Solana’s (SOL) biggest decentralized finance lender “Solend” is experimenting with the same “permissionless” ideas that support the limitless token listings on decentralized exchanges.
Anyone on Solana who has 100 SLND (roughly $70 in fees) and some extra assets can create their own “permissionless pools” for lending cryptos.
Permissionless pools are a conjunction of user-loaned cryptocurrency assets that keeps DeFi technology stable. This practice is not common in lending circles.
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. On the market leader Ethereum, only a few lending protocols do it, and, up until now, none did on Solana.
As of right now, borrowable tokens like SOL, USDC, and wrapped assets like BTC totaling $471 million are supplied to Solana’s DeFi markets by Solend’s 21 whitelisted lending pools.
What is Permissionless Lending?
`Permissionless lending is a practice where anyone with a crypto wallet can access Defi applications created on Blockchain thanks to DeFi lending because it allows open, permissionless access and there is no minimum amount of funds needed.
Solend Takes a Risk
There is a good reason why Solend only approved the introduction of 21 lending pools. By design, permissionless pools are an attractive place for scammers. That happens due to the lack of user requirements for participation.
Solend’s main Twitter account warned prospective depositors and borrowers on Wednesday. “Make sure you trust the pool creator”, said Solana’s biggest decentralized finance lender.
In a blog post, the Solend team claimed that its pools could support the development of “unsecured” lines of credit where borrowers rely solely on reputation, assist projects in “bootstrapping” lending markets for their native tokens, assist influencers in “monetizing their following,” and more.
The Risks of DeFi Lending
DeFi lending is a very attractive feature. Interest rates are usually very decent. You get the chance to leverage market volatility and capitalize on crypto assets.
In fact, DeFi lending is a very alluring passive income stream for cryptocurrency owners because many of the interest rates offered on these dapps are significantly higher than anything currently available in the traditional financial sector.
However, as with any investment, DeFi lending also has many risks. For once, your currency might suddenly drop. Which could leave you at a significant loss. Also, Permissionless DeFi lending is subject to scammers and hackers.
For this reason, it is crucial that both all sides of Defi lending are trustworthy. Users need to do their own research on pool creators before jumping in.