Step by Step: An Easy Guide for Using Kamino

This is a simple guide on how to use Kamino Finance. In just a few simple steps, anyone can start earning fees and rewards.

Step by Step: An Easy Guide for Using Kamino

Note: This article is not financial advice. Kamino Finance does not endorse any tokens or platforms mentioned in this article.

Overview:

  • Kamino makes it easier to earn yield from concentrated liquidity.
  • Choose a vault, deposit tokens, and earn fees and rewards.
  • Kamino automates the process of market making in DeFi.

Decentralized exchanges (DEXs) need liquidity to help users make trades. By providing a DEX with liquidity, users can earn real yield from fees on trades and additional rewards from DEXs and projects.

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Liquidity is a $10 word for "tokens on an exchange." If liquidity is thin or low, then trading is more difficult and expensive. If liquidity is deep or high, then trading is easier and more capital-efficient. 

Want to earn yield from providing concentrated liquidity? Users can optimize the yield on their liquidity positions with Kamino's automated vaults, which make it easier than ever to earn APY as a liquidity provider.

This article will show users how to use Kamino Finance to more easily provide liquidity on Solana's most advanced DEXs. It only takes a few steps to get started.

Step 1: Connect  wallet.

Step 2: Choose a Kamino vault.

There are several kinds of automated vaults available on Kamino:

  • Stable Strategy: Two stablecoins pegged to $1 paired with minimum risk from price fluctuations.
  • Example: USDH-USDC
  • Pegged Strategy: Two tokens paired that are pegged in price follow each other's fluctuations in value.
  • Example: SOL-stSOL
  • Non-pegged Strategy: Two different kinds of tokens that vary in price.
  • Example: SOL-DUST or USDH-ETH
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APY is based on estimated trading fees plus additional rewards. Fees earned from trading and rewards are auto-compounded frequently.
  • Note: Users don't need both tokens. They can deposit just one asset into each vault. Kamino will split deposits into the correct proportion necessary.

Step 3: Deposit tokens.

Enter how many tokens to deposit as liquidity. Users can type in any amount, or they can press "max" or "half" to enter how much they have in their wallet.

  • Remember: Users can deposit both tokens, or they can just deposit one token. Kamino takes care of everything if users only have one of the tokens.
  • Click "DEPOSIT" and confirm the transaction.

Step 4: Relax and earn yield from trades!

Once users have finalized their transaction, they're ready to earn yield. Users can withdraw their deposit at any time. Once a deposit is withdrawn, though, it will no longer earn yield or rewards.

Step 5 (Optional): Leverage kTokens on Hubble and Solend

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Shares are represented by a kToken, which is a fungible LP token. These tokens have value, and users can use them to participate in DeFi. Deposit kTokens on Hubble or Solend, and then borrow stablecoins to leverage a position on Kamino—or do anything in DeFi!

What Happens When Users Provide Liquidity on Kamino?

Concentrated liquidity is a game changer for DeFi. It's a powerful technology that creates deep liquidity with fewer tokens, so users can earn similar fees from deploying less capital.

Before concentrated liquidity was invented, most of the tokens users provided to a DEX were never used for trading. The technology wasn't that great, and this meant that users had to provide tokens that could be used elsewhere (for lending or flipping NFTs) to optimize earning fees from trades.

While concentrated liquidity helps make sure more tokens can be used to earn fees, it requires users to choose a price range for providing liquidity. This means they have to constantly change their position whenever prices change.

Having to change positions frequently can be a hassle. Moreover, when users don't change their price range, they can stop earning fees when prices change too much. Kamino fixes this problem by automatically rebalancing ranges.

Kamino also automatically compounds the fees earned back into positions. Auto-compounding increases the size of a position, which increases the tokens available for swaps, and this increases the opportunity of earning more fees by providing additional liquidity to the market.

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Auto-compounding helps users seek bigger gains, faster. If a user earns 10% on $100, then they get $10. If they add that $10 to their initial deposit, they're earning 10% on $110 to get $11 dollars.

Start Providing Liquidity and Earning Fees

If users follow all the steps in this guide, they should be on their way to earning optimized fees as a liquidity provider. Note that it's important to choose the right Kamino vaults for the right market conditions and individual goals.

Market making can earn high yields during periods of high trading volume, but users must always consider the quality of the assets provided. For users who want to know more about how market making works, check out this article from Kamino and learn more about it!