Sendit Systemic Design and Risk Controls

This document outlines the steps involved in understanding and utilizing Sendit's systemic design features and risk controls, which are crafted to contain adverse outcomes without completely eliminating them. By using isolated pools and other strategic mechanisms, Sendit aims to prevent the spread of financial risks and ensure stability during market fluctuations.

Step 1

Understand that Sendit's systemic design considerations include risk controls engineered to contain adverse outcomes rather than eliminate them. The use of isolated pools is key to preventing contagion between different tokens.

Step 2

Deposit Solana into each individual pool, as these pools are separated to prevent contagion. In the event that one pool incurs bad debt, the issue does not spread across the entire platform. High liquidation penalties are in place to encourage rapid repayment of distressed debt.

Step 3

Recognize that liquidators are incentivized to intervene and repay debt swiftly. Position limits are implemented to ensure no single borrower can pose significant systemic risk, thus minimizing manipulation potential. Losses are socialized, distributing any pooled deficit proportionally to reduce individual exposure.

Step 4

In the event a pool incurs bad debt, losses are shared among the SOL LPs within that pool. SOL-denominated debt offers a natural counterbalance during market downturns because both the collateral (such as meme tokens or SPL tokens) and the debt (SOL) move together, which helps stabilize Loan-to-Value (LTV) ratios. These mechanisms were effective during the significant October 10th market crash, the largest single-day drawdown in crypto history.

Step 5

During this stress test, no pool insolvencies occurred, SOL depositors did not experience any loss, and liquidations were minimal. The system demonstrated resilience under actual stress conditions.