Isolated pools, the DeFi experience that could change everything on Solana


The year 2021 has unfortunately been punctuated by repeated DeFi hacks. However, in many cases, these could have been avoided. Fortunately, some protocols are imagining new solutions to reduce the risk of having their pools siphoned off by hackers.

The problem of standards

With the advent by Uniswap in 2019, most DeFi protocols have adopted the liquidity pool model introduced by the decentralized exchange.

Thus, many savings and loan markets have emerged. Most of them work on the same model. Borrowers deposit a given asset in order to be able to borrow another. For example, it is possible to deposit 1 ETH to borrow 2,000 USDC.

Unfortunately, in some cases, malicious actors manage to take advantage of flaws in designing a token to leverage an entire platform. Thus, a bad design of a given token can lead to a systemic risk for an entire protocol. For example, the Cream Finance protocol has registered $120 million in losses due to a design flaw in a token supported by the platform.

Despite the existence of standards on Ethereum, such as the ERC-20, many tokens have problems. Indeed, developers do not always take care to ensure perfect compatibility with the standard and often deviate from it to add functionality to the token. It also happens that the companies audit (when the latter are actually carried out) let through vulnerabilities, occasionally.

Forget crazy DeFi, and focus on Bitcoin with KuCoin (affiliate link) >>

Isolated Pool: Solend’s solution

On Solana, the standards are stricter than on Ethereum. However, this does not eliminate the risk of manipulating a poorly designed token. The teams of Solend have found a solution to the systemic risk caused by the poor design of certain tokens.

To do this, the protocol will put in place pools isolated from the rest of the protocol. Thus, the new active ingredients listed on the platform that have not yet proven themselves will be isolated from the rest of the protocol in specific pools.

Therefore, it will not be possible to deposit the potentially harmful asset to borrow a safer asset.

“Isolated pools are not a miracle solution! Attacks are always possible. However, the value at risk is limited to the isolated pool, rather than the entire protocol TVL. You can think of this as a quarantine for risky assets. »

Publication by Solend

Solana, blockchain 3.0?

It has several advantages for protocols. First, this isolates risky assets from the rest of the TVL. In addition, it allows to list a larger number of potentially riskier tokens, but by applying to them strict restrictions, for example a rate of collateralization above average. Conversely, a more aggressive strategy can be applied to certain tokens by reducing the collateralization rate to obtain better efficiency of the capital deposited.

This feature should see the light of day at the end of January on the Solend protocol, if no delays are encountered in the development phase.

Recently, the Solana network has encountered many stability problems. Thus, the network is facing major congestion problems, the last of which was recorded on 4 January.

Do you also anticipate an explosion in bitcoin and cryptocurrency adoption, despite the rocky path of DeFi protocols? To easily buy your bitcoins (BTC) and your favorite cryptos, register today on the KuCoin platform ! (Affiliate link)

Free subscription

Sing up for the weekly email from Coinews that makes reading the news actually enjoyable. Join us for free

Latest stories

You might also like...