After adding a points-based incentives scheme, MarginFi, a lending business running on the Solana blockchain, has seen considerable growth. Many users assume these points will someday convert into valuable tokens, even if their actual function is yet unknown. MarginFi has seen a spike in activity as a result of this belief, drawing a number of “airdrop farmers” who borrow and lend inside the Solana ecosystem.
MarginFi has had success with the rewards program, quadrupling its total value locked (TVL) in only two weeks and exceeding the $10 million mark. Although compared to bigger protocols, this increase may not be very significant, it nonetheless signals progress for certain areas of Solana-based decentralized finance (DeFi). It might serve as the impetus for a new “Solana Summer,” a time of expansion for the blockchain ecosystem, according to some optimistic analysts.
The points system for MarginFi attempts to measure user contributions to the success of the platform. Each dollar deposited results in four points for the borrower and one point for the lender. The point accumulation is larger the longer the credit duration. Edgar Pavlovsky, the inventor of MarginFi, has chosen to remain silent about rumors of impending token airdrops connected to these points.
Other cryptocurrency projects have distributed tokens to consumers via point systems. These coins often act as governance tokens, allowing members of the community to influence protocol decisions. Additionally, many gather tokens in order to sell them as values rise due to the appeal of prospective financial benefits. Users of MarginFi have been avidly gathering points in anticipation of an upcoming windfall from an airdrop that can be sold when the Solana token (SOL) appreciates, such as fictitious user BigPaperHand.
The points-based MarginFi platform has seen unprecedented growth, drawing a wide variety of users. According to data from Hello Moon, a provider of blockchain infrastructure, many users are investing liquid staking tokens (LSTs), which are locked SOL tokens generating 7% interest. These LSTs enable investors to keep control of their SOL holdings while providing appealing dividends. The development of MarginFi fits with the general pattern of Solana DeFi platforms adopting LSTs, indicating the possibility of a DeFi renaissance inside the Solana ecosystem.
However, as MarginFi becomes more well-known, worries regarding liquidity restrictions start to surface. The platform must make sure it is able to sell the collateral that defaulting borrowers have given it. Since Solana currently has no trading activity, lending protocols like MarginFi must put limitations on token deposits to enable secure on-chain liquidation. For instance, the maximum deposit limit for bSOL, an LST produced by the Solana validator service SolBlaze, has been surpassed on MarginFi, accounting for a significant fraction of the bSOL tokens now in circulation. The creator of SolBlaze is aggressively attempting to increase bSOL’s liquidity via partnerships with other Solana DeFi networks.
MarginFi needs more liquidity in the Solana ecosystem to maintain its development, which is difficult for the whole Solana DeFi industry. MarginFi would gain from more liquidity, as would the price of SOL, the Solana network’s native coin. Demand for SOL would probably increase with the acceptance and usage of Solana-based protocols as users try to access and make use of the ecosystem’s resources.
In keeping with this development, Cypher, a trading protocol that often works with MarginFi, has made plans to launch its own points system to encourage expansion. Barrett, the creator of Cypher, believes that encouraging activity is essential for protocols in the DeFi area since it benefits the ecosystem’s general growth.
The point-based rewards scheme is essential to promoting engagement and development as MarginFi and other Solana-based platforms continue to innovate and draw users. It is yet unclear how this trend will develop and if it will lead to yet another big increase of the Solana DeFi market.
