Exploring Kamino Finance - A Leading DeFi Protocol on the Solana Network

IntermediateMay 27, 2024
Kamino Finance is a DeFi protocol offering solutions for borrowing, lending, and liquidity. The platform allows users to deposit assets and earn interest.
Exploring Kamino Finance - A Leading DeFi Protocol on the Solana Network

What is Kamino Finance?

Kamino Finance is a decentralized finance (DeFi) protocol on Solana that offers solutions for borrowing, lending, and managing liquidity. It started as a concentrated liquidity platform for market makers and evolved into a fully functional DeFi project.

The platform allows users to deposit their assets and earn interest. These deposited assets are then concentrated in liquidity strategies designed for decentralized exchanges (DEXs). Evolving into a functional DeFi project allowed Kamino to release Kamino 2.0.

The upgrade introduced K-Lend, a fully integrated application with features like a unified liquidity market, k-Tokens, advanced risk management mechanisms, a real-time risk simulator, and enhanced Oracle systems.

This allowed the project to simplify the activities of DeFi users while enhancing capital efficiency and risk management capabilities.

History of the Kamino Project

The Kamino project was launched in 2022 by four co-founders. Gonzalo Parejo, Rodrigo Perenha, Benjamin Gleason, and Guto Fragoso.

Gonzalo Parejo is the project’s chief executive officer, while Rodrigo Perenha is its director and chief technology officer. Henrique Netzka is a management team member responsible for optimizing the products presented by the Kamino project.

The project has conducted a single seed funding round to raise $6.1 million. The round was supported by Ariel Patschiki, Clocktower Technology Ventures, David Arana, Flourish Ventures, and Gilgamesh Ventures.

The project also conducted its Kamino Points Initiatives season 1, which aimed to reward existing users while incentivizing new users to join the ecosystem. The event was set for three months from the first quarter of 2024.

Core Primitives

Automated Liquidity Vaults

The automated liquidity vaults are concentrated liquidity pools that automate users’ passive earnings. In traditional Concentrated Liquidity Market Makers (CLMMs), users who deposit assets to the platform are subjected to price fluctuations that can lead to impermanent loss (IL).

Setting efficient ranges for liquidity provision requires expertise, manual adjustments, and reinvestments of earned fees. These require multiple interactions and gas fees. The Kamino project tackles these challenges through automation. Positions are constantly rebalanced for optimal performance, and rewards are automatically compounded for accelerated growth.

The automated vaults allow for single-sided deposits and withdrawals, eliminating the need to deposit multiple tokens. To simplify the user experience, Kamino issues k-Tokens to depositors.

These are tradable evidence of deposits that users can use to borrow funds and increase their yield. These tokens retain their yield-bearing value while being used as collateral. This feature allows the project to provide capital-efficient strategies and utilities to users.

Kamino Lend

The KaminoLend architecture is a single liquidity structure that replaces traditional multi-pool structures. By choosing not to fragment available liquidity, the project mitigates lower liquidity utilization, which prevents lenders from earning lower fees.

The K-Lend single liquidity structure pools different assets, such as SOL and SOL-LST tokens, into a single pool, allowing users to trade between multiple assets. While the project gathers available liquidity, it has systems to minimize risk. One such system is the elevation mode, or e-Mode function, which allows for customized asset parameters within the single pool.

The e-Mode feature is similar to Aave V3’s Efficiency Mode. It lets users borrow highly correlated assets at an efficient loan-to-value (LTV) ratio. K-Lend groups assets into “elevation groups” within the unified market. Each group can set its own LTV parameters and liquidation thresholds at appropriate percentages, allowing for increased control over risk and leverage.

Features of the Kamino Ecosystem: Multiply Vaults, Borrow/Lend and Risk Dashboard

Multiply Vaults


Source: Kamino Finance Website

Multiply Vaults is a Kamino product that allows users to leverage their assets and take advantage of yield-bearing opportunities. The feature is built using K-Lend’s eMode and kToken collateral to offer strategies for efficient capital utilization.

The Multiply Vault interface allows users to open and manage a position while managing the associated risks to that position. If users supply JitoSOL to the multiply vault, they receive the k-Token equivalent, which can be used as collateral to borrow SOL and re-supply to increase their leverage.

