Camino Sees Benefits From Liquidity Stimulation On PYUSD

Hello!

Death, taxes, and the Kansas City Chiefs getting incredibly lucky at the end of football games. When will it end?

It’s day two of the NFL season, and I’ve already resigned myself to the fact that my Buffalo Bills are going to lose to Patrick Mahomes in the playoffs again. At least I have all of our newsletter subscribers to keep me company:

Camino is Solana’s home for liquidity stimulation

PayPal stablecoin PYUSD has recently seen rapid growth on Solana. Much of the growth has been driven by Kamino, the new DeFi platform where much of this activity is taking place.

Kamino, a lending protocol on Solana that began gaining traction in late 2023, listed PYUSD with generous liquidity incentives in early July. Today, Kamino holds about $344 million in PYUSD, according to onchain data. That’s 62% of the total supply on Solana.

It’s easy to see why PYUSD has been soaring on Kamino — for a time, it was offering an 18% APY on the stablecoin. That elevated yield hasn’t come cheap. $500,000 is spent weekly on PYUSD incentives, and that figure was hundreds of thousands of dollars higher a couple of weeks ago.

A source familiar with the matter told me that these incentives are being handed out by Trident Digital, a little-known firm that stablecoin issuer Paxos uses for liquidity services. I was unable to determine for sure whether the PYUSD adoption incentives were ultimately paid for by PayPal or the Solana Foundation.

But looking at the bigger picture, PYUSD isn’t alone in spending money to be adopted on Kamino. In fact, eight of Kamino’s top 10 liquidity repositories by volume have “incentive farms,” which apparently allow projects to stake their tokens and allow Kamino to pay out to contributors. Tons of Solana projects have done this: Jito, Marinade, Blaze, and Sanctum all appear to have active liquidity farms. Ethena and Wormhole have also apparently spent money on liquidity incentives.

While all this was happening, Kamino grew significantly. On December 6, 2023, Kamino’s total value locked (TVL) was $42 million, according to DeFiLlama. Nine months later, that figure has reached $1.4 billion, and Kamino looks set to seriously displace Jito as Solana’s largest protocol by TVL.

Some have compared Kamino to Ethereum’s lending protocol Aave, a top-tier DeFi protocol that has the third-highest TVL of all protocols with over $11 billion locked. Kamino isn’t the only lending protocol on Solana — MarginFi and Save (formerly Solend) also come to mind — but its liquidity management vault tab seems to set it apart. There’s also the fact that both other participants have had their own shortcomings in the past.

Still, there is an open question about how sticky Camino’s TVL can be. Of the $1.4 billion currently stored on Camino, $380 million is in PYUSD, and the weekly yield gains appear to be slowly tapering off. The $148 million in Camino liquidity vaults, many of which are receiving incentives, is also significant.

“Kamino lenders are happy lenders,” Kamino co-founder X wrote this week. I’ll be interested to see if liquidity incentives are the key to their happiness.

— Jack the Cuban

Zero in

India really stood out at the Colosseum Radar hackathon:

The hackathon, which runs from now until October 8, has attracted a lot of interest from the Solana community, and as you can see, more than a third of the registrants are from India. The winners of the hackathon have a chance to join the startup accelerator Colosseum, which also includes seed funding.

The first Colosseum hackathon this spring spawned the Solana Ore viral experiment, which we’ve written about quite a bit, so I’m rooting for more equally interesting projects to emerge from this hackathon.

— Jack the Cuban

Pulse

ICYMI — Stories you may have missed this week:

0xDeep created the Solana Programs Verified Directory, a public dashboard of trusted and verified Solana programs. It is designed to help users ensure the integrity of their interactions.
PRISM explorer launched the first AI-powered data analytics platform for Solana, which allows users to query the entire Solana database back to epoch zero using SQL and AI agents.
Volmex Finance introduced the SVIV index, Solana’s first implied volatility index tracking 14-day expected volatility, with a future upgrade planned for derivatives trading.
Jupiter Exchange announced a new feature called “Protect Your Swaps” designed to protect transactions from sandwich attacks by routing swaps directly to Jito Labs validators.
GRASS Airdrop caused disappointment among some users due to the smaller than expected number of tokens being released despite the minimum participation requirements.
Mercurio is gearing up to launch its Spend virtual debit card, which promises to allow Solana wallet users to spend their cryptocurrency at more than 90 million Mastercard merchants.
Scammers A new method for burning tokens directly from Solana wallets using the Token 2022 standard has been discovered, adding a new layer of risk to unsuspecting users.
AggLayerUnveiled by Polygon Labs CEO, it is a cross-chain interoperability layer that connects Solana, Ethereum and other blockchains to provide “infinite scalability” for Web3.
Baybit has begun issuing bbSOL, a liquid staking token on Solana that allows users to earn staking rewards while maintaining liquidity and maximizing yield.