How to Borrow USDH with Kamino kTokens
With Hubble’s kToken integration, users can easily earn real yield by providing liquidity and access additional capital at the same time.
Note: This article is not financial advice. Kamino Finance does not endorse any tokens or platforms mentioned in this article.
Kamino Finance and Hubble Protocol are working together to make Solana more composable, more capital efficient, and more liquid than ever.
The addition of kTokens to Hubble's basket of whitelisted collateral for borrowing USDH is a monumental move toward improving each of these important aspects of decentralized finance (DeFi).
With Hubble's kToken integration, users can easily earn real yield by providing liquidity and access to additional capital at the same time. This unlocks incredible possibilities for users who want to leverage their liquidity positions and maximize their exposure to everything Solana DeFi has to offer.
Unlock Liquidity with kTokens and USDH
When users deposit liquidity on Kamino, they will find a kToken in their wallet. This token is a receipt of their deposit on Kamino, representing a user's share of the liquidity provided in a concentrated liquidity pool.
While holding kTokens, they accrue fees and rewards. Whenever users want to withdraw their funds from Kamino, they can burn kTokens to retrieve a portion or all of their deposit.
Now, Hubble is the first platform that enables users to leverage their kTokens after depositing on Kamino.
Users can now use kTokens from the USDH - USDC Vault to borrow Hubble's overcollateralized stablecoin at up to 97.08% loan-to-value (LTV) ratio.
Hubble loans with USDH - USDC kToken collateral have a 0% Stability Fee and a 0.25% one-time fee for minting USDH.
What Can Users Do with Their kTokens and 97.08% LTV?
Once users borrow USDH, they can use these tokens to earn yield in DeFi like any other stablecoin. Significantly, however, they can also redeposit their USDH back into the Kamino vault, once again receiving kTokens that they can leverage on Hubble.
This flow can be summarized as follows:
- Step 1: Deposit USDH/USDC liquidity on Kamino.
- Step 2: Borrow USDH with kTokens.
- Step 3: Deposit additional liquidity on Kamino.
- Step 4: Repeat.
Kamino also allows single-sided deposits, so users can deposit USDC or USDH only into the USDH/USDC Vault, and Kamino will balance the position for them.
It's important to note that to retrieve kTokens from Hubble, users must repay their USDH loan.
How kTokens Create a "Bridge" to DeFi Composability
One problem Kamino solves for liquidity providers (LPs) is removing a roadblock between concentrated liquidity DEXs and composable DeFi. Composability allows the DeFi community to extend their participation, but the receipt token, an NFT, that LPs receive from providing concentrated liquidity creates a DeFi dead-end.
Unlike, for example, a Solana Monkey Business NFT, which can be used as collateral for a short-term loan, concentrated liquidity NFTs are very difficult to price. Concentrated liquidity NFTs are a unique description of a complicated position that, when returned, helps users withdraw their liquidity–they serve a function but have no floor price on market.
On the other hand, when users provide concentrated liquidity through Kamino, they receive a kToken as a receipt of deposit, and this token is essentially a fungible LP token. Therefore, it can be used like any other token on Solana.
Like the LP tokens from first-generation automated market makers (AMMs), kTokens can be priced, and Hubble can accept this asset as collateral for borrowing USDH. Just as Kamino makes it easier to provide concentrated liquidity, it also makes it possible to supercharge liquidity through Hubble.
Why Would Anyone Leverage Their kTokens for USDH?
First, users can optimize their yields by providing concentrated liquidity with far more capital than they started with, and the minimized risk on stable vaults like USDH-USDC makes this possible.
Second, users can help create deep liquidity for traders looking for the best user experience in DeFi. When users can leverage liquidity positions on Solana, the network can become a capital-efficient venue for trading.
Traders are attracted by capital efficiency, and LPs are attracted by yield–Kamino fuels this symbiosis by fostering deeper liquidity for the ecosystem and even more so by allowing leverage via Hubble Protocol.
By decreasing the friction between traders and their desired trades, Kamino allows both parties to benefit from providing liquidity with leverage:
- Trades can be made with negligible or zero price slippage.
- Liquidity providers can earn optimized yield from fees.
Earn Yield from Providing Concentrated Liquidity and Borrow USDH
Hubble Protocol and Kamino Finance are on a mission to increase the liquidity of DeFi on Solana. As both projects push DeFi to new heights, the same focus that Hubble places on sustainable DeFi, powered by real yield, also powers Kamino Finance.
As Kamino expands its vaults, and as kTokens enables users access to increased liquidity via Hubble Protocol, the ecosystem at large can find new utilities from the possibilities the integration of kTokens on Hubble allows.