Traditionally, borrowing assets have a 75% LTV, allowing 4x leverage. However, Kamino’s e-Mode can increase the LTV to 90%, enabling up to 10x leverage. By borrowing SOL and depositing it back into the vault, users amplify their exposure to SOL’s price movements, which have significantly higher returns and risks.

Once the user can maintain a positive net APY, the borrowed SOL will continue to bear yield.

Borrow/Lend


Source: Kamino Finance Website

This feature utilizes Kamino Lnd to supply, borrow, and withdraw assets. The interface allows users to navigate to their preferred asset APY, confirm the supply amount, and initiate the supply. Once supplied, users can monitor their position on the platform.

The supplied assets prompt the platform to mint kTokens, representing a user’s liquidity position and accrued yield. These kTokens can be deposited as collateral on K-Lend, just like any other token. This unlocks various borrowing strategies for users, such as yield looping and delta-neutral positioning.

The borrowing activity is similar to supplying. The user navigates to the borrowing APY, inputs the amount, and initiates the borrowing event. Withdrawing assets is equally convenient. Users can navigate to the desired asset, select “Withdraw,” and pull out their assets.

Long/Short


Source: Kamino Finance Website

The Long/Short feature in Kamino Finance allows traders to speculate on the price movements of cryptocurrencies using leverage. When a trader takes a long position, they essentially bet the asset’s price will rise. On the other hand, a short position is taken when a trader believes the cost of an asset will decline.

To use this feature, traders would navigate to the Long/Short tab, select the desired asset pair, and decide on the amount of leverage to apply. These advanced trading features allow traders to use the project’s enhanced capital efficiency.

Liquidity


Source: Kamino Finance Website

The Kamino project is designed to enhance capital efficiency and optimize the use of assets provided by liquidity providers (LPs). In traditional Automated Market Makers (AMMs), LPs deposit assets into liquidity pools used by traders on the platform.

However, these assets are spread across the entire price range for the chosen pair in price ranges with low trading volume. Kamino’s liquidity feature uses a concentrated liquidity market maker (CLMM) tool that allows LPs to choose specific price ranges. This allows the liquidity providers to concentrate in ranges with higher trading volumes, leading to more efficient use of capital and higher earnings.

The platform also gives liquidity providers a kToken, which can be used to borrow assets and increase the holder’s leverage.

Risk Dashboard


Source: Kamino Finance Website

The Kamino risk dashboard is a safety protocol that analyzes token risk factors using the Kamino Risk Assessment Framework (KRAF). This framework analyzes the overall level of risk, which could potentially lead to liquidation of loan assets.

The risk dashboard consists of a risk overview, loans analysis, detailed token decompositions, volatility analysis, liquidity analysis, price shock analysis, market risk analysis, single-loan analysis, transaction analysis, and more.

The KRAF framework is designed to be robust and adaptable. It proactively identifies vulnerabilities before they become threats, allowing the parties involved to take action based on the available information.

What is the KMNO Token?


Source: Kamino Finance Whitepaper

The KMNO token is the native token of the Kamino project. The token was launched on Solana in 2024 during the Kamino Genesis airdrop. As the native token, it gives holders governance and staking rights, allowing them to earn passively.

The token has a total supply of 10 billion tokens, with 431 thousand currently polled on Raydium. It currently has zero sales tax, allowing holders to transact at lower costs.

The tokenomics allocated 35% to community and grants, 35% to key stakeholders, 20% to the core contributors of the project, 10% to the treasury to provide liquidity, and 7.5% to the genesis community allocation.

The allocation to stakeholders and core contributors will be locked up for 12 months after the token generation event. Afterwards, it is vested for 24 months.

Is the Token a Good Investment?

The KMNO token would allow users to stake in the Kamino protocol, resulting in more passive income opportunities for holders. The Kamino project is a platform that allows users to take advantage of yield-bearing tokens on Solana.

This better positions the project and its native token to exploit the developing DeFi space. In the years to come, early investors in the Kamino project will be able to decide how a potentially massive project will develop, allowing them to have a say in its long-term viability.

Risk Analysis

Advantages

The Kamino project streamlines DeFi participation using its automated vaults, k-Tokens, and risk assessment framework. This allows the project to eliminate the complexity of interacting with CLMMs, making it easier to earn yields on assets.

The project prioritizes capital efficiency and risk management, allowing users to act appropriately by providing all the information needed to execute secure transactions.

