Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
On November 27th, Jito announced a massive retroactive airdrop for early protocol participants who earned Jito Points since the start of 2023.
Thanks to these newer hyped protocols, Solana is experiencing a surge in interest among DeFi investors while protocols that have yet to tokenize tease us with the incentive of earning a future token for depositing liquidity.
As a veteran DeFi user and airdrop farmer, we know that the best opportunities are when we can earn with assets we already hold such as SOL, stablecoins, or liquid staking derivatives like mSOL.
One up-and-coming DeFi protocol supporting such assets that has yet to release a native token is Kamino Finance. Launched in fall 2022, Kamino Finance offers a suite of products including lending and borrowing markets (Kamino Lend), one-click looping strategies (Multiply), one-click leverage strategies (Long/Short), and automated liquidity vaults for optimizing concentrated liquidity provisions (Liquidity).
For this tutorial, we will simply focus on the Automated Liquidity Vaults (one-click looping strategies) available for Kamino Lend markets.
Kamino looks similar to a DeFi money market like Aave where we have lenders and borrowers interacting based on a set of parameters for borrowers to overcollateralize with assets such as SOL, JitoSOL, mSOL, and interestingly enough, concentrated LPs.
Kamino Lend features a single liquidity market, rather than a multi-pool design, including an eMode (Elevation Mode) mechanism that enables higher leverage when lending/borrowing solely within a certain asset grouping (ie mSOL/SOL or JitoSOL/SOL).
Elevation Mode (first introduced in Aave V3 as Efficiency Mode) allows users to borrow highly correlated or soft-pegged assets at a more capital-efficient LTV ratio.
Within Kamino Lend’s unified liquidity market, assets can be grouped into “elevation groups (eGroups)”. Each eGroup has customized LTV parameters and liquidation thresholds assigned to it, ultimately unlocking higher leverage possibilities, as well as tailored liquidation parameters.
Kamino Multiply is a one-click vault product that enables users to leverage exposure to yield-bearing assets such as bSOL, JitoSOL, and mSOL. Multiply combines Kamino Lend and eMode to offer powerful yield strategies such as the following:
- Deposit mSOL as collateral
- Flash loan borrow SOL
- SOL is swapped into mSOL and is supplied back into Kamino Lend
- And repeat until achieving leveraged position!
The Multiply vault dashboard provides rich position information and allows for granular position management including the ability to Deposit, Adjust, Withdraw, and Close Position.
One major risk to consider before leveraging a position on Kamino is their Automated Deleverage.
Auto-deleveraging is a novel mechanism introduced by the Kamino contributors that can facilitate a protocol-wide deleverage of any asset if the current supply and/or borrow amount is deemed as too risky according to their risk framework.
Auto-deleveraging can also be triggered by the Risk Council, and possibly be automated in the future. Should a situation ever occur similar to that of the Aave CRV or the Solend Whale debacles, the Risk Council can trigger the deleveraging module to…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
