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Kamino Borrow is a peer-to-pool lending market on Solana. The concepts below cover the foundational ideas — reserves, markets, LTV mechanics, rate curves, and liquidations.

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Foundations

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The peer-to-pool model

Kamino Borrow is a peer-to-pool lending market. Depositors contribute assets into shared liquidity pools. Borrowers draw from those pools. The protocol mediates automatically — setting rates, tracking position health, and executing liquidations — with no counterparty matching required. This contrasts with order-book lending, where a specific lender must be matched to a specific borrower before a loan can begin. Peer-to-pool lending has no such requirement. Capital is fungible within the pool, and any borrower can draw from it the moment they post sufficient collateral. The consequence is permissionless borrowing: no underwriting, no identity check, no credit assessment. The collateral is the only guarantee. As long as the borrower’s position remains overcollateralized, the protocol enforces the loan automatically and the lender has no exposure to borrower identity or intent.

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What is a reserve

A reserve is a pool for a single asset within a market. All deposits of USDC in the Main Market enter the same USDC reserve. All borrows of USDC in the Main Market draw from that same pool. The same deposited dollar is lent simultaneously to multiple borrowers through accounting — the reserve tracks total deposits, total amount borrowed, the current rate, and each lender and borrower’s proportional share. Each asset has its own reserve because different assets carry different risk profiles and warrant different rate parameters. SOL and USDC should not share a pool — their volatility, liquidity, and acceptable LTV ratios differ materially. There is one reserve per asset per market. The reserve is the fundamental unit of the lending system.

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What is a market

A market is an isolated collection of reserves governed by shared risk parameters. Collateral deposited in one market cannot be used to borrow from another. Liquidity does not flow between markets. Risk does not either — a liquidation cascade or parameter change in one market has no effect on positions in another. Kamino currently operates four markets:
MarketPurpose
Main MarketThe primary market. Supports Solana’s core assets: SOL, wETH, tBTC, USDC, USDT, JitoSOL, mSOL, bSOL. Deepest liquidity, broadest collateral support.
JLP MarketOptimised for JLP (Jupiter Liquidity Provider tokens) as collateral. Allows JLP holders to borrow against their LP position without unwinding it.
Altcoins MarketSupports higher-volatility assets with tighter risk parameters and lower LTV ratios. For assets that do not meet Main Market standards.
Prime MarketInstitutional-grade market supporting real-world assets (RWA) and requiring the PRIME token for access. Custom risk configurations for larger positions.
For full detail on market structure, position modes, and cross-collateralization, see Markets.

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Overcollateralized lending

Every loan on Kamino is backed by more collateral value than the loan itself is worth. A borrower cannot receive $1,000 without first depositing collateral worth more than $1,000. This requirement exists because DeFi lending has no identity layer. There is no credit history, no legal recourse, and no way to compel repayment beyond the collateral already posted. Overcollateralization is not a tax on the borrower — it is the mechanism that makes anonymous, permissionless lending possible at all. It substitutes collateral for the creditworthiness checks that traditional lenders rely on. The degree of required overcollateralization varies by asset and market, governed by Max LTV and Liquidation LTV parameters.

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LTV — the three values

LTV (Loan-to-Value) measures your debt relative to your collateral. 
LTV = debt value / collateral value
Three distinct LTV values apply to every position:
LTV valueDefinition
Max LTVThe ceiling at which you can open or increase a borrow. You cannot originate new debt that would push your LTV above this value.
Liquidation LTVThe threshold at which your position becomes eligible for liquidation. Always higher than Max LTV.
Current LTVYour live debt-to-collateral ratio right now. The number that determines position health at every moment.
The buffer that actually matters is the gap between Current LTV and Liquidation LTV — not the gap between Current LTV and Max LTV. Max LTV is already consumed at origination. The real safety margin is how much further your collateral can fall before the protocol can begin liquidating you. Concrete example:
  • Deposit 50 SOL at $200 = $10,000 collateral. Borrow $7,000 USDC → Current LTV = 70%
  • SOL drops to $175 → collateral = $8,750 → Current LTV = 80% → eligible for liquidation
The formula for tolerable price decline: 
Tolerable decline = (Liquidation LTV − Current LTV) / Liquidation LTV
                  = (80% − 70%) / 80% = 12.5%
A 12.5% SOL price drop triggered liquidation from a position that started comfortably below Max LTV. Interest compounds your risk silently. At a 10% annual borrow rate on $7,000 USDC, with collateral prices flat:
TimeDebt balanceCurrent LTV
Day 1$7,00270.02%
6 months$7,35073.50%
12 months$7,70077.00%
After a year, the position has drifted from 70% to 77% LTV with no price movement — even with stable collateral prices, accruing interest steadily erodes your safety buffer.
Variable borrow rates can spike during high-utilization periods. A rate spike from 10% to 40% makes debt accumulate four times faster than expected. Monitor positions during volatile markets.

