Kamino's liquidity vaults are an automated liquidity solution that allows users to earn yield on their crypto assets by providing liquidity to concentrated liquidity market makers (CLMMs).

How do you earn yield in Kamino vaults?

A Kamino vault deploys liquidity into an underlying DEX pool, consisting of 2 tokens. When you deposit into a vault, you earn fees from trading volume. In other words, if you deposit into a pool with Asset X and Asset Y, any token swaps that utilize that pool will incur a small cost to the swapper. As a Kamino depositor, you earn from that swap fee.

Automating Concentrated Liquidity (CLMM) DEXes

CLMMs are exponentially more capital-efficient than traditional automated market makers (AMMs). However, this efficiency also adds complexity and users can rarely harness the full potential of providing concentrated liquidity due to:

  • Price volatility and Increased risk of impermanent loss (IL)

  • Inefficiently set ranges

  • Manual range management

  • Manually harvesting and redepositing fees/rewards

All of the above ultimately comes at the cost of effectiveness and convenience.

How Kamino solves the Liquidity Dilemma

Kamino automates the entire LP process and optimizes capital efficiency & yields through:

  • Automated position rebalancing

  • Auto-compounding trading fees & additional incentives

  • Auto-swap for single-sided deposits & withdrawals

Additionally, Kamino gives you a fungible kToken as a receipt for your deposit. This means that, after depositing into a Kamino vault, you can use your kToken in DeFi.

To fully appreciate the evolution that Kamino brings, you need to understand the value of concentrated liquidity market makers (CLMMs):

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