Solana DeFi Ecosystem Deep Dive

Solana is all the rage right now. Its token is up ~80% this month, and it seems like everyone but you is gloating on Twitter about how much money they’ve made on this run up.

That said, I bet 99% of people couldn’t name you 3 apps on Solana.

For as fast and efficient Solana block space is, there is not much to do there. That seems poised to change in the coming months. With the introduction of a host of new infrastructure and interesting applications (as well as meme coins of course) we could be seeing a Renaissance of activity on chain.

The best part is that I used all of the coolest new apps (most of which have airdrops coming) and broke them all down:

Jito

Rule #1 of this exercise: any chart that goes parabolic like the one above must be examined.

This is the TVL of Jito, a MEV powered staking solution for SOL. The concept behind this protocol is incredible simple: take MEV from the Solana Network and return it to the stakers of the network via staking rewards.

To do this you simply go to the Jito website, deposit your SOL and receive jitoSOL in return. The jitoSOL automatically earns staking rewards that are MEV boosted and auto compounds them on your behalf, at ~6.8% APY at the time of writing.

MEV boosted staking is a concept that has been discussed for a long time but is finally implemented in a way that makes it easy to use. You can essentially park your SOL here and farm both the yield and farm the airdrop while using the jitoSOL in other DeFi applications as you please.

This is one of the higher ROI uses of SOL right now if you ask me. All of these protocols will have airdrops in the near future, and ecosystems that get rich tend to spend those riches within the ecosystem.

WAGMI ya know?

MarginFi

Okay so you got some SOL, you staked it and you are earning the highest possible yield any being can possibly earn on staked SOL.

What next?

As mentioned at the beginning, is there anything to do with all of this fast and cheap block space? Well, one thing you can do really well on Solana is DeFi. It is simply the best experience for swapping, lending, borrowing, you name it. It feels nice to be able to transact instantly and without excessive fees.

The hottest new borrow / lend protocol on Solana is MarginFi and yes, they accept jitoSOL. Fantastic.

We can head over to the MarginFi site where we are greeted by a list of assets available for borrowing and lending.

In this case, I am going to lend out my jitoSOL that I just wrapped up, which now does two things:

1. Allows other people now borrow against my jitoSOL, earning me yield.

2. Allows me to borrow an array of assets from the pool.

In this case I can now borrow USDC, SOL, or any of the tokens that have available liquidity. The way these protocols work is there has to be liquidity provided on the lending side for a user to come in and borrow. Sounds simple, but most people don’t seem to realize that point. At some point, you run into limits (whether those are protocol or market enforced, as seen with $BONK below).

Side note: anytime borrows at a limit like this it generally means people are borrowing a specific token with the hopes it goes down, so they can pay back their initial loan for less capital.

While borrow / lend has existed in the space for a long time, including in Solana with services like Solend, that has not stopped TVL on MarginFi from going absolutely parabolic as well.

Farmers are anticipating an airdrop, as MarginFi also has a “points” tab on its site just like Jito. You can also see in the experience so far why these protocols are going parabolic together. Think about our user flow so far:

Acquire SOL → Stake SOL → Acquire jitoSOL → lend jitoSOL → Borrow USDC → Repeat

Don’t worry, nothing bad has ever happened with this sort of leveraged behavior in the history of financial markets. Up only.

Jupiter

This one is a bit of a tease because they just announced their token today (although the airdrop criteria is not out yet so it may be worth playing around.)

Jupiter is the fastest and shiniest new DEX on Solana. It brings all of the functionality you want from a DEX under one roof. This includes products like a DEX aggregator, advanced trading interface (with limit orders and repeating buys), a bridge, and a perp DEX all in one protocol.

The interface is very neat, and makes it incredibly conducive to do all of your on chain trading in one place.

So now that we have been looping our SOL to stake it, get jitoSOL, borrow against it, and do it again, what do we do now?

We trade of course. We can trade any shitcoin we want using the loans we have taken out on MarginFi. We can also use the jitoSOL that we have (or the USDC we borrow) as collateral in the perp DEX.

Exhibit A: I used my remaining 0.2 SOL in my wallet to open a 100x long position of 16.9 SOL on heavy leverage.

As mentioned before, nobody in the history of financial markets has ever been hurt doing this.

Not Financial Advice.

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