Contemplating Solana DeFi #3 - Introducing Kamino 2.0 aka. K-Lend (Airdrop opportunity)
Things are moving at lightspeed in Solana DeFi, so I’ll be providing an update on one of the chains fastest growing applications with Kamino Finance and the introduction of Kamino Lend.
It’s been some time since we initially covered Kamino and there have been huge updates since! Now is a perfect time to update you on what’s been happening, share the most recent changes and improvements introduced with Kamino 2.0, and provide some insight on the incipient points program.
Contents:
Kamino Origins
Liquidity vaults
kTokens
Kamino 2.0 & new features
Points and airdrop
Risk dashboard
Disclaimer: This article will be submitted to Superteam for the Kamino bounty. I have been following the team’s development for a while, it is one of the first Solana applications I looked in to and is genuinely one of my favourite to use but I am in no way affiliated or invested in the Kamino project.
What is Kamino Finance?
Kamino is a permissionless end-to-end DeFi platform which unites borrowing, lending, liquidity and leverage all within one seamless and pleasant user experience.
The application is rich of features and not only have the team have been spearheading innovation, but are also passionate about user education, risk management and transparency.
Problem solver
Kamino was initially introduced solely as the go-to liquidity layer for concentrated liquidity market makers (CLMMs), users would deposit pairs of their assets to the underlying DEXs and seek yields from the fee’s collected from trading within the liquidity pools.
CLMMs are capital-efficient but also have a basket of problems due to the complexity that comes with them.
Ordinarily when providing liquidity, it is down to the user to manage and actively rebalance their position and risk accordingly which requires time, effort and attention.
Kamino empowers its users with innovative strategies to manage their positions, streamlining the LP process and automating liquidity and yield optimization through position rebalancing and auto-compounding of fees and rewards.
This doesn’t remove undue risk that comes with investing and participating in DeFi, you still need to maintain your investment position and there are very real risks to losing your capital so practice caution and due diligence.
To further streamline the experience for liquidity providers, there is a direct integration with Jupiter to enable a one-click balancing of deposits and withdrawals for asset pairs. Users decide on weighting on the balance and Jupiter supports the lightspeed aggregation in the background.
#OPOS
Staying liquid with kTokens
In the past, if you were to participate in providing liquidity to DEX’s, you could no longer utilize your deposited assets in the pool. Similar to liquid staking, Kamino solves this issue with liquidity by supplying a ‘kToken’ (aka, a receipt token) for LPs, which represents the equivalent value of your deposit and can be used throughout compatible DeFi protocols.
kTokens are hugely innovative as they do not just represent the equivalent value of your initial deposit to Kamino Vaults, but also adapts over time to reflect the accrued value you gain from yields from your position.
With the introduction of Kamino 2.0 and K-Lend, you have the option to supply certain kTokens for collateral to earn some decent additional yield, or utilize to borrow against.
Introducing Kamino 2.0 (aka. K-Lend):
In November 2023, after some time in beta testing phase, the team announced the complete overhaul of Kamino with a fresh new UI and a suite of new features.
The main additions included the ability to borrow, lend, one-click yield ‘looping’, leverage and additional features to help users manage and understand their risk.
Prior to the 2.0 upgrade, the main value drivers for users to choose Kamino was decent APY, the advanced features and reporting, or because of the incredible user experience - which in my opinion, is second to none.
These benefits have now spilled over into the new products and it gives users no reason to go anywhere else for their DeFi needs.
Let’s break down the new features below…
For the conservative (Moderate-risk):
Liquidity Vaults
Provide liquidity to desired token pairs and earn passive yield from the fees on the underlying DEX pool
Explore curated possibilities for basic or more exotic vault strategies, Kamino makes it frictionless to deposit in seconds. Yields are auto-compounding, removing any burden managing this manually
DIY Creator Vaults are a truly innovative feature, which gives users the freedom to set up their own permissionless liquidity vaults with custom strategies. A simple 2-step process which empowers users to be creative and incentivizes sharing with their network - vault creators will be able to earn their own fees from users depositing liquidity to their custom strategies
Lend and borrow
Deposit to lend a wide range of assets and begin earning fairly generous APY. It’s possible to then utilize your supplied assets to rehypothecate them as collateral for borrowing against, all within the same seamless dashboard.
To ensure the security of liquidity on Kamino, there are maximum ‘loan to value’ thresholds set to mitigate the risk of an insolvency which helps to calculate position ‘borrow power’. If this threshold is surpassed your position will be liquidated to protect the integrity of the protocol and to offer as incentive to the user to practice staunch risk management.
