Solend: Still Shipping

Over the past year, we’ve seen remarkable success for the memecoin launch platform Pump.fun, which has generated over $70M in fees. While this platform provides an easy application and marketplace to launch and long memecoins, the shortside has been underserved. Dumpy.fun implements a marketplace to express a bearish position on these tokens and capitalize on the downside. Memecoin longs can supply to the lending market and collect interest revenues from borrowers, while shorts can borrow longtail assets from the money market on leverage with flashloans. Additionally, depending on demand from the shortside, Dumpy.fun could offer an attractive venue for yield on memecoin spot exposure, with additional risks. The protocol charges a 20% takerate on interest revenue, which accrues to the DAO treasury.

Largely, the technical implementation presents major risks. Solend has historically incurred bad debt totaling about ~$8M, which has been covered using funds from the DAO treasury. It should be expected, given the variance and illiquidity of these longtail memecoins, that the volume and frequency of liquidations on the platform will increase. The risks of inefficient liquidations and the occurrence of bad debt is only increased by offering leverage on these assets. Absent the occurrence of bad debt, which is no guarantee, liquidations are revenue generating events for the protocol, as the DAO treasury pockets 30% of the liquidation penalty. 

With Save’s new LST, under stake-weighted quality-of-service (SW-QoS), Save can direct more network resources to transactions involving the Save application. This can lead to more efficient execution of liquidations and reduce the risk of incurring bad debt. The impact of SW-QoS on Save’s application performance will very much be dependent on the quantity of stake that it receives, and absent an appreciable balance, this benefit may be negligible.

While TVL on Save still trails its competitors Kamino and MarginFi, the percent growth in deposits has outpaced its competitors over the past quarter. This may be an early signal to the protocol resuming its growth trajectory.

The SLND token has a claim on the direction of protocol generated revenues, which accrue to the DAO treasury. It currently trades at a $36M market cap, with a fully diluted valuation of $90M. The SLND token is highly illiquid, generally only settling $1M-$5M in trading volume per month. This illiquidity comes with substantial risks of price impact, slippage, and volatility. While SLND’s market capitalization has fallen from over $100M at the start of the year, the protocol demonstrates continued growth in revenues.