Protocols with way lower borrowing than lending

Hi,

Probably this is a very dumb question and can be answered with A-Income coming from somewhere else or with B- It’s not sustainable. The question is what’s the strategy of some lending protocols like for instance Solend to provide lower borrowing rates than the lending rates. I understand that things like this allow to create these infinity loops that provide higher APY , but i don’t know how they can afford that or if it’s something that ultimately will end up making them go into a “bankruptcy”.

On the other hand, other plataforms like AAVE (Which i know is the safest and one of the oldest) have some more reasonable rates.. quite low but logical , higher borrowing rates to pay to the lenders and make a profit..

So, what’s the catch and is possible to have a sustainable plataform without the “right” rates. If so, how?

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3 thoughts on “Protocols with way lower borrowing than lending”

  1. Typically protocols set aside tokens for this. Just think of it like an on-going airdrop and without those tokens, the rates wouldn’t be as attractive.

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  2. In all honesty, I would rather diversify with Spool considering the diversification Spool as it would help automate yield farming and save me from all this stress.

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