Arb interest rate spreads across protocols?

There are often major discrepancies in interest rates across different protocols - for example right now the deposit/borrow rates on Jet for usdc are .3%/1.5% while on Mango they are ~30%/40%. The rates are dynamic and often update every hour or so meaning it’s not practical for most users to seek out the best option. It seems like a natural next step for borrow/lend platforms is to make some attempt to get the best rate for their users, so for example the Jet usdc deposits could be send to Mango while the discrepancies persist (and the Mango borrows could be farmed from Jet).

I’m wondering what people think about this idea in general. There are a few problems with this that might not have easy solutions:

  • For most platforms there’s not a deterministic way to guarantee you’re getting the best rate. For example if everyone sees borrows are expensive on Mango and sends funds there, then when the interest rate dynamically updates the rate might collapse. This isn’t a huge issue at the moment as these discrepancies can persist for days, but I think it’s likely that we’ll see multiple attempts to close these spreads in the future.

  • If Jet deposits are sent to other protocols then you’re doubling platform risk and so you’d probably want to demand a somewhat substantial premium to compensate for this.


My instinctual response, and it may be wrong, is that if the Jet protocol were to partake in this it might be at odds with Jet users.

It seems that arbitrage is best left to opportunistic 3rd parties. But I’m happy to hear pushback on this idea.

the point of Jet and other money markets isn’t to send the deposits to other protocols. The opportunity is for people to borrow the (for example) USDC on Jet and deposit themselves on Mango.

If you’re a depositer of USDC you’d be better off simply putting it where you see the higher rate. Or, you’d borrow, say, SOL and farm that where you find a rate above the interest rate you’d pay to borrow (which is not hard right now).

If I had to guess I’d say the only reason the rate is quite low on Jet right now is because a bunch of people have simply deposited capital onto Jet without borrowing to farm elsewhere because they don’t really understand how to arbitrage the rates out there, and are simply hoping for a nice airdrop.

That said, there is probably space in the solana ecosystem for a “Yearn” style product atm. Yearn originally was a protocol that moved stablecoins etc around to whichever market had the highest rates at a given moment, like compound, aave, bzx, etc. For folks who just want the best deposit rate at any given moment, that would be the best bet.

But I don’t think Jet can arbitrarily move the deposits on its protocol because the entire point of Jet is to allow other users to borrow said deposits.