For the degen (High-risk):
Multiply vaults
A common DeFi trick degens practice is ‘Looping’. This works by cycling borrowed assets and depositing them back into lending repeatedly until a target compounded yield rate desired is achieved.
Ordinarily Looping would be something that would need to be managed manually as so:
Deposit assets to lend > Borrow with collateral > Lend borrowed assets > and cycle until you reach your desired risk threshold or LTV ceiling
Important: The more that assets are looped the higher the risk of position liquidation if there is a highly volatile event
K-Lend streamlines this whole process by automating the looping process in the background and with one-click allows depositors to set a target ‘multiply’ rate to achieve, removing the need to process numerous transactions and manually calculating the positions required.
There is currently only three assets available on Multiply; bSOL, JitoSOL and mSOL. It’s worthwhile noting that holding a bSOL position will also contribute to BLZE airdrop
Users can see an overview and manage their stake within ‘My position’, which includes a significant amount of detail on elements including APY, liquidation rate, LTV ratio and provides the ability to adjust the leverage as deemed fit.
It is recommended to not over extend your position to accommodate for any rapid volatility or black swan events which would cause your position to be automatically liquidated.
Lever-up with long/short vaults
Are you feeling bullish or bearish on the market? Continuing the theme of ‘one-click’ actions, K-Lend enables degens to enter long or short positions with leverage.
How to enter a position;
Choose the direction you expect the market to go, i.e. short/long position, enter the rate of leverage and deposit the applicable asset to to facilitate this.
Adjust the leverage slider to the desired weighting - the higher the lever the higher the risk
Review your exposure and note the LTV (stay in the green if you can)
Open your position and review this regularly
Its possible to simulate potential outcomes from leveraged positions before committing so users can forecast and plan ahead for how they should manage their position when their desired price targets have been achieved.
Points announced and hint at airdrop
As with other Solana projects like Jito and MarginFi, which have had mega success in introducing their native points campaigns, it was confirmed recently that Kamino will be following suit with their own.
Anyone who has been utilizing Kamino up until now will have points allotted based on their historical usage - rewarding the earliest users for their participation.
As the points aren’t even live yet, there is likely a while yet for you to begin accruing - the best way to do this for now is just by organically using the platform until the team announce more granular details on the best ways earn them.
Join the Discord and Telegram to get the earliest insights:
Discord: http://discord.gg/kaminofinance | TG: https://t.me/kamino2
Platform performance
Although it is still speculation, eventually Kamino Points will translate into user rewards or airdrops of a new native token.
Since it was hinted to the wider community alongside the introduction of Kamino 2.0, its no surprise that metrics have gone parabolic with TVL finally having it’s hockey-stick moment - in both SOL and USD values:
Since the beginning of November, TVL has managed a 3x, increasing to around $38mil - with a staggering 50% of which being captured by the new Kamino Lend product in only 3 weeks since release:
What is absolutely wild is how the points incentive and release of Kamino 2.0 has brought Kamino into the limelight and their daily active user count has absolutely exploded.
Cumulative DAU has grown from around 4.5k to 13.5k in just 30 days!
Security and commitment to risk education
After the deleveraging chaos of 2022, one thing is abundantly clear - protocols and builders need to provide a solid risk framework for their users.
One of the biggest (and best) plays from Kamino is their continued commitment to transparency and prioritization of the financial safety of their users. Although investment decisions need to be owned by users in DeFi, the Kamino team has taken steps to support through education and is mitigating the risks that come with participating in DeFi through novel frameworks.
This is the beautiful thing about onchain decentralized finance is that everything can be transparent and open so users of the system can assess the risks of their participation fairly.
Don’t trust, verify.
Risk dashboard
Go to risk.kamino.finance to view an end to end risk dashboard developed by the Kamino team.
The dashboard includes data directly from the Kamino platform in real-time and allows users to inspect many different risk metrics taken an calculated directly from on chain data.
The data is so granular that you can check and follow individual wallets with their respective positions and filter only the information you want/need to see;
Risk metrics - e.g. TVL vs Utilization %
Loan positions - Easily identify DeFi participant types, identify risks and can be used for whale-wallet tracking
Price shock analysis - model scenarios for volatility in the price of assets and the resulting liquidations
The goal for the Kamino is that this practice becomes the gold standard of the DeFi space and essentially what every team will eventually be aspiring to.
In my opinion they now have a massive head start on this before others as risk management has been such a huge focus for the team, with that I believe it becomes a serious contender for one of the most trusted DeFi platforms in the future.
I hope you enjoyed reading!
Support by sharing with your friends and on socials and drop a comment below with any questions or feedback.
See you in the next one!
f.