How to Lend SOL with Solana NFT Lending Protocols
Learn about SOL lending on three Solana NFT lending platforms: SharkyFi, FRAKT, and Rain in this Kamino DeFi Basics article.
Note: This article is not financial advice. Kamino Finance does not endorse any tokens or platforms mentioned in this article.
- There are several models for Solana NFT lending protocols.
- Some NFT lending platforms allow lenders to repossess NFTs.
- Lending SOL for NFTs is a developing part of DeFi.
The connection between non-fungible tokens (NFTs) and decentralized finance (DeFi) is growing stronger all the time. In a previous article on Solana NFT lending, the concept of NFT lending was introduced, providing some examples of how users might borrow SOL by posting NFT collateral.
This article will go further and explain how to lend SOL with Solana NFT lending protocols. There are currently several Solana lending platforms where users can lend SOL to earn interest from users borrowing against their NFTs, and this article will look at three: SharkyFi, FRAKT, and Rain.
Get Loan Sharky with SharkyFi
Ever wanted to lend SOL for JPEGs without having to bust some kneecaps? For every user with an inner loan shark itching to get out, SharkyFi lets them scratch that itch with a sharky lend, no henchmen required.
Users who lend SOL on SharkyFi start their loan sharky journey by first selecting a collection and making an offer NFT holders can choose to accept or refuse. The current best offers are clearly displayed on the site, including how much SOL is available for users to borrow in each NFT lending pool.
When a lender chooses a collection they wouldn't mind owning if the borrower defaults on their loan, they are prompted to enter an offer in SOL and how many offers they are willing to open at one time with a maximum of three offers. The duration of each loan is predetermined, and all users have to do is deposit SOL.
As can be seen in the example above, placing an offer for SharkyFi's sharx NFT collection shows that the APY is 160% with a loan duration of 16 days. The floor price for sharx is at 12.10 SOL, and the current best offer is 8.61 SOL. Once this offer is placed, it can be revoked at any time until a borrower takes it.
If the offer is taken, a smart contract is written up that allows the borrower to keep the NFT in their wallet. The borrower must repay their loan by its due date, or else the user lending SOL can repossess the NFT. That's pretty simple for NFT lending!
Lend SOL on FRAKT with Collection NFT Lending Pools
The way lending and borrowing work on FRAKT is quite different from SharkyFi. Instead of making specific offers for NFT collections, SOL lending on FRAKT involves depositing SOL into a collection's pool and earning APY as a fractional member of the pool rather than sole (no pun intended) lender.
This means that users can earn APY from funding loans on more expensive collections without providing the entire SOL balance for an NFT. Users who lend SOL this way earn a consistent APY and can withdraw their SOL from the pool at any time. If a loan goes unpaid, then the NFT is entered into a raffle.
In addition to NFT lending pools, FRAKT provides several different utilities for borrowing and lending, including bonds. If a user who lends SOL supplies the entirety of a bond, then they are given the option to repossess defaulted NFTs. What's more, these loans can be traded on a secondary market to recoup liquidity.
Beyond opportunities for lending SOL, the protocol also has its own FRAKT NFTs (two since a merger with Pawnshop Gnomies). The FRAKT protocol also has its own governance token, and FRAKT staking can earn users several rights and rewards, including tickets to raffles for repossessed NFTs.
Making it Rain Solana with SOL Lending and Rain Fi
The third Solana NFT lending platform on this list provides yet another different model for lending SOL. On Rain, lenders create their own lending pools, and then they can choose from a wide variety of NFT collections to lend to at once.
What's also different about Rain Fi loans is that they can be adjusted in several different ways by each lender. First, in a major break from the two other protocols mentioned here, loans can be supplied in multiple assets other than SOL, including USDC, BONK, and mSOL.
Then, users can choose how much they would like to fund for their pool, the maximum duration of their lending, and they can also adjust the loan-to-value (LTV) ratio for each NFT collection. Users who want to do the math can also choose a more customized lending experience where they can dictate base rates and the curve for rate adjustments based on funding and utilization.
If a borrower fails to repay their loan in time, they are given a small grace period to do so. When borrowers fail to repay their loan after the grace period, then the NFT collateral is automatically transferred to the lender's wallet.
Is Lending SOL for NFT Collateral a DeFi Game-Changer?
Each of the protocols mentioned in this article approaches NFT lending in a different way, and they have greatly expanded lending options on Solana. Before, using fungible tokens both ways, users could borrow and lend SOL and other tokens on Solana lending platforms like Solend, Tulip, and Francium in slightly different ways—but nothing quite like the NFT lending ecosystem.
For example, a Tulip SOL lender and a Francium SOL lender might earn a different APY than a Solend SOL lender due to those loans being used for leveraged yield farming (LYF) exclusively, while Solend loans can be used for anything. In all cases, though, as opposed to lending SOL for NFTs, lenders do not receive liquidated assets (unless running a Solend liquidations bot).
A lender can deposit on Meteora, a lending aggregator that hunts down the highest APY on different Solana lending platforms, which is another interesting take on SOL crypto lending. However, the variety of ways users can lend SOL through Solana NFT lending platforms looks like a game changer not just for NFTS, but for DeFi as well.