The Ultimate Guide to DeFi on Solana

Understanding DeFi is hard, let alone DeFi on Solana. So why should you care? Simply put, the growth in this industry is phenomenal. Solana has reached over 300,000 users and DeFi played a huge part.

It has attracted the brightest minds and this is not stopping. In this article, I will be providing you a simple overview of DeFi on Solana.

In this post we will be talking about the following:

What is DeFi?

DeFi stands for decentralized finance. It is an opportunity to develop a safe and secure financial system that bypasses traditional banking.

The technology is based on blockchain architecture that aims to create an alternative system for payments, loans, insurance, etc. To learn more you can read my article Everything you Need to Know About DeFi.

Now you may be asking then what the hell is Solana? As stated in my previous article. Solana is a permissionless layer 1 blockchain that facilitates the development of smart contract platforms. It was founded in 2017 by ex-dropbox engineer Anatoly Yakovenko.

Why Build on Solana?

So you’re probably thinking. Why not build on Ethereum? After all, it does have over 500 applications already, compared to Solana’s measly 77. It’s a proven platform with high security. Well, there are a few reasons:

  1. Speed – Solana is freakin’ fast. As of writing, it is processing over 2700 transaction per second (TPS) compared to just 30 TPS for Ethereum. This is especially important as it allows high-frequency trading.
  2. Cheap – It’s cheap as hell. Solana has an average transaction cost of just $0.00025. When compared to Ethereum it’s miles ahead. Who wants to spend upwards of $5 on a trade when you can pay a fraction of a cent?
  3. Easy to Develop – Solana uses Rust. Rust is a general-purpose programming language that emphasizes performance and safety. Why is it so good? According to the 2021 stack overflow survey, Rust was the most liked programming language. Its intuitive design facilitates quick app building.

Top 3 DeFi apps

  1. Serum – What is Serum? Serum is a decentralized exchange (DEX) founded in 2020 by the serum foundation. It has heavy institutional backing from the likes of FTX. The DEX features an on-chain order book where users can trade between cryptocurrencies without a third party. Developers can also build on top of Serum. This allows them to “compose with Serum’s on-chain central limit order book to share liquidity”. Thanks to Solana’s architecture users can execute fast and cheap trades.
  2. Solend – Like Aave, Solend is an app where users can lend and borrow. They have also introduced leverage trading. This is all done without an intermediary. Solend “can scale to being 100x faster and 100x cheaper” than competitors. So what is their vision? Well, it’s to become the fastest and most secure DeFi lending app for Solana. I think this is certainly possible. They have strong ties with Raydium and Coin 98, they also have Venture Capitalist backing from Polychain and Coinbase Ventures.
  3. Marinade Finance – this is a liquid staking platform. Liquid what? Liquid staking allows users to stake their Solana without locking it up. They can access their funds at a moment’s notice. Currently, there is over $280 million held in Marinade Finance making it the top DeFi app on Solana by total value locked (TVL).

What Does the Future Hold?

The future certainly looks bright. As hardware improves so will transaction times and decentralization. But what about DeFi apps? Founder Anatoly Yakovenko stated that they will be bringing all stocks to Serum.

These will be traded openly as tokens and hopefully, this brings institutions to their ecosystem. But it doesn’t stop there. They are launching the Saga phone. This device will be deeply connected to the Solana blockchain and allow the management of web 3 digital assets.

Is this really a big deal? Yes. This will tap into a market of over 6 billion people. No longer will you have to interact with dodgy DeFi apps on your computer, deal with private keys, or fiddle around with hardware wallets. You will be interacting with DeFi seamlessly.

Final Thoughts

Overall, I am optimistic about the future of Solana DeFi. The speed and economical transactions are second to none and the space continues to attract the brightest minds. The ecosystem is strong with the likes of Serum and with the rollout of the Saga phone, this will only get better.