What is marginfi?
marginfi is a decentralized lending protocol on Solana that offers composable money markets through three distinct lending layers: a Global Market for interconnected assets, Isolated Markets for independent risk pools, and a Native Stake Market for liquid staking collateral. marginfi also includes mrgnLoop and Arena as features for automated leverage strategies and memecoins trading.
Deposit some collateral to be used in the protocol. This collateral allows you to borrow the tokens available in the open markets. Approve the transaction in your wallet to continue.
Global Market
The Global Market is marginfi’s main lending pool, where any user can supply or borrow many cryptocurrency assets. All assets in the global market are interconnected such that collateral provided on a token can be used to borrow another token in the pool. This market excels for users who are more interested in capital efficiency and deep liquidity.
Isolated Market
The Isolated Market is a segment for new and riskier tokens. These tokens do not meet the requirements for being allowed as assets in the Global Market. The assets in this market, unlike the global market, operate independently. Any risk associated with a token is contained in the token pair alone. It’s an excellent option for users who want exposure to specific assets without cross-market risks.
Native Stake Market
The Native Stake Market allows users to use native Solana staking derivatives as collateral. These are for tokens like Helius from Helius validator, jitoSOL from Jito, or bSOL from BlazeStake as collateral. The Native Stake Market is primarily for users who have staked their SOL tokens in any of the validators available in the market. Native Stake enables users to earn staking rewards while still being able to borrow against their staked positions. Users might not find a desired staked token like JitoSOL because they have been migrated to the global markets.
Ecosystem
marginfi is integrated with many Solana protocols to ensure effective performance. Some of these are Mantis SVM, Juicer, and DreamOS.
The following are ways through which marginfi powers this ecosystem of applications:
Mantis SVM
As a parallelized Solana Virtual Machine, Mantis SVM increases on-chain execution speed marginfi. It allows marginfi to process liquidations, collateral updates, and lending products such as yield, staking yield and even restaking yield.
Asgard Watchbot
This is a telegram bot integrated to create real-time alerts for marginfi users. Since the lending application is not a mobile app, getting emergency notifications for any occurrence on the user’s account is impossible. With Asgard, for example, accounts at risk of liquidation can be notified before they are liquidated so that users can make adjustments to avoid losing funds.
Portfolio
As with many DeFi protocols, marginfi provides a portfolio section that curates all the open trades for a user’s account, such as the tokens borrowed, the amount lent out, and even the overall health factor of the account. This helps aggregate all the possible assets that could have been borrowed or supplied across different open markets from other categories.
marginfi Stake
marginfi offers a staking feature for earning yield and compounding returns in a few clicks. By staking with marginfi, users receive LST tokens to represent their staked SOL, just like other liquid staking protocols.
Margin Loop (mrgnloop)
Margin Loop is a feature in marginfi that allows users to leverage their positions automatically by using looping. This is done by repeatedly borrowing and depositing assets within a single transaction using flash loans.
How Margin Loop Works
- Start with an Asset: You deposit a token (e.g., SOL) into marginfi.
- Borrow Against It: marginfi lets you borrow stablecoins (e.g., USDC) against your SOL.
- Swap and Re-Deposit: You swap the USDC for more SOL and deposit it again.
- Repeat the Loop: The process repeats several times automatically, increasing your exposure to SOL.
The Loop tool helps users earn interest in larger positions and use the same collateral multiple times to maximize borrowing power. Loop is highly risky for poor account health. Also, in a volatile market, looping should be used with caution.
Conclusion
marginfi is one of the popular lending protocols on Solana. It offers a capital-efficient and user-friendly approach to lending, borrowing, and leverage. With its Global Market, Isolated Arena, and Native Stake Market, the protocol balances risk management with flexibility to make trading on it appealing to both everyday users and advanced traders.