Disadvantages

While automation can simplify DeFi participation, it also reduces user control. Users must entrust assets to the platform’s algorithms to manage their liquidity positions, potentially limiting their ability to fine-tune the strategies in play.

Another disadvantage is that Kamino Finance is a new project. This means the project lacks the track record to onboard conservative investors and participants.

Challenges

The DeFi space is almost saturated with established players offering similar functionalities. Kamino must continuously innovate and enhance its offerings to attract and retain users.

Another challenge is the DeFi space’s regulatory landscape and crypto asset price volatility. Periods of high volatility would prove challenging for the platform, raising questions about its capacity to provide capital efficiency.

Competitive Analysis

The Orca project is built on the CLMM layer of Solana’s network, similar to Kamino, allowing it to provide similar features. While both projects have similarities, they offer their features differently.

The Kamino project focuses on capital efficiency for both experienced and new users. Orca is designed to cater to the needs of newer traders, and its platform is designed with that simplicity in mind. This is also reflected in the platform’s risk management feature.

The Kamino project uses a risk framework that provides automated and advanced risk management tools for users of all experience ranges. The Orca project, on the other hand, utilizes essential risk management tools like divergence loss, which is of little use to advanced users.

Although the Orca project is focused on newer traders in the space, it has a larger community due to its community focus. This gives it an edge against the Kamino project.

How Can You Own KMNO?

Users can follow a simple process to own KMNO tokens and become a part of the Kamino ecosystem.

Setup a Wallet

One way to own KMNO tokens is to purchase them through an exchange. For this, the user must create a Gate.io account, complete the KYC process, and add funds to the account. Users would be allowed to purchase KMNO tokens once it is listed.

Utilize the KMNO Tokens

Once users have acquired KMNO tokens, they can explore the KMNO Finance platform by staking, lending, borrowing, and participating in governance.

Take action on KMNO

Users can trade the KMNO token here.

Author: Bravo
Translator: Cedar
Reviewer(s): Wayne、Matheus、Ashley
* The information is not intended to be and does not constitute financial advice or any other recommendation of any sort offered or endorsed by Gate.io.
* This article may not be reproduced, transmitted or copied without referencing Gate.io. Contravention is an infringement of Copyright Act and may be subject to legal action.

Exploring Kamino Finance - A Leading DeFi Protocol on the Solana Network

IntermediateMay 27, 2024
Kamino Finance is a DeFi protocol offering solutions for borrowing, lending, and liquidity. The platform allows users to deposit assets and earn interest.
Exploring Kamino Finance - A Leading DeFi Protocol on the Solana Network

What is Kamino Finance?

Kamino Finance is a decentralized finance (DeFi) protocol on Solana that offers solutions for borrowing, lending, and managing liquidity. It started as a concentrated liquidity platform for market makers and evolved into a fully functional DeFi project.

The platform allows users to deposit their assets and earn interest. These deposited assets are then concentrated in liquidity strategies designed for decentralized exchanges (DEXs). Evolving into a functional DeFi project allowed Kamino to release Kamino 2.0.

The upgrade introduced K-Lend, a fully integrated application with features like a unified liquidity market, k-Tokens, advanced risk management mechanisms, a real-time risk simulator, and enhanced Oracle systems.

This allowed the project to simplify the activities of DeFi users while enhancing capital efficiency and risk management capabilities.

History of the Kamino Project

The Kamino project was launched in 2022 by four co-founders. Gonzalo Parejo, Rodrigo Perenha, Benjamin Gleason, and Guto Fragoso.

Gonzalo Parejo is the project’s chief executive officer, while Rodrigo Perenha is its director and chief technology officer. Henrique Netzka is a management team member responsible for optimizing the products presented by the Kamino project.

The project has conducted a single seed funding round to raise $6.1 million. The round was supported by Ariel Patschiki, Clocktower Technology Ventures, David Arana, Flourish Ventures, and Gilgamesh Ventures.

The project also conducted its Kamino Points Initiatives season 1, which aimed to reward existing users while incentivizing new users to join the ecosystem. The event was set for three months from the first quarter of 2024.

Core Primitives

Automated Liquidity Vaults

The automated liquidity vaults are concentrated liquidity pools that automate users’ passive earnings. In traditional Concentrated Liquidity Market Makers (CLMMs), users who deposit assets to the platform are subjected to price fluctuations that can lead to impermanent loss (IL).

