Jupiter Exchange is working to set the record straight after concerns emerged around its lending protocol. Kash Dhanda, the platform's director of operations, acknowledged that previous communications had exaggerated the security of Jupiter Lend's vaults. Previous publications had suggested there was no risk of contagion, a claim that was later withdrawn. Dhanda admitted that this message was wrong and insisted on the need to provide clearer and more precise information on the risks involved.
In brief
- Jupiter COO Kash Dhanda has clarified that previous statements claiming zero contagion in Jupiter Lend's coffers were not accurate and that the misleading posts have been removed.
- He explained that although vaults use rehypothecation, each vault has its own configurations and limits, which the team considers a form of insulation.
- Kamino co-founder Marius Ciubotariu pointed out that the Jupiter Lend migration tool was blocked because users were misled about the design of the protocol and the risks involved.
Jupiter clarifies the risks associated with safes and their insulation
Before Dhanda issued his clarification, Jupiter had shared social posts describing the vaults as operating with “isolated risk”, even suggesting that this setup prevented any interaction between the pairs. One publication went further to claim that the design entirely eliminated the possibility of contagion. This post drew criticism and was ultimately removed, leading to a broader review of how the protocol's mechanics were communicated.
In a video lasting just over three minutes, Dhanda acknowledged the error in the video and said the posts were removed to prevent the spread of an incorrect message, adding that the vaults carry a limited risk of contagion, rather than none.
In hindsight, we should have issued a fix as soon as we removed it. But that's how it is. The bottom line is that we should have said that there is a very limited risk of contagion because that is in fact correct.
Kash Dhanda
Fluid co-founder Samyak Jain added contextexplaining that Jupiter Lend uses rehypothecation. He noted that the vaults are still insulated, saying that “Each vault has its own configurations, ceilings, liquidation threshold, liquidation penalty, etc., and there is definitely rehypothecation for better capital optimization. »
Jupiter Lend faces criticism over vault structure
However, Kamino co-founder Marius Ciubotariu expressed concern that this setup could mislead users. He said the Jupiter Lend migration tool was blocked because their “Users have been misled about the design of the protocol and the risks they are taking. » Ciubotariu argued that although the platform has long indicated that vaults would prevent one asset from impacting another, the system works differently in practice.
The Kamino co-founder explained that when a user deposits SOL and borrows USDC, the deposited SOL can be loaned to loop users like JupSOL and INF, exposing the user to the risks associated with these positions. In his view, this results in entirely interconnected risk between assets, which contradicts the way the product was presented.
However, Dhanda maintained in the video that the protocol uses rehypothecation while keeping the vaults isolated. He said the structure should be seen as isolated due to the unique configuration of each vault.
Resistance and support in protocol design
The word “insulation” seemed to be at the center of the disagreement between executives at Jupiter Lend and Marius Ciubotariu:
- Dhanda and Jain say the vaults are insulated because each operates with its own configuration, including loan-to-value ratios, limits on assets, and rules for liquidations, which provides resilience and allows liquidity to flow through rehypothecation.
- Ciubotariu countered that this setup does not constitute true insulation, arguing that in both traditional and decentralized finance, users need to know whether collateral can be reused and how that affects contagion risk.
- He pointed out that describing pair-specific configurations as isolated is misleading and could give users a false sense of security
Furthermore, in comments shared with The Block, Ciubotariu noted that he would consider reopening the migration tool once Jupiter stops presenting the system in a way that gives users and the Solana community an inaccurate picture, as well as updating the tool to allow movement in both directions.
Early debate on performance and security
Jupiter Lend was introduced in August with loan-to-value ratios reaching up to 90%. Dhanda highlighted the protocol's performance during the market crash on October 10, noting that its ability to avoid any bad debt demonstrated that it could handle pressure even as a relatively new platform.
However, Ciubotariu disagreed, pointing out that the protocol had only been active for a month with limited positions exposed to real market stress. He noted that Jupiter Lend would need years of testing in harsher conditions before making any claims about safety or resilience.
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