Jet, a Solana-based liquidity protocol, has launched a DeFi product called “Leveraged Swaps” to simplify margin trades. Leveraged swapping is a feature that allows users to borrow from liquidity pools for investing purposes by using their collateralized assets (backing crypto with other assets). Collateralization acts as a second line of defense against abrupt liquidations, thereby adding another layer of safety.
The launch comes as analysts and customers remain skeptical about DeFi liquidity, especially ahead of the Merge. With DeFi platforms such as Compound and Aave putting a lid on borrowing ETH freely, Jet Protocol’s “Leveraged Swaps” might help shift user interest towards Solana. For perspective, Solana, which has been struggling this year, would require a massive sentiment overhaul to go up the popularity charts. Jet Protocol might just help with that.
Jet Protocol is one of the popular lending and borrowing platforms on Solana that aims to replicate Uniswap by offering this new swap trading functionality. What makes it fascinating is its use of Automated Market Maker (AMM) to generate enough liquidity. This way, more liquidity providers are expected to come in and execute trades.
How will the leveraged swap work?
With leverage swaps, users can borrow assets using their existing assets to invest and earn yields across liquidity pools. As the existing assets would be collateralized in the first place, liquidation risk is further reduced.
Wil Barnes, CEO of Jet Protocol, believes that this new DeFi product will reduce financial complexity within the crypto space.
Jet, for now, will allow SOL, BTC, ETH, and USDC as the collateral choices. Users will be able to secure their existing crypto assets using one or all of the mentioned options.
This product is a lot similar to the DeFi Saver—an Ethereum-based Defi application. Both DeFi saver and now the Leveraged Swaps propose to make yield management easier for individuals. However, DeFi Saver is much bigger with a total value locked (TVL) of $124 million, according to DefiLlama. Conversely, Jet Protocol has less than $5 million by way of TVL.
However, unlike DeFi Saver, which levies a transaction fee as an external provider, Jet Protocol is expected to sit on top of pools, courtesy of its in-house lending support, according to Barnes. Barnes added that this swap trading product would keep reinventing itself, depending on customer requirements.