Why did USDe loops scale faster on Solana than MegaETH?
The answer is in lending market design.
@ethena partnered with
@megaeth to help launch and scale USDm, and also recently expanded to
@solana with partners like Paxos to scale USDG.
The strategy was very similar on both chains: subsidize USDm/USDG borrow rates to encourage USDe looping.
That loop created:
• More USDe mint demand for Ethena
• More USDm/USDG borrow demand
• More lending TVL and ecosystem liquidity
Here's what was happening inside the USDe loop:
• Buy USDe, which yields ~4%
• Deposit as collateral
• Borrow USDm/USDG at 2.5–3%
• Sell borrowed stablecoin for more USDe
• Repeat near max LTV
At max leverage (~8–9x), users pushed the strategy toward ~18–20% APY.
But the loop's success depended on one variable: borrow-rate predictability.
▶️ What happened on Solana?
On Solana, Kamino/Jupiter kept USDG borrow costs capped around ~2.5%.
Users knew: even near 100% utilization, borrow costs would likely stay below USDe yield (4%).
So users sized aggressively near max LTV.
▶️ What happened on MegaETH?
On MegaETH, the same trade ran through Aave using USDm.
But Aave's USDm borrow rate isn't capped below USDe yield.
As utilization rises, borrow costs can theoretically push toward ~14%, well above the 4% USDe yield.
▶️ Why capped borrow rates matter?
Even if the strategy is profitable today, users know there's a scenario where the loop can turn negative quickly.
For loopers, the max possible borrow rate matters as much as the current one.
At high leverage, even small rate spikes can delete weeks of accumulated yield.
That uncertainty changes behaviour.
Despite MegaETH launching earlier and offering heavy incentives, Solana's USDe supply expanded faster and bigger.
~570M on Solana vs ~430M on MegaETH.
▶️ Introducing Silo for looping
Silo v3 enables isolated lending markets with predictable, bounded interest rates designed for sustainable looped strategies.
Borrowers are protected from runaway interest rate spikes, while admins retain the ability to adjust rates over time without forcing users to close positions or migrate to new markets.
This creates a more stable borrowing experience and allows markets to continuously rebalance incentives between lenders and borrowers as conditions evolve.
Silo v3 gives borrowers predictable, sustainable leverage without the risk of sudden interest rate spikes, ensuring predictable looped strategies.
Yield attracts leverage. Borrow-rate certainty scales it.
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Borrow rates are variable. Higher leverage means smaller room for error. Review market parameters before opening a position. NFA.