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Introduction

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).

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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.

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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.

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How Kamino solves the Liquidity Dilemma

Kamino automates the entire LP process and optimizes capital efficiency & yields through:
  • Automated position rebalancing - Continuously adjusts liquidity ranges for optimal performance
  • Auto-compounding trading fees & additional incentives - Reinvests earnings back into your position
  • Auto-swap for single-sided deposits & withdrawals - Deposit or withdraw with any token balance
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).