Kamino Finance – A New Liquidity Layer For Solana DeFi

This review is dedicated to Kamino Finance, the first automated liquidity solution built on Solana’s concentrated liquidity decentralized exchanges (DEXs). The Hubble-incubated project serves as an optimized liquidity layer, improving the capital efficiency of trading on Solana.

Kamino Finance Origins

The DEX landscape has gone through a continuous transformation throughout the past few years. Now, we have automated market makers, or AMM for short, which can be understood as a piece of code used to facilitate token swaps without the aid of an intermediary like on a centralized exchange (CEX). However, after the first AMM was launched by UniSwap in 2018, people started noticing some of its inefficiencies.

Kamino Finance – Overview

The inefficiencies of the AMM led to the emergence of concentrated liquidity market makers, or CLMM for short. Kamino Finance is built on top of CLMMs and makes it possible for users to participate in the future of decentralized trade by increasing the adoption of CLMMs through an automated layer solution. The addition of Kamino could improve CLMM and CLMM-powered DEXs in the near future and thus become the backbone of hyper-efficient liquidity.

But what does it do? Kamino automatically manages a user’s concentrated liquidity positions. The basic idea is to optimize CLMM liquidity using the speed and cost of Solana to efficiently rebalance positions on behalf of users and reduce the complexity of providing concentrated liquidity.

Why Do We Need CLMMs?

Being quite a new approach which is still in its growth phase, the CLMM poses a few difficulties for those users who are not expert market  makers. Even though the concept of using a CLMM seems easy enough for LPs, traders, and projects, its full potential is yet to be harnessed for the following reasons:

• The risk of impermanent loss or IL increases with concentrated position..
• While setting ranges, users must determine what is most efficient for themselves.
• The fees/reward are compounded manually on CLMMs, which can reduce gains from compounding.
• Managing positions on aCLMM takes time, and this time consumption makes it inefficient for those who need to manage multiple positions.

A Few Benefits Offered by Kamino Finance:

Kamino Finance was developed to solve the aforementioned issues with CLMMs and create a way for users to automatically yet actively manage their LP positions. Following the motto of “set it and forget it,” Kamino improves the CLMM user experience with:;

• Advanced market-making strategies based on quantitative modeling
• Automated position rebalancing at optimal ranges
• Auto-compounding fees and rewards for increased capital-efficiency
• Passive user participation
• Fungible receipt tokens that can be used in DeFiKamino Finance allow tokenizing of

Reasons for Hubble Incubation

Hubble Protocol, the home of stablecoin USDH, has incubated and launched Kamino Finance on the Solana blockchain to become a pioneer in the CLMM optimizer. The difficulty of managing profitable LPs on CLMMs has been a sore spot for DeFi users for over a year, and CLMMs have been less-that-efficient tools for DeFi. For this reason, Hubble Protocol incubated Kamino Finance as a means to assist the next DeFi generation in the ever-growing Solana DeFi ecosystem.

Hubble has announced plans to build its first Kamino vaults on Orca’s concentrated liquidity whirlpools. These pools will feature stablecoin pairs and the pegged-asset pair stSOL-SOL, and the pools will be heavily incentivized by Hubble, Orca, and Lido.

Final Verdict

Kamino Finance is a project incubated by none other than Hubble Protocol to change the DeFi landscape on the Solana blockchain. Since Kamino’s launch, it has already reached and lifted its maximum deposit limit three times, showing the huge demand for this kind of product. 

The project has undergone three audits and will continue auditing in the future. Kamino appears to be an ambitious product that solves a major problem for DeFi, and it will be interesting to see where this kind of development leads.