Solend x Socean: A Guide to Do More with your scnSOL
- ScnSOL is now listed on http://solend.fi!
- 100K SOCN (our governance token that has not been released yet) has been allocated to reward scnSOL deposits for 1 month
- Start earning rewards by depositing scnSOL on Solend!
We’re incredibly pleased to announce that our liquid staking token, scnSOL, is now listed on Solend! On top of earning staking rewards, stakers of Socean can now borrow using scnSOL as collateral, accruing interest at the same time!
In this guide we’ll also teach you how to maximise your returns (~56.7% APY) by doing leveraged staking!
Solend is a lending protocol. You can lend (by depositing your assets) and gain interest on your deposits, and use your assets as collateral for borrowing.
Solend is one of the biggest lending protocols on Solana, with a TVL of over 600M. We’re huge fans of the Solend team and we’re really excited to partner with them to list scnSOL!
How to use scnSOL with Solend
A simple strategy to maximise your returns with minimal risk
Second, with the scnSOL you’ve received, head over to https://solend.fi/dashboard.
Click on scnSOL.
Finally, supply scnSOL to the protocol! Voila, you are now earning 2.95% returns in SOCN! :D
But wait! Ser, 7+2.95% in yields is nice. But I don’t just want 10-ish% yields! I want more!
Well, here’s the secret sauce for those with a taste for more.
Maximising your returns with Leveraged Staking
Leveraged staking sounds pretty scary doesn’t it. The big scary word — leverage. You probably think of these words — liquidations, margin, gambling.
Well, leverage isn’t such a scary thing actually. Leverage’s just a healthy way to increase your position, so long as you’re not under-collateralized.
What does that mean? Well, as long as the assets you deposit (your collateral) is safely more than the amount you borrow, you’re just increasing your position with a very low risk of liquidation. As long as your collateral is worth more than what you borrow, you will not lose your funds.
So how does leveraged staking work?
Well, it’s pretty simple. You just borrow SOL off your scnSOL deposit, and then stake your SOL with Socean, and then deposit your scnSOL again!
First, borrow some SOL off Solend. You have a borrow limit that’s based on how much you deposited. In this case, I’ve deposited about 24 scnSOL, so i can borrow up to 18 SOL. You can borrow a bit less to give yourself some wiggle room.
Normally, when you borrow an asset, you have to pay interest. At Solend, the borrow rate is -5.73%. That’s not a typo. You earn 5.73% APY from borrowing! This is because Solend is paying out SLND rewards for borrowers of SOL, which more than cancels out the interest you are paying on your loan. Absolutely mindblowing!
So let’s calculate the yield now. You’re earning 7% on staking with Socean (in SOL), 2.9% on depositing scnSOL (in SOCN), and now you’re earning 5.7% on borrowing SOL (in SLND). That’s a total of 15.6% APY!
Now we repeat the simple strategy we did in the first part. We take the SOL we borrowed, stake with Socean, get scnSOL and then deposit it again with Solend!
From here, you can just repeat this process of staking, depositing and borrowing as many times as you want (and your collateral allows you to). At a 75% borrow ratio, you can reach 4x leverage. That gives you a theoretical maximum APY of (4 * (7%+2.9%)) + 3 * (5.7%) = 56.7%.
You must be thinking here, there must be some sort of catch. How is this possible?
There is always a risk when using leverage. The main risk of is liquidation risk: when the price of your collateral (in terms of USD) drops below the required collateralisation ratio. However, this is usually a problem when borrowing an asset that is not price-stable with respect to the collateral. Since we are using scnSOL to borrow SOL, and 1 scnSOL is backed by at least 1 SOL, this risk is greatly reduced.
There are three ways in which you might be liquidated. The first is if a sudden run on the market occurs where there is a strong liquidity preference for SOL over scnSOL. This could potentially cause the scnSOL/SOL price to drop. The second is oracle risk, where the price oracle (Pyth) quotes the wrong scnSOL/SOL price. Third is protocol risk — where Socean gets hacked. Given that we have been heavily audited with three safety audits, this is extremely unlikely, but always in the realm of possibility.
The dashboard Solend provides gives you a clear overview of your positions to make sure you can monitor your positions carefully. For example, with my 24 scnSOL (worth ~4.3k USD), I borrowed 10 SOL (worth ~1.75k USD). That’s far and below my borrow limit of 3.25k!
Or if you’re not comfortable with leverage, you can just deposit your scnSOL and chill! The amazing thing about DeFi is that you have the freedom to set up your own strategies based on your own risk tolerance and yield appetite. Enjoy!
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