JustLend wants more than TRON with new kending model

JustLend DAO, the largest lending platform operating on the TRON blockchain, unveiled the Supply and Borrow Market V2 (SBM V2) on June 17. In an attempt to avoid contagion risk within different assets, the protocol adopted a new architecture from shared pools to isolated collateral.

The significance of this change cannot be confined to the TRON blockchain since JustLend has consistently made its way into the list of top five DeFi lending protocols in the world in terms of total value locked (TVL), shows On-chain data. A restructure of the approach towards managing risk contagion may influence the behavior of billions of locked value in the entire DeFi lending space, where protocol failures have historically triggered cascading liquidations.

What is the difference between SBM V1 and SBM V1

With the SBM V2 upgrade, a two-tier architecture was used to isolate depositors’ funds from the borrowers’ collateral. Depositors can put different types of assets, such as USDT, into a “Vault”, which acts as a common liquidity pool. The funds will be distributed across several different borrowing platforms, where each platform will have its own set of collateral.

Each borrowing environment will function independently. Therefore, a drop in the price of collateral tokens will lead to liquidation in that specific platform only, without affecting any other platform that utilizes that same vault. This helps avoid cross-market contagion and reduces the overall liquidation risk across the protocol.

Another important change in the new upgrade is that it uses an adaptive interest rate curve instead of the jump model used in SBM V1. With the Adaptive Interest Rate Curve, if the utilization level in one market is low, the entire interest rate curve shifts downward to attract borrowers. On the other hand, once the utilization becomes very high, the rates will go higher to encourage repayments. The goal is to maintain an optimal level of capital efficiency for all markets without needing manual parameter changes.

Why isolated lending matters for the wider market

The move towards isolated collateral markets follows the development of lending structures within DeFi platforms. Euler V2, which launched its modular vault system on Ethereum, used the same approach: each token is kept in a dedicated ERC-4626 vault with its own risk parameters, rather than the shared liquidity pools that defined earlier lending protocols

The motivation is the same across networks. Lending protocols with shared liquidity pools involve systemic risk since the downfall of one collateral will negatively affect all users of the pool, regardless of what tokens they deposited. The largest DeFi lending protocol by total value locked (TVL), Aave, partially mitigated the issue using the isolation mode for risky assets. Now, JustLend V2 uses isolation by default for all markets.

For the global crypto lending market, the pattern is clear. Major protocols are now moving away from monolithic pools. For example, as evidenced by an analysis of Aave V2 transactions conducted by BIS, DeFi lending pools successfully attracted deposits worth nearly $50 billion within just two years; the deposits were largely driven by high-yield ambitions. Such funds will be sensitive to risk design. Protocols that show better isolation capabilities will definitely win more depositors, especially institutional ones.

What JustLend SBM V2 means in practice

Individual risk parameters (such as Liquidation Loan to Value Ratio, “LLTV”, a term introduced by JustLend) are no longer universal but can be configured per market. A speculative meme token that is being used as collateral in a particular market can have stringent liquidation conditions without affecting conservative tokens in other markets.

Depositors will receive the yield accrued from all the lending markets where their funds have been provided by their respective Vault, with interest paid out automatically based on the allocation of deposits. The protocol justifies this as an efficient utilization of capital, as a single deposit earns yields from several lending markets at once.

The JustLend DAO platform runs on the TRON blockchain and relies on Chainlink price oracles. The V2 version retains the existing Oracle system but adds on to it the new market structure.

The protocol’s JUST (JST) token holders oversee any changes in parameters using the JustLend Improvement Proposals framework. Changes in the new V2 markets’ risk parameters will also be subject to this governance mechanism, with community review before implementation.

What to watch for

The key question is whether V2 brings any fresh investment to JustLend. According to Gate.com’s rankings of the best lending protocols, JustLend had earned its spot due to the dominance of its protocol within the TRON ecosystem, not based on its features. An architecture that now replicates the designs provided by Euler and other Ethereum-native protocols could reverse this trend, particularly if cross-chain depositors begin comparing isolation guarantees across platforms.