Yield & APYs
Kamino produces yield from volume across the Solana ecosystem
Kamino automates concentrated liquidity DEXes on Solana, enabling users to earn fees from volume.
When User X swaps from Token A to Token B, this swap is facilitated by a pool that consists of both Tokens A and B. User X essentially deposits Token A into that pool, and in return receives Token B. For this service, User X pays a small swap fee, which is distributed to the liquidity providers.
The total amount of Token A and Token B in this pool did not appear out of thin air. It was deposited by users that are willing to provide their tokens as liquidity, in return for a small swap fee.
Kamino enables users to deposit their funds into liquidity pools, thus earning yield from swap fees. However, in a concentrated liquidity DEX (CLMM), it's not so simple to deposit your funds. You need to manually select the price range for your deposit, manually harvest rewards, and remove all your liquidity and redeposit it if your position is no longer in the correct price range.
Kamino automates all of this. Deposits, range selection, reward compounding, and rebalancing. It's Solana's first one-click solution for CLMMs.
There are three APY values you will see on a Kamino vault page: Vault APY, Kamino APY and Total APY. Here's what they mean:
This is the APY from Strategy Fees, which includes trading fees and DEX incentives, as explained above. These earnings are auto-compounded regularly. The Vault APY is calculated according to the previous 24 hours of volume on a given pool, and is not an absolute value that users can always expect to receive.
This is the APY from incentives provided by Kamino's partners. If a vault has these additional incentives, the amount and the reward token will be displayed in the vault interface. Kamino APY is either auto-compounded back into your position, or regularly claimable via the My Rewards tab. Kamino rewards are announced monthly in Discord, in the first week of every month.
The Total APY reflects the combined values of the Vault APY and Kamino APY. Total earnings from DEX fees and rewards, and Kamino incentives are all combined into this value.
Please note that the APY displayed on Kamino does not account for impermanent loss, and purely reflects the projected yield according to the APY of the past 24 hours. It's highly encouraged that you familiarize yourself with each vault, and how impermanent loss may come into play (predominantly for mixed strategies).
Kamino auto-compounds all DEX fees and rewards earned on a user's position. This means that users never have to harvest the fees & rewards they earn on their position. Auto-compounding occurs multiple times per day. In the case of fees, they are collected and deposited. In the case of rewards, they are sold for tokens A and B and then deposited.
Most of the Kamino incentives are auto-compounded back into user positions as well, though this can vary between pools, as well as from month to month. Details on incentives are updated in the first week of every month, and are announced in Discord.
Your total earnings are a combination of all the yield earned on the vault, including all incentives from the DEX Rewards, Kamino itself (kRewards),and fees earned in each individual token. All rewards except kRewards are always auto-compounded. kRewards are often auto-compounded, but if not, they are claimable in the My Rewards tab of the Portfolio Portal.
In the above example, the earnings are broken down as follows:
SOL Fees - Auto-compounded trading fee earnings, earned in SOLBONK Fees - Auto-compounded trading fee earnings, earned in BONKBONK Rewards - BONK incentives on the DEX, auto-compounded into your position by KaminoBONK kRewards - BONK incentives on Kamino, either auto-compounded, or manually claimable
Options give a user the right, but not the obligation to buy an asset at a defined price, referred to as the Strike, and often from a specific date. This means that, in Kamino's context, users will receive options, and can then choose to "exercise" these options, based on whether they wish to acquire the underlying asset.
At the beginning of each incentive period, the strike price of options will be determined, and incentives will be awarded in these options. Not all incentives on Kamino are options. If you do receive rewards in options, it will appear as follows in your wallet:
HBB Option in Wallet
Any options received also have a value, and it's from this which the APY for options rewards are calculated. The value of the option is calculated in USDH ($1 = 1 USDH), as "Market price of underlying less the strike price of the option".
If HBB is trading at $0.25, exercizing the options means the holder receives something worth $0.25, by paying $0.10, earning a net profit of $0.15 for each HBB option they choose to exercise.
- At the airdrop date, users will receive options in their wallets, should they have deposited into vaults with options are rewards
- Users will have a two-month period to exercise these options. Should they choose not to exercise it within that period, the options will expire
In ‘Exercisable Positions’ you will see which Options are in your wallet that can be settled.
For each option, you’ll see the Underlying token (usually HBB) as well the Exercise Currency (USDH), which you need to be holding in order to redeem the underlying token. You can also see the amount you hold in ‘Size’ as well as the amount you need to pay to redeem (eg. you pay the Strike).
You can also see the time period for Exercise. You can Settle the option art any point within this time period.
2. Click on ‘Settle’, and enter how many of your options you want to Settle
(1 Option = 1 token of the underlying)
In this example, I’m settling all 10 of my HBB Calls, paying 0.1 USDH for each one, so a total of 1 USDH.for 10
3. And that’s it.