The Concentrated Liquidity Market Maker (CLMM), also known as the next-gen automated market maker (AMM), has become a powerful source of revenue for liquidity providers (LPs). Additionally, they have proven to increase the capital efficiency of the decentralized exchange (DEX).
Kamino, an automated liquidity solution based on DEXs operating CLMMs, boosts efficiency even further. Kamino allows LPs to easily reap the full benefits of CLMM liquidity provision while maximising capital efficiency.
The Problems With the Current Model
There is an exponentially greater opportunity for capital return when providing liquidity on CLMMs than there is for traditional AMMs. However, it is essential to note that this efficiency is achieved at the expense of added complexity.
With this new technology, CLMM liquidity providers face many challenges that make turning a profit difficult.
- CLMMs necessitate LPs to rebalance their positions regularly to keep them within the “ideal” price range. For most LPs, this is a challenging task.
- With CLMMs’ NFT deposit receipt, the ability to be compatible with other protocols is eliminated, making it impossible to implement liquidity mining programs.
- CLMM positions don’t automatically compound the trading fees, so users must manually claim and compound their profits.
The Kamino Solution: How Does It Work?
These problems are solved by Kamino, which manages users’ LP holdings on their behalf, so that users can”set it and forget it.” The following are some of the ways in which Kamino optimizes its capital efficiency and yield:
- Advanced market-making tactics
- Rebalancing of positions by automated means
- Automatic compounding of fees and rewards
- Easy-to-use interface and design
Kamino is trying to enhance the DeFi user experience. As DeFi develops and gets more sophisticated, it poses a number of challenges for newer and older users, but Kamino is redefining DeFi by making it simple for anybody to provide concentrated liquidity on a DEX and earn yield.
Moreover, Kamino will create “real yield” opportunities for users rather than inflationary yield, which causes users to lose value when inflationary rewards tokens depreciate in value. Finally, since it relies on the super fast speed of Solana, Kamino will be able to provide DeFi with solutions that were not possible on EVM blockchains because of scalability and cost issues.
Why Hubble Protocol Incubated Kamino Development
Building on Solana to create DeFi solutions has been Hubble Protocol’s focus for more than a year. Kamino Finance extends Hubble’s objective to improve capital efficiency and liquidity for DeFi on the world’s fastest blockchain network.
Kamino prioritizes making life easier for LPs, but it also focuses on increasing their capital on hand. Using kTokens (Kamino LP tokens) as collateral allows users to borrow USDH from the project that incubated Kamino. Hubble.
Kamino will maintain the same high standard of security that Hubble has set in the past. It will undergo several security audits and tests before and after its launch.
As a DeFi solution being built during a prolonged bear market, Kamino’s automated yield aggregation and management will highly optimize DEXs for the coming bull market. In addition, Kamino’s capital-efficient yield solutions for stablecoin holders offer users a strategy to stay stable assets no matter how volatile the market gets.
By providing easy-to-use solutions for new technologies like the CLMM, Kamino will also help onboard the next generation of DeFi users. To put it all together, the adoption and growth of DEXs for mainstream crypto trading could see huge numbers in the coming years as DEX capital efficiency increases, with Kamino driving more effective liquidity.
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