Solana DeFi Yields With Stablecoins: Spot SOL
Solana (SOL) has been one of the standout performers in 2023, outperforming Bitcoin (BTC) and Ethereum (ETH). For holders of spot SOL, there are numerous strategies to earn additional yield while maintaining exposure to this rapidly growing asset. Here’s an overview of how SOL holders can maximize their yield with low-risk options like staking and more advanced strategies like leveraging liquid staking tokens (LSTs).
What is SOL Staking?
Staking SOL is a straightforward way to earn passive income while securing the Solana network. By staking SOL with liquid staking solutions, users receive tokens like jitoSOL, mSOL, and others, representing their staked assets. These tokens offer ~7-8% APY, primarily driven by SOL inflation, though the real yield—when factoring in emissions—is closer to 1-2%.
Key SOL LSTs by TVL:
- jitoSOL (Jito)
- mSOL (Marinade)
- INF (Sanctum)
- JupSOL (Jupiter)
- bSOL (Blaze Stake)
- LST (MarginFi)
These tokens are integrated across multiple Solana money markets and can be used as collateral, allowing users to maximize yields through looping strategies.
Yield Steps:
- Stake SOL to receive liquid staking tokens (e.g., JupSOL, mSOL).
- Deposit LST as collateral in a Solana money market.
- Borrow SOL against the LST collateral.
- Convert borrowed SOL into additional LST.
- Repeat the process to loop the position for enhanced yields.
This “looping” approach can significantly boost returns, but it comes with risks—particularly liquidation risk if the LST depegs from SOL. Higher leverage increases this risk.
Optimizing SOL Yields with Kamino Multiply
Kamino Multiply simplifies the looping process for users, enabling automated multiplication of yields. For example, with JupSOL, you can earn up to 16.4% APY when looping the position five times at 80% loan-to-value (LTV). However, leverage comes with liquidation risks if JupSOL depegs against SOL.
Risk of Liquidation Based on Leverage:
- 5x leverage: Liquidation occurs if JupSOL depegs >11%.
- 4x leverage: Liquidation occurs if JupSOL depegs >16%.
- 3x leverage: Liquidation occurs if JupSOL depegs >25%.
- 2x leverage: Liquidation occurs if JupSOL depegs >44%.
Factsheet
| Name | Yield | Sector | Chains |
|---|---|---|---|
| jitoSOL | 8.3% APY | Staking | Solana |
| mSOL | 7.2% APY | Staking | Solana |
| INF | 7.0% APY | Staking | Solana |
| JupSOL | 8.3% APY (up to 16.4% w/ looping) | Staking/DeFi | Solana |
| bSOL | 6.8% APY | Staking | Solana |
Conclusion
SOL staking offers attractive returns, especially when utilizing liquid staking tokens like JupSOL and taking advantage of money markets. While looping positions can substantially increase APY, the risks—especially liquidation due to depegging—must be carefully managed. For users seeking to maximize their yields, automated solutions like Kamino Multiply present an opportunity to do so efficiently.