Note: This article is not financial advice. Hubble Protocol does not endorse any tokens or platforms mentioned in this article.
Key Takeaways
- Solana lending protocols provide several strategies to optimize yields.
- Lending strategies can be manually or automatically optimized.
- Composability on Solana creates opportunities for users to earn yield.
There are many opportunities to earn yield from lending on Solana. In a few past articles, Hubble laid down some basics about Solana lending protocols as well as tools for finding some of the best rewards:
If users want to lend tokens on a Solana lending platform, they can optimize their yield in multiple ways. This article will discuss methods to take advantage of some of the best lending strategies on Solana.
Manually Looping Lending Positions with Leverage
This first strategy was discussed in a Crypto Basics article on crypto leverage, and it involves manually looping positions on Solend Solana SLP tokens. This strategy can take a bit of clicking to set up, but it will optimize users' ability to earn fees and rewards.
How it works:
- Deposit tokens for lending.
- Borrow tokens.
- Deposit borrowed tokens for lending.
- Repeat.
The most common way to loop through lending is by borrowing the same token, usually a stablecoin. This is because looping the same asset (or two different stablecoins) reduces exposure to liquidation.
However, users can find creative opportunities that can arise between multiple assets and multiple Solana lending platforms. Note that looping cannot be performed on every protocol where users can lend tokens, like Tulip Finance and Francium, as the borrowing side is limited to leveraged yield farming (LYF) positions.
Earning Yield Through Solana Lending Aggregators
Several lending aggregators on Solana can automate lending strategies on users' behalf. Each protocol utilizes different strategies, but their primary goal is to pursue optimized yields from lending:
- Tulip protocol contains a platform for strategy vaults that lend between Solend, Tulip, and Mango. Additionally, through a partnership with Friktion, users can unlock their USDC deposit and deposit tuTokens in Friktion's Volt #1.
- Everlend allows users to deposit a wide array of Solana lending assets (currently 11) that will be distributed between a selection of most of the Solana lending platforms, depending on their current APY.
- Mercurial Finance has launched Dynamic Vaults that optimize lending yields and interact with Mercurials liquidity pools. Most of the assets users can deposit through Mercurial are stablecoins, but SOL is also accepted.
Simultaneously Lend on Solend and Participate in Other DeFi with cTokens
Solend cTokens are a versatile way to earn from lending and participate in other DeFi products and services. Wherever users deposit their cTokens, they continue accruing yield from users borrowing the underlying asset on Solend.
- Users can acquire cTokens on Solend on this page.
Minting USDH with cTokens
There are currently six assets users can lend on Solend and then use that yielding position to borrow USDH. Essentially, cToken collateral can accrue yield while users borrowing with those tokens can use USDH to capture additional yield around the Solana DeFi ecosystem.
Earn from Options Strategies on Katana
Katana currently has a DeFi options vault that accepts cSOL. If users find it difficult to wrap their heads around the complexity of options, Katana takes care of setting positions for them.
When users deposit assets in an options vault, they are locked into the strategy until it expires. While waiting, users earn from lending, which can compound additional yield from participating in Solana lending.
DeFi Composability Continues to Expand
The extreme composability of DeFi on Solana allows for multiple ways to optimize yield on lending positions. As the ecosystem matures and more projects begin accepting cTokens (Solend), tuTokens (Tulip), and other yield-bearing assets that accrue yield from lending, the possibilities for setting composable positions increases with each integration.
The possibilities for participating in Solana DeFi are as numerous as the protocols developing new utilities for users on the network. Luckily for users on the network, development activity on Solana is chugging along at the speed of light.
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