Introduction

Nothing beats the gamification of protocol interactions quite like a points program can. Despite a streak of bittersweet outcomes, people seemingly can't get enough of them. The joy derived from speculating on what could be, more often than not ends up being greater than what is experienced during the inevitable conclusion when the age-old question of "did I farm the project, or did the project farm me?" is answered.

Some say that a bird in the hand is better than two in the bush. A sentiment that was shared by those in charge of orchestrating the fourth iteration of Kamino's incentives campaign. For which the focal point is pivoting to rewarding participants in fungible tokens as opposed to ambiguous IOUs in addition to some interesting mechanics that leverage this change in approach.

Season 4

From the 7th of August all the way to the second week of November, up to 100 million locked KMNO tokens will be distributed across three vaults residing on the platform's Earn layer with varying allocations. The decision to make a handful of options eligible for rewards, rather than the entire available market, stems from Kamino's desire to direct more lending activity to vaults curated by reliable operators.

Known for their unwavering commitment to security, the scope of Season 4 has been extensively audited 18 times by four different well-known firms and tested relentlessly to ensure an impenetrable and safe environment for funds entrusted by its users.

It's also worth noting that none of these automated strategies currently (could be subject to change in the future) charge depositors any management nor redemption fees, significantly increasing returns. All incentivized products clearly reflect additional boosted yields in the interface for which the breakdown can be simply observed by hovering over the APY section. Any accumulated gains during the program will be visible in real-time.

Staking continues to remain an essential component for maximizing returns. Each user begins with a default 3% staking boost, which applies to the KMNO rewards (excluding base yield) across all eligible positions. This boost is incremented by 0.01% for each additional day staked, to encourage long-term participation. The multiplier is proportional to stake coverage: for every 1 KMNO staked, $1 of deposits qualifies for the boosted yield, ensuring that rewards scale in line with both staking activity and deposit size. Boosts from previous seasons are also carried over, although at a drastically reduced rate.

While staking isn't exactly necessary, it does enable to make the most of the promotion, especially when already holding spot or planning to build a position.

From an inflation perspective, the emissions planned for the three month period are fairly negligible and make up almost exactly 1% of the total token supply. Briefly mentioned earlier, all vaults aren't created equal and receive different amounts, greatly impacting their utilization by comparison.

Most of the incentives have been allotted to the USDC Prime vault, receiving roughly 72.72% of the entire pot as per data reported by the protocol's campaign details section. The remainder is divvied up by Allez' USDC (18.18%) and Steakhouse's USDG (9%). It's not abundantly clear as to why the schedule was chosen, but if we were to make an educated guess, it most likely boils down to risk profile. Given that USDC Prime is the only strategy in the group that is labelled as conservative, they should receive the most. Though Allez has an identical MO to the largest beneficiary, they are not as acclaimed as Steakhouse. The least incentivized USDG vault features a yield-bearing stablecoin as the base asset and can be considered the riskiest due to an additional layer of smart contract risk.

As expected, the distribution weight is directly correlated with the size of the deposits.

Whether this season has been successful thus far is up for debate, but it's efficacy can be partially measured by calculating the impact of incentives on deposits by dollar amount. However this only portrays half of the picture, with the rest being revealed once we can quantify the amount of capital that remained after mercenary capital exited.

Obtaining sticky liquidity is a hurdle for virtually every financial application and ultimately ends up being a game of conversion that incorporates strategic emissions, unless the product has unprecedented product-market-fit. In this case Kamino has, on average, attracted a whopping $217.13 in deposits for every dollar of incentives distributed.

Any accumulated rewards can be partially realized (subject to a penalty) at the end of the campaign on November 6th, or vested in full over six months. All forfeited tokens are pooled together and distributed between participants claiming their allocations once the vesting period is over.

Yields on Kamino

Aside from the incentives on the earn vaults, there are several high-yielding strategies available on Kamino currently.

For one, looping SyrupUSDC from Maple Finance yields an APY of 21.5% currently. This is at 5x leverage and can be spun up in just a few clicks with Kamino Multiply.

The historical net APY on this market can be viewed below at various levels of leverage used. Keep in mind that this is a pure stablecoin loop which means a lower risk of liquidation. SyrupUSDC on Solana currently offers a 7% yield and with a 3.2% borrow rate on USDG that equals to a total strategy return of 21.5% at 5x leverage.

Keep in mind that this looping strategy is only profitable as long as the borrow cost is lower than the SyrupUSDC APY currently sitting at 7%.

Another asset that recently went live on Kamino is ONyc from OnRe Finance. OnRe allows its users to tap into the global reinsurance markets and the yields they offer. $ONyc is the core product on OnRe and has grown to more than $20m in TVL since going live last month. OnRe is primarily collateralized by sUSDe from Ethena but will this evolve over time. You can read more about OnRe, how ONyc works and the risks associated with this product in their docs here.

As of now, ONyc yields an APY of 11.8% and since going live on a Kamino market August 5th, it's possible to juice this return by utilizing Kamino Multiply. The token is currently limited to 2x leverage on Kamino Multiply but still yields more than a 25% APY. Liquidity is thinner than on the SyrupUSDC vaults so keep a close eye on the borrow costs as a large deposit could cause the borrow rate to spike up.

There are various other interesting looping strategies on Kamino right now on assets like SOL (up to ~20% APY) and JLP (>80% APY) all of which can be accessed seamlessly via Kamino Multiply. You can find all of these strategies here.

Kamino Traction

With the expansion to of several new markets and looping strategies, the TVL on Kamino keeps growing as is now sitting slightly above $3bn.

Fees remain at a steady level of more than $300k on most days with potential for upside should the tvl keep growing.