How Solend works

Solend consists of a decentralized system of lending pools. Users deposit assets they want to lend into a liquidity pool and borrowers draw from the pool when they want to take out a loan. Solend borrowers must first supply assets before they can borrow. Given the high volatility of crypto assets, borrowers must post more collateral than the value of the loan, or commonly referred to as overcollateralization. Interest rates on Solend are driven by market supply and demand. To facilitate this activity, Solend issues cTokens to lenders that reflect accruing interest on the underlying token. Permissionless pools allows anyone to create an isolated pool on Solend.

How Solend makes money

Solend collects protocol fees from several sources. First, the protocol collects revenue from the interest rate spread, which is a percentage of the borrow interest rate. The fee varies depending on the underlying asset. For permissionless pools, the interest spread would be 20%. Second, an origination fee is charged upon the origination of a loan. This fee is broken down into a program and host fee. The program fee contributes to Solend's insurance fund. The host fee can be collected by any interface that refers loans to the protocol. The origination fee for most vaults is set to 10bps and there's an 80/20 split between protocol and host fee. Lastly, the protocol charges a liquidation insurance fee as a penalty on liquidations. The fee is currently 30% of the liqudation penalty. These funds go to the DAO treasury.

How you make money on Solend

You earn lending fees on Solend by depositing your idle crypto assets to be used by borrowers looking for leverage. Scream also offers additional protocol incentives in its native SLND token to bootstrap demand.