Solend and Hubble Synergize Stablecoin Borrowing on Solana

Hubble Protocol is proud to announce a partnership with Solend! We’re also proud to have our $USDH stablecoin join one of six tokens in the new Solend Stable Pool.

Hubble Protocol is proud to announce a partnership with Solend! We’re also proud to have our $USDH stablecoin join one of six tokens in the new Solend Stable Pool.

For the foreseeable future, one of Hubble’s biggest objectives will be to integrate $USDH into as many protocols as possible, establishing its footprint as one of Solana’s key decentralized stablecoins.

A partnership with Solend is not only significant for the additional $USDH use-case it provides, but also because of how established Solend is in Solana DeFi.

At the time of writing, Solend is a Top 3 TVL project on Solana, according to DeFi Llama. Thus, having $USDH integrated bodes well for its reputation and further adoption across Solana.

This article will cover the mechanics and use-cases of the Solend Pool and some key points that were raised in our recent Twitter Spaces with Solend.

Mechanics and Use-cases of the Solend Stable Pool

At present, there are six stablecoins in the Solend pool alongside $USDH. The pool is driven by users supplying and borrowing these stablecoins, and participation includes rewards offered for supplying or borrowing.

List of stablecoins available for borrowing and lending on Solend.

How the Solend Stable Pool Works

To use the pool, users need to supply any of the six stablecoins. Once a user has supplied tokens, they can borrow any stable in the pool. What’s important to note is that users have to supply tokens before they can borrow.

The pool has a maximum loan-to-value (LTV) ratio of 95%, which means that you can borrow up to 95% of the value you supplied. For example, if you supply $1,000 of one stablecoin, you can borrow up to $950 in $USDH.

There are two metrics to take note of here: Supply APY, and Borrow APY.

Supply APY

Supply APY is what you earn as a compounded yearly percentage of the amount you supplied. So, if you supplied 1,000 $USDH, with a 10% Supply APY, you could theoretically have 1,100 $USDH in a year.

Note that the APY changes algorithmically and is also calculated to include token rewards each project provides as incentives. The APY you see today may not be the APY you see tomorrow.

Borrow APY

Borrow APY is the interest you would pay as a yearly percentage of your borrowed amount.

So, if you borrow 1,000 $USDH at a 10% Borrow APY, you would owe 1,100 $USDH in a year. To offset Borrow APY, Hubble is rewarding users with $HBB tokens for borrowing $USDH.

The Borrow APY displayed for $USDH is the actual Borrow APY after taking into account the percent of $HBB rewards you earn.

Example of Borrow APY on Solend.

As seen here, the actual Borrow APY of $USDH is 14.78%, but Hubble rewards borrowers with $HBB, so users who Borrow $USDH will effectively pay 9.21% interest taking into account the $HBB rewards they earn.

Utilization Ratio

The Borrow and Supply APY of each token are influenced by the amount borrowed divided by the amount supplied. This ratio is called the utilization ratio.

If the pool has a total of 1,000 $USDH supplied, and 900 $USDH borrowed, the Utilization Ratio is 90%.

The Utilization Ratio has a direct impact on the APYs of each stablecoin. The higher the Utilization Ratio, the higher the Supply APY will be, which incentivizes users to supply more $USDH and lower the Utilization Ratio.

Conversely, the lower the Utilization Ratio gets, the higher Borrow APY will be, incentivizing users to borrow more and increase the Utilization Ratio.

Consequently, as users actively supply and borrow, the Utilization Ratio will shift and APYs will vary.

Use-Cases of the Solend Stable Pool

One way users can take advantage of Solend’s Stable Pool is leverage. Users can try to maximize their Supply APY, while minimizing their Borrow APY by taking advantage of the 95% LTV to borrow and supply multiple times.

By participating in the Stable Pool on Solend, users can leverage up to 20x on a single deposit.

It’s up to each user to determine which ratios for supplying and borrowing each stablecoin best maximize returns according to current APYs, and it’s important to note that the varying APYs could result in user positions that eventually have higher Borrow APYs than Supply APYs.

Points from the Hubble x Solend Twitter Spaces AMA

As part of the partnership between Solend and Hubble, we hosted a Twitter Spaces to discuss Hubble, the $USDH peg, and the Solend Pool.

A key point that was brought up was the differences between borrowing on Solend and borrowing on Hubble, and what those differences enable on each platform.

In terms of costs, Hubble charges a 0.5% fee at the moment, whereas Solend has no fees, but a much higher Borrow Interest Rate (Borrow APY).

As Marius outlined, this means that Solend could be more practical for short-term borrowing. For example, over a period of a week, a higher yearly rate, say 10%, is much more cost-efficient than a once-off 0.5% fee.

However, once the loan period grows longer, a lower once-off fee is more cost-efficient. Even when Stability Fees are implemented on Hubble in the future, the fees should be around 1-2%, which makes it advantageous to borrow from Hubble over the long term.

It's up to users to choose how they want to borrow USDH, and the options are getting more numerous by the day. With this much choice in the ecosystem, it’s an exciting time to participate in DeFi on Solana.

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