Loopscale launches for more efficient Solana DeFi
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More than a half decade into DeFi, the sector is still somewhat of a wild west beset by elevated risk, unpredictable yields and the occasional crisis. Mary Gooneratne, co-founder of Solana DeFi startup Loopscale, wants to give blockchain borrow-lend a facelift.
“A lot of those [existing DeFi] architectures were designed kind of as a function of Ethereum’s constraints,” Gooneratne said in an interview.
Lightspeed has learned exclusively that Loopscale is opening its protocol to the public today, marking the end of its closed beta phase.
Loopscale’s distinguishing feature is its order book architecture that executes loans by directly matching lenders and borrowers with fixed rates and terms. This is in contrast to the pool-based model, which allows users to lend into and borrow against different baskets of reserve assets. The Ethereum borrow-lend giant Aave uses pools, for example.
Pool-based lending leaves markets “constrained by the riskiest asset in that basket,” Gooneratne told me. Loopscale’s order book lets borrowers and lenders take a market view on assets rather than adopting the protocol’s pre-set risk profile, she added.
Gooneratne and her co-founder Luke Truitt met while working on a computer science project for an undergraduate class at Duke. They went on to found a defense startup while still in school, which was acquired in 2020.
After graduating, Gooneratne and Truitt began working on a real-world asset lending startup, Gooneratne said. As part of that work, the pair set up a lending market for whiskey — tokenized by the Solana-based liquor collection startup Baxus in which collectors or distillers could borrow against their spirits.
Building on Solana should allow Loopscale to open new forms of decentralized financing, Gooneratne said. She gave the example of DePIN: Since DePIN payment streams are publicly visible, and their ownership can theoretically be transferred to lenders and priced, node operators could use their payment streams as collateral on loans to acquire more nodes.
But since this is cryptoworld, the most popular initial use cases may be the more speculative ones. Loopscale offers a loop product where users can take on leveraged loans by borrowing against a yield-bearing asset to acquire more of the asset. Loopscale also has a points system set up, presumably for users to stake their claim to a future token.
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