Setting efficient ranges for liquidity provision requires expertise, manual adjustments, and reinvestments of earned fees. These require multiple interactions and gas fees. The Kamino project tackles these challenges through automation. Positions are constantly rebalanced for optimal performance, and rewards are automatically compounded for accelerated growth.

The automated vaults allow for single-sided deposits and withdrawals, eliminating the need to deposit multiple tokens. To simplify the user experience, Kamino issues k-Tokens to depositors.

These are tradable evidence of deposits that users can use to borrow funds and increase their yield. These tokens retain their yield-bearing value while being used as collateral. This feature allows the project to provide capital-efficient strategies and utilities to users.

Kamino Lend

The KaminoLend architecture is a single liquidity structure that replaces traditional multi-pool structures. By choosing not to fragment available liquidity, the project mitigates lower liquidity utilization, which prevents lenders from earning lower fees.

The K-Lend single liquidity structure pools different assets, such as SOL and SOL-LST tokens, into a single pool, allowing users to trade between multiple assets. While the project gathers available liquidity, it has systems to minimize risk. One such system is the elevation mode, or e-Mode function, which allows for customized asset parameters within the single pool.

The e-Mode feature is similar to Aave V3’s Efficiency Mode. It lets users borrow highly correlated assets at an efficient loan-to-value (LTV) ratio. K-Lend groups assets into “elevation groups” within the unified market. Each group can set its own LTV parameters and liquidation thresholds at appropriate percentages, allowing for increased control over risk and leverage.

Features of the Kamino Ecosystem: Multiply Vaults, Borrow/Lend and Risk Dashboard

Multiply Vaults


Source: Kamino Finance Website

Multiply Vaults is a Kamino product that allows users to leverage their assets and take advantage of yield-bearing opportunities. The feature is built using K-Lend’s eMode and kToken collateral to offer strategies for efficient capital utilization.

The Multiply Vault interface allows users to open and manage a position while managing the associated risks to that position. If users supply JitoSOL to the multiply vault, they receive the k-Token equivalent, which can be used as collateral to borrow SOL and re-supply to increase their leverage.

Traditionally, borrowing assets have a 75% LTV, allowing 4x leverage. However, Kamino’s e-Mode can increase the LTV to 90%, enabling up to 10x leverage. By borrowing SOL and depositing it back into the vault, users amplify their exposure to SOL’s price movements, which have significantly higher returns and risks.

Once the user can maintain a positive net APY, the borrowed SOL will continue to bear yield.

Borrow/Lend


Source: Kamino Finance Website

This feature utilizes Kamino Lnd to supply, borrow, and withdraw assets. The interface allows users to navigate to their preferred asset APY, confirm the supply amount, and initiate the supply. Once supplied, users can monitor their position on the platform.

The supplied assets prompt the platform to mint kTokens, representing a user’s liquidity position and accrued yield. These kTokens can be deposited as collateral on K-Lend, just like any other token. This unlocks various borrowing strategies for users, such as yield looping and delta-neutral positioning.

The borrowing activity is similar to supplying. The user navigates to the borrowing APY, inputs the amount, and initiates the borrowing event. Withdrawing assets is equally convenient. Users can navigate to the desired asset, select “Withdraw,” and pull out their assets.

Long/Short


Source: Kamino Finance Website

The Long/Short feature in Kamino Finance allows traders to speculate on the price movements of cryptocurrencies using leverage. When a trader takes a long position, they essentially bet the asset’s price will rise. On the other hand, a short position is taken when a trader believes the cost of an asset will decline.

To use this feature, traders would navigate to the Long/Short tab, select the desired asset pair, and decide on the amount of leverage to apply. These advanced trading features allow traders to use the project’s enhanced capital efficiency.

Liquidity


Source: Kamino Finance Website

The Kamino project is designed to enhance capital efficiency and optimize the use of assets provided by liquidity providers (LPs). In traditional Automated Market Makers (AMMs), LPs deposit assets into liquidity pools used by traders on the platform.

However, these assets are spread across the entire price range for the chosen pair in price ranges with low trading volume. Kamino’s liquidity feature uses a concentrated liquidity market maker (CLMM) tool that allows LPs to choose specific price ranges. This allows the liquidity providers to concentrate in ranges with higher trading volumes, leading to more efficient use of capital and higher earnings.

The platform also gives liquidity providers a kToken, which can be used to borrow assets and increase the holder’s leverage.

