Borrow USDC with SOL

Share this!

Learn how to borrow against Solana by using the Solend DeFi platform. Deposit Solana(SOL) and borrow USDC with it.

Can I borrow against Solana?

Yes, you can! The Solana blockchain offers a unique opportunity to borrow assets by using your SOL tokens as collateral. This opens up exciting possibilities for leveraging your crypto holdings and accessing additional liquidity.

Consequently, this guide aims to help you understand the process of borrowing USDC, a popular stablecoin, with SOL on Solend, a prominent DeFi platform on the Solana blockchain.

By following our step-by-step instructions, you can unlock the potential of decentralized finance(DeFi) and explore a new world of financial possibilities.

Before we dive in, let’s take a quick look at the world of lending and borrowing on the Solana blockchain:

  • Decentralized Finance (DeFi): DeFi platforms like Solend operate on the blockchain, providing users with greater control and transparency compared to traditional financial institutions.
  • Lending: You can deposit your crypto assets, including SOL, into DeFi protocols and earn interest on your holdings.
  • Borrowing: You can use your deposited crypto as collateral to borrow other assets, such as USDC, for various purposes.

By continuing to read this guide you’ll learn how to borrow against Solana(SOL):

  • A deeper understanding of DeFi platforms like Solend
  • How to setup Phantom wallet and connect to Solend
  • Deposit SOL and borrow USDC

What Is Solend and How Does It Work?

Solend is a decentralized lending and borrowing platform built on the Solana blockchain. This means it operates without any central authority, allowing users to interact directly with the protocol through their wallets.

Unlike centralized platforms like YouHodler, where you need to create an account and go through identity verification, Solend offers permissionless access, meaning anyone can participate without restrictions.

Here’s how it works:

  • Lenders: Deposit their crypto assets (e.g., SOL) into Solend smart contracts and earn interest on their holdings.
  • Borrowers: Use their deposited crypto as collateral to borrow other assets (e.g., USDC).
  • Interest rates: Automatically calculated based on supply and demand for each asset.
  • Governance: Decisions regarding the protocol’s future are made through a decentralized autonomous organization (DAO), where token holders vote on proposals.
Deposit assets for lending and borrowing on Solend
Deposit assets for lending and borrowing on Solend

Solend’s main advantage is its decentralized nature, offering greater transparency, security, and resistance to censorship. However, it also requires users to have a deeper understanding of blockchain technology and comes with the inherent risks of DeFi, like smart contract vulnerabilities and market volatility.

YouHodler, on the other hand, offers a centralized and user-friendly experience with features like fiat gateways and account management tools. However, it comes with the trade-off of being in control over your assets and potentially facing higher fees and limited transparency.

Ultimately, the choice between Solend and YouHodler depends on your individual needs and risk tolerance. If you’re comfortable navigating the DeFi landscape and prioritizing decentralization, Solend offers an attractive option. If you prefer a more user-friendly platform with centralized features, YouHodler might be a better fit.

Related: How to buy USDC without KYC(MetaMask)

How To Borrow Against Solana(In 4 Steps)

Next, we will guide you through the entire process of using the Solend platform to borrow against Solana(SOL). In particular, we are going to use some SOL funds, deposit them, and borrow USDC with them.

Finally, remember that the process is the same for all assets available on this platform. Meaning, you are free to use any other token to borrow or lend out funds.



Step 1: Setting Up Your Wallet(Optional)

First, to be able to use the Solend platform you need a Web3 wallet like Phantom. In short, Phantom is a next-generation crypto wallet designed specifically for the Solana blockchain. It’s more than just a storage solution for your digital assets; it’s a gateway to the exciting world of DeFi (decentralized finance) and NFTs (non-fungible tokens).

Visit https://phantom.app/download and select your browser type. Follow the steps in your respective extension store to add Phantom to your browser. After installing, you should see Phantom Startup in a new tab. Basically, setting up a new wallet goes as follows:

  • Create ‘New Wallet‘ and ‘create a password
  • Write down or store the seed phrase
  • Finish the setup and start Phantom from within the browser
Installation of Phantom is finished
Installation of Phantom is finished

Finally, if you are using Chrome, it will be on the top right-hand side of your browser. If you don’t see it look for a “puzzle piece” icon and click on it to access a list of installed extensions.

