The emergence of smart contracts on Ethereum has only been a few years in the making, yet the total value locked in DeFi projects has already surpassed $280 billion. Early DeFi projects like MakerDAO and Aave remain highly competitive, even holding dominant positions in the market, while new and innovative projects are continually emerging, hoping to carve out their own niches.
On July 2, Kamino announced on the X platform the introduction of PYUSD and the launch of an incentive program that will be updated based on the inflow of funds. Users can receive rewards in PYUSD simply by depositing funds into Kamino Lend's main market; the more they deposit, the higher the rewards. With substantial funds flowing into Kamino Lend, the liquidity of PYUSD will see significant growth, and Kamino will experience a wave of new activity.
01 Differentiated Competitiveness
Kamino Finance is a protocol built on the Solana blockchain and has recently emerged as a significant liquidity and lending solution in the DeFi space. It has now been integrated into the OKX Web3 Wallet.
Kamino Finance traces its origins back to the Hubble Protocol, which offers two tokens on Solana: the HBB governance token and the USDH over-collateralized synthetic dollar. Although Kamino has not publicly announced any fundraising plans, Hubble raised over $18 million in 2021 and 2022. Today, by DeFi Total Value Locked (TVL), Kamino is the largest protocol on Solana, with assets totaling $1.15 billion, surpassing Raydium and MarginFi.
Kamino distinguishes itself from other liquidity provision (LP) products by supporting one-click automated compounding strategies for concentrated liquidity. This provides users with a unified and secure suite of DeFi products, laying a solid foundation for Kamino's development. Today, Kamino has become a DeFi protocol integrating lending, liquidity, and leverage, offering users transparent analytics, detailed performance data, and extensive position information.
On the Kamino platform, users can easily borrow and lend assets, provide leveraged liquidity to concentrated liquidity DEXs, build automated liquidity strategies, and use concentrated liquidity positions as collateral.
02 Core Features
Kamino offers users four core features: Borrow/Lend, Liquidity, Multiplier, and Long/Short trading.
First, Borrow/Lend.
Kamino's Borrow/Lend feature is an over-collateralized lending protocol with two unique aspects:
1. Partial Liquidation: Instead of fully liquidating the borrower's collateral, only part of it is liquidated to bring it below the liquidation TVL threshold. The liquidated collateral is subject to a 5% to 10% liquidation penalty.
2. Kamino uses Pyth Network and Switchboard as oracle providers. For Liquid Staking Tokens (LST), Kamino uses a staking ratio formula to smooth prices and reduce the risk of liquidation due to temporary decoupling.
Currently, Kamino offers three lending markets: the Main Market, the JLP Market, and the Altcoin Market.
Secondly, Liquidity
Kamino's liquidity vaults function as Concentrated Liquidity Market Makers (CLMM), automatically providing liquidity for Orca, Raydium, and Meteora. Liquidity Providers (LPs) benefit from auto-compounded fee revenue and automatic rebalancing of positions to ensure liquidity remains within range. Kamino's liquidity vaults also offer token incentives such as JTO and KMNO or Meteora MET points.
The "kTokens" that liquidity providers receive can be used as collateral for borrowing, enhancing the flexibility and security of the liquidity provided.
Third, the Multiplier
Kamino's multiplier feature allows users to leverage staking by depositing SOL or liquid staking tokens (LSTs) such as JitoSOL, bSOL, and mSOL. The process involves a leveraging loop where users can amplify their staking position. The steps are as follows:
1. Deposit SOL or LST.
2. Borrow via a flash loan.
3. Swap the borrowed SOL for LST.
4. Use the acquired LST as collateral.
This loop is repeated until the desired leverage ratio is achieved, with a maximum leverage of up to 5x. If the borrowing interest rate consistently exceeds the yield from the LST, the position will be liquidated.
Long and Short Positions
Users can execute long or short trades on seven supported assets by leveraging a looping mechanism. The process is as follows:
1. Deposit USDC or the desired token.
2. Borrow a flash loan.
3. Convert the borrowed USDC to the desired token.
4. Use the token as collateral.
This loop is repeated until the desired leverage ratio, ranging from 1.7x to 6.7x, is achieved.
03 Economic Model
KMNO is an SPL token on Solana, launched on April 30, 2024, with a total token supply of 10 billion. KMNO's functionalities include staking, providing liquidity, and incentives.
Users can stake KMNO to earn Kamino points and increase their earnings. For every $1 worth of KMNO staked, users receive triple Kamino points daily. Staking KMNO also increases users' staking points, starting with a base multiplier of 30% and increasing by 0.5% daily, up to a maximum of 300%.
In terms of liquidity provision, KMNO can be used to provide liquidity for supported KMNO pairs, such as with JitoSOL, bSOL, mSOL, BLZE, jupSOL, and SOL. Users providing liquidity to incentivized KMNO pools can earn KMNO and/or other partner tokens as rewards.
Additionally, KMNO is used for various operations on the incentive protocol. Users who earn Kamino points receive KMNO at the end of each points season. Liquidity providers also stand to gain KMNO token rewards. In the future, KMNO may also be used for governance participation within Kamino, although specific plans for the governance system are yet to be determined.
Summary
While many new projects are currently forking directly from Ethereum to other emerging blockchains, innovative projects continue to emerge with the aim of improving capital efficiency, reducing risks, and lowering costs. Some projects are built on existing infrastructure, simplifying user operations, optimizing yield, and increasing leverage availability, such as Kamino, which may alter future liquidity provision methods.