Risk Dashboard


Source: Kamino Finance Website

The Kamino risk dashboard is a safety protocol that analyzes token risk factors using the Kamino Risk Assessment Framework (KRAF). This framework analyzes the overall level of risk, which could potentially lead to liquidation of loan assets.

The risk dashboard consists of a risk overview, loans analysis, detailed token decompositions, volatility analysis, liquidity analysis, price shock analysis, market risk analysis, single-loan analysis, transaction analysis, and more.

The KRAF framework is designed to be robust and adaptable. It proactively identifies vulnerabilities before they become threats, allowing the parties involved to take action based on the available information.

What is the KMNO Token?


Source: Kamino Finance Whitepaper

The KMNO token is the native token of the Kamino project. The token was launched on Solana in 2024 during the Kamino Genesis airdrop. As the native token, it gives holders governance and staking rights, allowing them to earn passively.

The token has a total supply of 10 billion tokens, with 431 thousand currently polled on Raydium. It currently has zero sales tax, allowing holders to transact at lower costs.

The tokenomics allocated 35% to community and grants, 35% to key stakeholders, 20% to the core contributors of the project, 10% to the treasury to provide liquidity, and 7.5% to the genesis community allocation.

The allocation to stakeholders and core contributors will be locked up for 12 months after the token generation event. Afterwards, it is vested for 24 months.

Is the Token a Good Investment?

The KMNO token would allow users to stake in the Kamino protocol, resulting in more passive income opportunities for holders. The Kamino project is a platform that allows users to take advantage of yield-bearing tokens on Solana.

This better positions the project and its native token to exploit the developing DeFi space. In the years to come, early investors in the Kamino project will be able to decide how a potentially massive project will develop, allowing them to have a say in its long-term viability.

Risk Analysis

Advantages

The Kamino project streamlines DeFi participation using its automated vaults, k-Tokens, and risk assessment framework. This allows the project to eliminate the complexity of interacting with CLMMs, making it easier to earn yields on assets.

The project prioritizes capital efficiency and risk management, allowing users to act appropriately by providing all the information needed to execute secure transactions.

Disadvantages

While automation can simplify DeFi participation, it also reduces user control. Users must entrust assets to the platform’s algorithms to manage their liquidity positions, potentially limiting their ability to fine-tune the strategies in play.

Another disadvantage is that Kamino Finance is a new project. This means the project lacks the track record to onboard conservative investors and participants.

Challenges

The DeFi space is almost saturated with established players offering similar functionalities. Kamino must continuously innovate and enhance its offerings to attract and retain users.

Another challenge is the DeFi space’s regulatory landscape and crypto asset price volatility. Periods of high volatility would prove challenging for the platform, raising questions about its capacity to provide capital efficiency.

Competitive Analysis

The Orca project is built on the CLMM layer of Solana’s network, similar to Kamino, allowing it to provide similar features. While both projects have similarities, they offer their features differently.

The Kamino project focuses on capital efficiency for both experienced and new users. Orca is designed to cater to the needs of newer traders, and its platform is designed with that simplicity in mind. This is also reflected in the platform’s risk management feature.

The Kamino project uses a risk framework that provides automated and advanced risk management tools for users of all experience ranges. The Orca project, on the other hand, utilizes essential risk management tools like divergence loss, which is of little use to advanced users.

Although the Orca project is focused on newer traders in the space, it has a larger community due to its community focus. This gives it an edge against the Kamino project.

How Can You Own KMNO?

Users can follow a simple process to own KMNO tokens and become a part of the Kamino ecosystem.

Setup a Wallet

One way to own KMNO tokens is to purchase them through an exchange. For this, the user must create a Gate.io account, complete the KYC process, and add funds to the account. Users would be allowed to purchase KMNO tokens once it is listed.

Utilize the KMNO Tokens

Once users have acquired KMNO tokens, they can explore the KMNO Finance platform by staking, lending, borrowing, and participating in governance.

Take action on KMNO

Users can trade the KMNO token here.

Author: Bravo
Translator: Cedar
Reviewer(s): Wayne、Matheus、Ashley
* The information is not intended to be and does not constitute financial advice or any other recommendation of any sort offered or endorsed by Gate.io.
* This article may not be reproduced, transmitted or copied without referencing Gate.io. Contravention is an infringement of Copyright Act and may be subject to legal action.
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