xStocks are tokenized onchain stocks, and leading Solana DeFi platfom Kamino Finance has integrated them into its protocol. This provides the opportunity to both supply and borrow against xStocks assets, and yield can be generated by taking advantage of differing supply and borrow APYs across various markets, while the option to borrow against tokenized stocks is in general a useful facility.
Crypto and real-world finance are becoming intertwined and one recent RWA-related development that caught a lot of attention recently was the launch of xStocks on Solana. A lot of the buzz revolved around how these tokens might fit into the DeFi world, and following on from that, leading protocol Kamino Finance has integrated xStocks assets, so today we’ll look at a strategy for using xStocks on Kamino to generate yield.
What Are xStocks?
So first of all, in case you missed it, xStocks are tokens representing real stocks. They were launched on Solana at the end of last month, tokens are backed 1:1 by the real stock, and they provide a way to trade stocks 24/7 onchain.
They are supported by centralized exchanges Kraken, Bybit and KuCoin, which require KYC, but since xStocks are tokens on Solana they can also be freely moved around peer-to-peer and traded without KYC on decentralized protocols.
What Is Kamino?
Kamino Finance is a leading Solana DeFi protocol that has been covered here before in this guide to Kamino Multiply, a looping function. Kamino’s TVL recently hit a new all-time high of $2.78 billion as the protocol continues to expand, and it offers a range of functions, including the borrowing and supply facilities that are central to the strategy we’ll look at below.
Please note when using Kamino that the usual DeFi risks apply, including smart contract exploits, frontend attacks, and stablecoin de-pegs, and as we’re using tokenized stocks you need to be careful about stock price changes when employing them as collateral for loans.
How to Borrow Against xStocks
First off, you will of course need to be holding some xStocks tokens, and if you don’t yet have those then you can acquire them using Kamino’s swap function, you can go directly to the Jupiter DEX or other Solana DEXes, or as mentioned you can buy on some centralized exchanges.
On the Kamino app, with your wallet connected you can start by clicking on the Market tab, and you need to click on the xStocks filter above the list of available markets.
Click on the Supply button for the ticker you’re holding in order to deposit your tokens, and for the purposes of the example strategy here I’m using TSLAx. You’ll then be able to enter the amount to add, and you just need to click deposit and sign off the transaction in your wallet.
Once you’ve done that, if you scroll down to the bottom of the markets you’ll find the USDG stablecoin market, and the borrow APY on that is currently 3.35%.
So, click on the borrow button, and you can borrow USDG using your deposited TSLAx as collateral. When you enter the amount to receive, the maximum amount depends on the maximum allowable LTV ratio (loan-to-value, meaning the maximum percentage of your collateral’s value that a loan can be equal to). In this case the LTV ratio is 35%, and the next step is simply to click Borrow USDG in order to initiate…