Fund your Wallet

Below are the steps for depositing SOL Tokens into Phantom Wallet:

  1. Open the Phantom Wallet app and tap on “Deposit“.
  2. From the list of suggestions, select “SOL“.
  3. You will see a large QR code displayed on the screen. This QR code represents your wallet address.
  4. Below the QR code, you will find your wallet address in text format. Tap on the copy icon to copy the address to your device’s clipboard.
  5. Now you have your SOL deposit address ready to share with the platform or individual sending you the SOL tokens.
Deposit Solana(SOL) on Phantom Wallet
Deposit Solana(SOL) on Phantom Wallet

Related: How to add funds to Phantom Wallet(Guide)

Step 2: Connecting To Solend

DeFi platforms like Solend offer users a decentralized way to interact with financial services. Overall, connecting to these platforms typically involves the following steps:

  • Connecting your wallet to the platform
  • A dashboard where you can monitor your funds
  • Details according to open positions and transaction history

Connecting Phantom Wallet to Solend

  1. Open the Solend website in your browser.
  2. Look for the “Connect Wallet” button, located prominently on the platform’s interface.
  3. Click on the button to initiate the wallet connection process.
  4. A pop-up window will appear displaying a list of supported wallets. Choose “Phantom” from the available options.
    Approve transaction on Phantom
  5. If you haven’t previously connected Phantom to your browser, an extension integration prompt will appear. This allows Solend to interact with your wallet and retrieve your information securely. Carefully review the permissions requested and click “Install” to proceed.
  6. Phantom will now display a confirmation request within its app. Review the details of the connection, including the platform you’re connecting to and the requested permissions. Once you are satisfied, click “Connect” to grant Solend access to your wallet.

Step 3: Depositing SOL(Add supply)

To be able to participate in the Solend DeFi platform, you have to deposit some funds in one of the liquidity pools. Also, when you deposit SOL into these pools you will earn interest for just holding SOL(currently 7.56% APR). Here is how you add supply:

  1. On the Solend website, go to the dashboard section
  2. Now click Main Pool tab
    Select Main Pool tab on Solend
  3. Find Solana(SOL) under All Assets and click on it
  4. A pop-up window appears and asks you to enter a value
  5. Give the amount of SOL you want to supply
    Supply Solana on Solend
  6. Confirm the transaction in your Phantom wallet
  7. Finally, your given supply will show up on the dashboard
Global overview of your supply on Solend
Global overview of your supply on Solend

Step 4: Borrowing USDC With SOL

Finally, after you successfully submitted SOL to the platform you are able to borrow extra funds. In other words, you can borrow against Solana to get additional cryptos(USDC). Next, the exact steps to achieve this:

  1. On the Solend website, go to the dashboard section
  2. Now click the Main Pool tab again
  3. Find USDC under All Assets and click on it
  4. A pop-up window appears and asks you to enter a value
  5. Click on Borrow tab and enter your value
    Borrow USDC with Solend
  6. Confirm by clicking Borrow and Approve transaction in Phantom wallet
  7. Finally, check if the USDC appears in your wallet

That’s it! At this point you have borrowed additional funds with your Solana being held as collateral on the Solend platform.

Related: Jupiter DEX: Best Solana Aggregator Platform

Borrow Against Solana: How Does It Work?

In the previous steps, you have gone through the entire process of using Solana(SOL) as collateral and borrowing USDC against it. Next, a more detailed look at the different terms and options you have on the Solend DeFi platform.

Understanding LTV and Liquidation in DeFi

LTV stands for Loan-to-Value ratio. It’s like a scorecard for your borrowing on DeFi platforms like Solend. It tells you how much you’ve borrowed compared to the value of your collateral.

Here’s how it works:

  • Imagine you deposit 10 SOL tokens and borrow 50 USDC.
  • Your LTV would be 50% because the USDC borrowed is half the value of your SOL collateral.

Why is LTV important?

  • LTV helps maintain stability on the platform.
  • A high LTV (close to 100%) means you’ve borrowed a lot compared to your collateral. This increases the risk of default if the value of your collateral falls.

What happens if you exceed the LTV threshold?

  • If your LTV goes too high, your position is at risk of liquidation.
  • This means the platform automatically sells your collateral to repay your loan.

Think of it like this:

  • You borrowed a car using your house as collateral.
  • If you fall behind on payments, the bank might sell your house to get your money back.

Remember:

  • Keep your LTV well below the threshold to avoid liquidation.
  • Monitor your LTV regularly and adjust your positions if needed.

All in all, stay safe and if you found this guide helpful, don’t forget to share it with friends!

Related: How To Withdraw USDC To Arbitrum(Guide)


📣Important: List of top Crypto Projects

👨🏻‍💻 StealthEX: Buy crypto no KYC(< $750,-)
🎁 Swapzone: Find the best crypto offer
🚀 Bitsgap: Best Automated Trading Bots
💲 Nexo: Reliable Crypto Lending Platform and get $25 free Bitcoin

***To be Profitable in the markets


Disclosure: This post could contain affiliate links. This means I may make a small commission if you make a purchase. This doesn’t cost you any more but it does help me to continue publishing cool and actual content about Bitcoin & Crypto – Thank you for your support!