Earn dual yield, while maintaining single-sided exposure to the SOL price
Vault Overview
SOL-only vaults consist of tokens that are pegged to the price of SOL. This includes vanilla SOL, and liquid-staked SOL tokens. With these vaults, you earn yield from two sources:
Each of Kamino's vaults deploy liquidity into CLMM DEX pools. By depositing into any of Kamino's vaults, you earn trading fees from volume in the underlying pool. For SOL-only vaults, the fees you earn are typically lower than in mixed vaults, however, you also earn the staking yield on your liquid staking token.
Liquid-Staking Yield
Liquid staking is a way for users to earn yield by staking SOL, without locking their SOL up. In essence, your tokens remain "liquid" for you to use in DeFi. So where does the yield come from? Solana is a proof-of-stake network that relies on validators to keep the network running. These validators require SOL on hand to confirm transactions and secure the network. By staking SOL to a liquid-staking SOL platform (Marinade, Lido, BlazeStake etc), you are providing the validators with the SOL they need.
In return for their service, validators receive SOL, and as a user who owns a liquid-staked SOL token, you receive a portion of that SOL yourself. These earnings are reflected directly in the price of your liquid staking SOL token. So, over time, the value of your token will gradually increase in relation to the SOL price.
Optimal Market Conditions
As these vaults provide 100% exposure to the SOL price, your position value depends on the value of SOL. When the SOL price stays stable, or increases, your position will increase in value.
You earn yield on this vault when the underlying pool facilitates a lot of transactions, leading to higher volume, and in turn more yield for you as a depositor. In addition, as long as the Solana network is up and running, you earn yield from your liquid staking token.
Range Overview
As both tokens are pegged to the SOL price, the range for these vaults can be particularly tight. This means your liquidity is concentrated to a higher degree, which in turn allows for optimized yields. Due to the gradual value accrual of liquid staking tokens, there is a "natural drift" that occurs with the passage of time.
For vaults that contain two liquid staking tokens, their values will increase over time at roughly the same rate, thus, ideally, these vaults will never need a deposit
For vaults that contain a liquid staking token paired with vanilla SOL (eg. stSOL - SOL), the liquid staking token will increase in price compared to SOL. Over long time periods, rebalancing may be needed.
Strategy Risks
All of Kamino's liquidity vaults are built on top of underlying DEXes, and Kamino is not responsible for the security of these DEXes.
SOL-only vaults give 100% exposure to the SOL price. When the SOL price drops in value, your position will decrease in value accordingly.
These vaults typically have low impermanent loss. However, in extreme conditions, the underlying liquid-staking derivative token can depeg from the SOL price. This would lead to impermanent loss, which may in turn be realized if the vault rebalances.
Here is a closer look at how impermanent loss can work in this scenario.
