Jupiter, one of Solana's largest decentralized exchange aggregators, has introduced Lend v2, a major upgrade to its lending protocol that allows both deposited and borrowed assets to be deployed as decentralized exchange (DEX) liquidity — potentially generating trading fees that can offset borrowing costs.

Jupiter describes Lend v2 as the first Solana lending protocol to let borrowed assets earn trading fees. The upgrade is designed to bridge two previously distinct categories of on-chain yield generation: lending and liquidity provision, a combination that has been explored on other chains but had not yet been implemented natively within Solana's DeFi ecosystem.

How Lend v2 Works

Lend v2 introduces two optional features — Smart Collateral and Smart Debt — along with a third addition called Lifetime PnL.

Smart Collateral enables users to deposit a single supported asset, such as USDC, USDT, SOL, or JupSOL. Jupiter can then deploy that asset into a correlated liquidity pool. According to Jupiter, eligible positions can earn lending yield, DEX trading fees, and, where applicable, native staking rewards simultaneously.

Smart Debt applies the same concept to borrowed assets and represents the more notable innovation of the upgrade. Rather than leaving borrowed funds idle outside the liquidity system, users who opt in can have those assets deployed as DEX liquidity. When traders interact with the pools, the resulting fees can potentially offset some or all of the interest charged on the debt.

Jupiter emphasized that the underlying borrowing process remains unchanged. Users can still borrow and repay assets as before, and those who prefer not to take on DEX exposure can continue using the platform's conventional lending features without modification.

Lifetime PnL, the third major addition, provides users with a historical performance view of a position, combining lending yield, borrowing costs, and trading fees over the position's entire lifetime.

"There's been a wall between the two primary ways people earn APY onchain — lending and LPing," said Jupiter COO Kash Dhanda. "Lend v2 brings down that wall by letting users opt in to letting their liquidity work as both lending and AMM liquidity at the same time."

Both Smart Collateral and Smart Debt are entirely optional. Jupiter stated that users who prefer conventional lending can continue to supply and borrow without any exposure to DEX liquidity or its associated risks. However, users who do opt in take on the risks inherent to liquidity provision, including impermanent loss and smart contract exposure from interacting with AMM pools.

The Capital-Efficiency Play

In conventional DeFi lending, deposited assets generate lending income while borrowed assets represent a cost. Liquidity provision, by contrast, offers another potential income stream through trading fees but typically requires users to open and manage a separate position.

By combining lending with liquidity provision in a single position, Jupiter is offering Solana users a new way to generate returns on capital that would otherwise remain static in a standard lending arrangement. The approach reflects a broader trend across DeFi toward protocol composability, where platforms increasingly integrate multiple financial primitives — lending, trading, and staking — within unified interfaces rather than requiring users to move capital between separate applications. Jupiter's existing position as a major Solana DEX aggregator gives it an established liquidity base to draw on as it expands deeper into lending.