Navigating Risks with Sendit

This document provides a comprehensive overview of using Sendit, a permissionless money market on the Solana blockchain. Sendit allows users to borrow SOL against Solana tokens and trade with up to 3X leverage. While it offers features such as isolation, over-collateralization, and transparency, users must be aware of potential risks associated with decentralized finance (DeFi) protocols.

Step 1

Understand the inherent risks of using Sendit. It is a permissionless money market enabling users to borrow SOL against their Solana tokens and trade any Solana token with up to 3X leverage. Despite its design focused on isolation, over-collateralization, and transparency, the platform is not without risks.

Step 2

Watch the video for a concise overview of the key risks every user should recognize. To begin, understand the collateral and loan structure: every loan on Sendit is over-collateralized. This means the borrower must deposit more in collateral value than they are allowed to borrow.

Step 3

Be aware that if the collateral value drops too quickly compared to the borrowed amount, the position may be liquidated. A liquidation penalty, which reduces the collateral value, is applied to encourage quick repayment by liquidators. While this mechanism safeguards the solvency of each pool, it can result in losses for the borrower.

Step 4

It's essential for borrowers to monitor their loan-to-value (LTV) ratio. Staying below 70% is crucial, as exceeding an LTV ratio of 75% triggers loan liquidation. Subsequent videos will further explore pool liquidity risks.

Step 5

In the following sections, we will delve into specific risks such as pool liquidity risks, market solvency risks, and liquidation risks. Additionally, we will cover understanding liquidations, oracle risk, smart contract and platform risk. The series will conclude with systemic design considerations and a summary of practical user guidance.