Lending Protocol Comparison

When to use this skill

Use when the user asks about:

• Where to lend or borrow a specific asset
• Comparing interest rates across lending protocols
• Understanding liquidation risks and collateral ratios
• Evaluating lending protocol safety
• Optimizing a lending/borrowing position

Comparison Framework

1. Protocol Inventory

For each protocol under comparison, gather:

• Protocol name, version, and chain deployment
• Total supplied and total borrowed for the target asset
• Utilization rate and rate model type (linear, kinked, or dynamic)
• Governance token and incentive status

2. Supply Rate Analysis

Compare supply-side economics:

• Base supply APY — the rate paid to lenders from borrower interest
• Incentive APY — any additional token rewards for supplying
• Net supply APY — combined effective return
• Rate stability — how much has the rate fluctuated over 7d/30d?
• Utilization sensitivity — at what utilization does the rate spike?

3. Borrow Rate Analysis

Compare borrow-side costs:

• Variable borrow APR — current and 30d average
• Stable borrow APR — if available, and conditions for rebalancing
• Rate model kink point — the utilization threshold where rates jump
• Effective borrowing cost after any incentive offsets

4. Collateral Parameters

For each protocol, document:

• Loan-to-Value (LTV) — maximum borrowing power per collateral unit
• Liquidation threshold — the LTV at which liquidation triggers
• Liquidation penalty — the bonus liquidators receive (user's loss)
• Collateral types accepted — which assets can be used as collateral
• Isolation mode — is the asset in isolation with debt ceilings?
• E-mode — are there efficiency modes for correlated assets?

5. Risk Assessment

Factor	Evaluation
Protocol audit history	Number, recency, and firms
Bug bounty size	Indicates confidence in security
Oracle mechanism	Chainlink, TWAP, custom? Freshness?
Governance timelock	Delay before parameter changes take effect
Bad debt history	Any past insolvency events?
Supply caps	Are there deposit limits?
Borrow caps	Are there borrowing limits?

6. Liquidation Scenario Modeling

For the user's intended position:

• Calculate the liquidation price given their collateral and debt
• Estimate the buffer (current price vs liquidation price as percentage)
• Model what happens if collateral drops 20%, 40%, 60%
• Recommend a safe health factor target (suggest 1.5+ for volatile assets, 1.2+ for stablecoins)

7. Output Format

Present a comparison table and recommendation:

Metric	Protocol A	Protocol B	Protocol C
Supply APY	X%	Y%	Z%
Borrow APR	X%	Y%	Z%
LTV	X%	Y%	Z%
Liquidation threshold	X%	Y%	Z%
Liquidation penalty	X%	Y%	Z%
Audit status	...	...	...

• Best for lending: Protocol recommendation with reasoning
• Best for borrowing: Protocol recommendation with reasoning
• Risk-adjusted pick: Considering security, rate stability, and terms
• Position recommendations: Suggested health factor and monitoring frequency