a dog pool — consisting of all dog tokens. We’re also doing a stablecoin pool made up of a variety of stablecoins so the LTVs can be higher than average.
We’re also working on a cool vault project around our isolated pools. Since we have a number of isolated pools that all contain USDC, and all of them are paying out different yields, we’re able to build out a vault over the top of it. Users can just deposit their funds into the vault and their investment will rebalance across all of the pools to get them the highest yield.
Permissionless pools is another thing we’re working on — similar to the permissionless NFTs. You would be able to launch your own pools, but this is much further down the road because we still need to do some Oracle upgrades.
Down the road we’re also planning on offering margin trading to our users. A lot of people are already using Solend to gain access to margin so they can borrow against their crypto as collateral.
There are a bunch of different directions and we’re also hiring a bunch right now to take advantage of different things. So, despite it being kind of a bear market, there’s still a ton of stuff to do and we’re looking forward to it.
Solving Problems Through Partnership
That’s a wrap on another week of the Project Serum Twitter Space interviews. What an insightful look into all the amazing things happening on Serum and in the digital economy as a whole. Thanks to brilliant people in the space like the Solend and Solvent teams, we’re seeing a new economy spawn right in front of our eyes.
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