Solana’s largest DeFi lender almost got Rekt. Why?

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Recently, Solana’s largest DeFi lender almost went rekt. The reason for the incident was that the Solend Protocol did not set limits on the size of a borrower, causing a butterfly effect in the economic field. As a result, a single whale was responsible for the vast majority of Solend’s SOL collateral and USDC loans. This guarantee was at risk of liquidation if the price of SOL fell significantly. Let’s look at what caused the incident and if it could have been avoided.

Brian Pasfield, CTO of Fringe Finance, commented on this situation:

When it comes to other DeFi lending/borrowing platforms that have gotten a bad reputation lately, there are differences between non-custodial platforms and many of these platforms. For example, Solana’s Solend had no leverage limits, let alone fixed leverage limits – which means it was poorly designed.

Even if debt limits are built into a lending platform, debit limits should be determined to properly balance protecting the platform from threats and maximizing user capital efficiency. Threats are price manipulation attacks as well as the risk of excessive slippage when liquidators dispose of collateral assets earned in a liquidation event, which would otherwise discourage liquidators and ultimately represent a risk of platform destabilization. A poorly chosen set of loan parameters can result in an unhelpful platform because, at one extreme, it could become insolvent and, at the other extreme, could offer too little capital efficiency to borrowers to justify their use. of the platform.

What mechanisms does Fringe Finance offer to prevent such situations?

Fringe Finance is a platform that seeks to unlock the billions of dollars of mainstream capital tied up in cryptocurrencies by offering secured loans. His team has developed a metrics modeling framework based on what they consider to be good theory to arrive at lending metrics designed to protect the platform while maximizing its usefulness to borrowers through relatively high capital efficiency. This solution will help platforms avoid the situations described above. The most recent published modeling is described in this article.

Learn more about Fringe Finance

On June 24, Fringe Finance, a brand new inclusive DeFi lending platform, threw a great metaverse party to celebrate the launch of its Primary Lending Platform (PLP).

From this date, lenders can deposit $USDC on PLP to earn interest, while borrowers can take out loans in $USDC against their altcoins. At the moment the platform supports $SHIB, $LDO, $APE, $MATIC, $LINK, $TOMOE (ERC-20 $TOMO), $REN, $IOTX, $TNBand $OGN. However, the initial release is just the start of a journey where the PLP will gradually add support for a long list of tokens as collateral.

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