⚠️ Not meant to be used in production.

What is this?

This is a reference implementation of a Solana lending pool program, using the Interest Bearing token extension to represent shares of the pool, and built with Anchor. This implementation illustrates how on-chain protocols influence client-side implementations.

How to run

1. Clone the repository
2. Run anchor build
3. Run anchor test

What does this reference implementation do?

See the tests in lending-pool.ts for implementation details. At a high level, it does the following:

• Creates a lending pool from SOL deposits in exchange for iSOL interest-bearing shares.
• Allows users to borrow SOL with USDC collateral.
• Immediately accrues interest on the pool upon borrowing.

flowchart TD
 subgraph subgraph_1ktz23e5x["Lending"]
        ne["SOL Lend Prog<br>"]
        n1["Pool<br>[5k SOL]"]
        n4["Collateral<br>[0 USDC]"]
  end
 subgraph subgraph_qkzpoz6u9["Interest"]
        node_qdujp98uo["iSOL Mint<br>[Interest Bearing Ext]"]
        n0["HolderA_ATA<br>[2k iSOL]"]
        ng["HolderB_ATA<br>[3k iSOL]"]
  end
 subgraph subgraph_yc1100259["HolderB's Wallet"]
        node_ns14q8hs5["Private Key"]
        nf["FrontEnd"]
  end
    n2["HolderA Acct<br>[<s>2k SOL</s> + Rent]"] -- Deposit 2k SOL --> ne
    n3["HolderB Acct<br>[<s>3k SOL</s> + Rent]"] -- Deposit 3k SOL --> ne
    ne -- Lend --> np("DeFi Protocols")
    np -- Yield --> n1
    ne -. PDA .- n1
    node_qdujp98uo --> n0 & ng
    ne -- Mint shares ---> node_qdujp98uo
    nf -- SOL Amount:<br>[Rent] --> n3
    nf -- "iSOL Value,in SOL:<br>[3k + Interest]<br>aka, **ui_amount**" --> ng

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Illustrated example

Lending flow

flowchart TD
 subgraph subgraph_1ktz23e5x["Lending"]
        ne["SOL Lend Prog"]
        n1["Pool[SOL]"]
        n4["Collateral[USDC]"]
        n3["Loan record"]
  end
    %%ne -.-|PDA| n1 & n4 & n3
    ne -- 1a.Deposit --> n5["Borrower ATA [USDC]"]
    np("Borrower Acct[SOL]") -->|0.Borrow| ne
    n5 -- 1b.Transfer --> n4
    ne --->|2a.Lend| n1
    n1 -- 2c.Recieve ---> np
    n1 -->|2b.Record| n3

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Lending pool states

%%{init: {'themeVariables': { 'pie1': '#000000', 'pie2': '#440044', 'pie3': '#882288', 'pie4': '#444444', 'pie5': '#800080', 'pie6': '#ff0000', 'pie7': '#FFA500'}}}%%
pie title Step1: SOL Lending Pool Init
    "HolderA" : 2
    "HolderB" : 3

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• No borrowers present.
• Interest rate is 0%.
  • Holders are not accumulating wealth.
• Interest rate == utilization rate (Borrowed / Deposits)

%%{init: {'themeVariables': { 
'pie1': '#444444', 
'pie2': '#882288', 
'pie3': '#000000', 
'pie4': '#440044', 
'pie5': '#800080', 
'pie6': '#ff0000', 
'pie7': '#FFA500'}}}%%
pie title Step2: SOL Lending Pool Borrow
    "HolderB-Loaned" : 2.079
    "HolderA-Loaned" : 1.386
    "HolderB" : 0.921
    "HolderA" : 0.614

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• A single borrower effectively borrows 69.3% of the pool.
  • Each holder's contribution (marked by color shade) is uniformly reserved for the loan.
  • Due to compounding interest, this amount is borrowed to produce an interest rate that doubles holder earnings by EOY.
• Utilization rate is 69.3% = Interest rate is 69.3%.
  • Interest rate gets adjusted automatically upon issuing loans.
• Interest rate is based on 1 year fixed rate.
  • EOY projected repayment amount is committed upon borrowing.
  • Paying off early has no effect on interest rate.
• Borrower will settle with 3.465 SOL loaned + 2.401245 SOL interest = 5.866245 SOL.
• Holders being accumulating interest upon borrowing because the loan is guaranteed via repayment or collateral liquidation.

%%{init: {'themeVariables': { 'pie1': '#000000', 'pie2': '#440044', 'pie3': '#882288', 'pie4': '#444444', 'pie5': '#800080', 'pie6': '#ff0000', 'pie7': '#FFA500'}}}%%
pie title Step3: SOL Lending Pool Repaid
    "HolderA" : 4
    "HolderB" : 6

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    xychart-beta
    title "Pool Growth"
    x-axis [HolderA+, HolderB+, BorrowerA-]
    y-axis "SOL (in Lamports)" 0 --> 10
    bar [2, 3, 10]

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Features not yet implemented

• Withdrawing SOL
• Same user borrowing twice

Features out of scope

• Liquidation mechanism.