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Borrow Factors

Borrow Factors are a risk adjustment multiplier applied to debt assets. Stable, liquid assets like USDC carry a Borrow Factor of 1.0 — no adjustment. Higher-risk or less liquid assets carry Borrow Factors above 1.0, which reduce your effective borrowing capacity and raise your risk-adjusted LTV. 
Risk-adjusted debt = actual debt value × Borrow Factor

Borrow Capacity = (Collateral Value × Max LTV) / Borrow Factor
With $10,000 collateral and 80% Max LTV:
Debt assetBorrow FactorAvailable to borrow
USDC1.0$8,000
BONK2.0$4,000
A Borrow Factor of 2.0 halves your effective borrowing capacity. It also doubles your effective risk-adjusted LTV for an equivalent real debt size — a position that looks healthy by market values may be much closer to liquidation once the Borrow Factor is applied.
Always check the Borrow Factor before borrowing any asset. It may make your effective safety buffer significantly smaller than headline market values suggest.

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Liquidation mechanics

When a position’s Current LTV exceeds Liquidation LTV, it becomes eligible for liquidation. Two design choices protect borrowers from catastrophic outcomes: Close factor — 10% per round. Liquidators may only close up to 10% of a position in a single liquidation event. If the position remains above Liquidation LTV after the first round, a second round can be applied. A borrower who adds collateral or repays debt between rounds can stop the process entirely. This prevents full wipeout from a brief, shallow breach. Dynamic liquidation penalty — 0.1% to 10%. The penalty starts at 0.1% for immediate liquidation and rises up to 10% as the position remains unhealthy longer. This structure serves both sides: borrowers lose less collateral if liquidated promptly; liquidators earn larger bonuses for waiting but take on execution risk from further price movement. The escalating penalty is the mechanism that incentivizes early resolution before the position deteriorates further. For full liquidation mechanics, eligibility conditions, and how to avoid liquidation, see Liquidations.

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eMode / Elevation Mode

When collateral and borrowed assets are closely correlated — for example, JitoSOL as collateral and SOL as debt — their prices move together. A price shock large enough to push a JitoSOL/SOL position into liquidation is far less likely than a shock to a JitoSOL/USDC position. eMode (Elevation Mode) recognizes this by permitting significantly higher Max LTV for approved correlated pairs.
ModeExample pairApproximate Max LTVApproximate max leverage
StandardSOL / USDC~75%~4x
eMode MainmSOL, bSOL, JupSOL / SOL~87%~7.7x
eMode JitoJitoSOL / SOL~90%~10x
eMode is the mechanism that powers Kamino’s Multiply product — capital-efficient leveraged exposure to correlated asset pairs. For configuration and eligibility, see Markets.

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Variable Rate Model

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How variable rates work

Variable rates are governed by a single observable signal: utilization — the fraction of a reserve’s total deposits that is currently borrowed. 
Utilization = borrowed amount / total deposited amount
The system is self-correcting. High utilization pushes rates up, which simultaneously discourages new borrowing and attracts new deposits — both effects reduce utilization. Low utilization pushes rates down, which stimulates borrowing and may prompt lenders to redeploy capital elsewhere — both effects raise utilization. Over time, rates tend toward an equilibrium where the reserve operates within a target utilization band. Two extremes to understand:
  • 100% utilization — all deposited capital is borrowed. No withdrawals are possible until borrowers repay. This is the failure mode the rate curve is designed to prevent.
  • 0% utilization — no capital is borrowed. Lenders earn nothing. This resolves naturally as borrowers arrive.

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The interest rate curve and the kink

Kamino uses a two-segment rate curve with a kink at the target utilization level. Below the kink — rates rise gradually. The pool is healthy: borrowing is affordable, withdrawal liquidity is available, lenders earn competitive yield. Above the kink — rates escalate steeply. This is a correction mechanism, not a punishment. The steep rates create strong pressure for borrowers to repay and for new lenders to deposit, which pulls utilization back below the kink. The high rates are temporary — they resolve as the market responds. Illustrative borrow rates for a USDC reserve:
UtilizationApproximate borrow rate
40%3–5%
80% (kink)12–18%
90%35–60%
95%90–160%
What lenders actually earn: 
Supply APY ≈ Borrow Rate × Utilization × (1 − Protocol Spread)
At 12% borrow rate, 80% utilization, 15% protocol spread: 
Supply APY = 12% × 80% × (1 − 0.15) = 8.16%
Supply APY is always below the borrow rate because the idle portion of the pool earns nothing but still sits in the denominator of the utilization calculation. Higher utilization means more of the pool is earning, which is why high-utilization reserves offer better lender yields. Variable rates offer maximum flexibility — borrow and repay at any time, no fixed term, no maturity to manage. The trade-off is rate uncertainty: a 5% borrow rate today can be 20% tomorrow if utilization spikes.