Debt in a lending protocol where the collateral value has fallen below the outstanding borrow value, making the position impossible to liquidate profitably. Bad debt occurs during extreme market crashes when liquidators cannot act fast enough or when oracle prices become stale. The protocol or its insurance fund must absorb bad debt losses. Kamino's Scam Wick Protection aims to reduce bad debt from price manipulation.
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Debt in a lending protocol where the collateral value has fallen below the outstanding borrow value, making the position impossible to liquidate profitably. Bad debt occurs during extreme market crashes when liquidators cannot act fast enough or when oracle prices become stale. The protocol or its insurance fund must absorb bad debt losses. Kamino's Scam Wick Protection aims to reduce bad debt from price manipulation.
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AMMs, routing, liquidity, lending, and trading infrastructure.
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Bad Debt (bad-debt) Category: DeFi Definition: Debt in a lending protocol where the collateral value has fallen below the outstanding borrow value, making the position impossible to liquidate profitably. Bad debt occurs during extreme market crashes when liquidators cannot act fast enough or when oracle prices become stale. The protocol or its insurance fund must absorb bad debt losses. Kamino's Scam Wick Protection aims to reduce bad debt from price manipulation. Related: Liquidation, Lending Protocol, Oracle Staleness
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The process of repaying a borrower's debt by selling their collateral when their position's LTV exceeds the liquidation threshold. Liquidators (typically bots) repay a portion of the debt and receive the collateral at a discount (liquidation bonus, typically 5-10%). Liquidation keeps lending protocols solvent. On Solana, liquidation bots compete via Jito bundles.
A DeFi protocol that enables users to deposit tokens to earn yield and borrow tokens against collateral. Key Solana lending protocols include Solend, MarginFi, Kamino, and Save (formerly Solend v2). Lending rates float based on utilization (borrowed/deposited). Deposits receive interest-bearing receipt tokens representing their share.
The condition where an oracle price feed has not been updated within an acceptable time window, making the price data potentially unreliable. Stale prices can lead to incorrect liquidations, mispriced trades, or exploitable arbitrage. Solana DeFi protocols must check the timestamp of oracle updates and reject or pause operations when prices exceed a staleness threshold (e.g., 30 seconds for Pyth feeds).
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Measure of a bond's price sensitivity to interest rate changes, in years. A 5-year duration bond falls ~5% per 1% rate rise. Short-duration instruments (T-bills, MMFs) have minimal duration risk, explaining their dominance in on-chain RWA adoption.
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The process of repaying a borrower's debt by selling their collateral when their position's LTV exceeds the liquidation threshold. Liquidators (typically bots) repay a portion of the debt and receive the collateral at a discount (liquidation bonus, typically 5-10%). Liquidation keeps lending protocols solvent. On Solana, liquidation bots compete via Jito bundles.
A DeFi protocol that enables users to deposit tokens to earn yield and borrow tokens against collateral. Key Solana lending protocols include Solend, MarginFi, Kamino, and Save (formerly Solend v2). Lending rates float based on utilization (borrowed/deposited). Deposits receive interest-bearing receipt tokens representing their share.
The condition where an oracle price feed has not been updated within an acceptable time window, making the price data potentially unreliable. Stale prices can lead to incorrect liquidations, mispriced trades, or exploitable arbitrage. Solana DeFi protocols must check the timestamp of oracle updates and reject or pause operations when prices exceed a staleness threshold (e.g., 30 seconds for Pyth feeds).
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A protocol that enables token swaps using algorithmic pricing against pooled liquidity instead of matching individual buyers and sellers. AMMs use mathematical formulas (typically constant product x*y=k) to determine prices based on the ratio of tokens in a liquidity pool. On Solana, major AMMs include Raydium, Orca, and Meteora.
An AMM design where liquidity providers concentrate their capital within specific price ranges instead of across the full 0-to-infinity range. CLMMs dramatically improve capital efficiency—LPs earn more fees per dollar deposited within their active range. If the price moves outside the range, the position becomes inactive. Orca Whirlpools and Raydium CLMM are leading implementations on Solana.
A smart-contract-held reserve of two or more tokens that enables trading via an AMM. Users deposit token pairs in specified ratios to become liquidity providers and earn trading fees. Pools are identified by their token pair and fee tier. Pool depth (total value locked) determines price impact for trades.
A token issued to liquidity providers representing their proportional share of a pool's reserves and accrued fees. LP tokens can be burned to withdraw the underlying assets. The value of LP tokens changes as the pool's token ratios shift and fees accumulate. LP tokens are often stakeable in yield farming programs for additional rewards.