Introducing: Kamino Swap

Today we’re introducing Kamino Swap, an intents-based, exchange platform built to offer the best price execution at any size, for any token swap on Solana. We believe this product ushers in a new era for Solana’s exchange landscape. Kamino Swap will have zero slippage, zero MEV, and zero platform fees.

Simply put, Kamino Swap is #betterthancex.

Kamino Swap is powered by the Pyth Express Relay infrastructure. The first product introduced on the platform is Limit Orders, live now in Beta. Below we’ll cover why we’ve built Kamino Swap, how the product works, and what it will grow into moving forward.

Why Kamino Swap?

Kamino Lend is built with a relentless focus on risk management, of which the protocol’s liquidation engine is a critical part. To ensure protocol and user safety, user positions need to be liquidated when they become unhealthy. These liquidations need to be as efficient as possible, which in turn requires a robust network of liquidators that are always incentivized to perform liquidations.

However, in working with Pyth to design a better liquidation UX, it became increasingly clear that the problem faced by Kamino is not unique to Kamino; on the contrary, it’s a problem faced by the Solana ecosystem at large.

The Problem: Liquidation UX

Extensive analysis of Kamino’s liquidation transactions has revealed a clear need for a better liquidation environment. Right now, liquidators need to write custom code to participate in liquidations, and to participate they need to be incentivized by attractive liquidation bonuses. This entails bad UX for both liquidators and users. Liquidators can only be onboarded via complex custom integrations, and users incur the extra fees that are required to incentivize liquidators.

At present, all liquidations on Kamino are executed via standard swap interfaces like Solana DEXs. Although liquidity on the network has improved, transacting via these swap interfaces still presents numerous problems, including congestion, account lock limits, slippage, and the increasing prevalence of MEV. This further harms UX, as these inefficiencies means liquidators often pay more for liquidations than necessary.

Two problems needed solving: Kamino needed a standardised liquidation interface used to perform liquidations, and liquidation transactions needed to have better price execution. Kamino’s new Limit Order platform achieves both.

The Solution: Kamino Swap

Before Kamino Swap evolved into what we’re introducing today, the goal was as stated above: We needed to create a competitive Limit Order venue to improve Kamino’s liquidation efficiency. A venue that enables liquidators to earn more while borrowers lose less.

As we explored optimizations to Kamino’s liquidation infrastructure, it became obvious that the inefficiencies seen in Kamino’s system are not unique to Kamino. On the contrary, we realized that we’d identified a clear gap in Solana’s exchange landscape.

Simply put, every user on Solana should have access to a UX-optimized Swap interface that provides reliable and efficient price execution at any size, between any assets on Solana. At its core, this is why we’ve built Kamino Swap, and throughout the product exploration process, we realized just how valuable this product would be for Solana users. With Kamino Limit Orders, you can place orders and get not only exactly what you ask for, but even receive more than your asking rate.

We’re excited to share what we’ve built. First, we’ll get into exactly how the new Limit Order infrastructure works:

The Infrastructure: Achieving best price execution

In simple terms, instead of plugging into a DEX or DEX aggregator—thus being subject to liquidity conditions, protocol fees, and MEV—Kamino Limit Orders broadcasts every swap to a network of searchers via Pyth Express Relay.

Searchers are a network of sophisticated market participants that seek out arbitrage opportunities across the crypto landscape.

When a swap is broadcasted, an auction takes place where searchers compete to fill the transaction. The searcher that wins the auction is the one that offers the best execution price, and the highest tip. It is through the heavy competition of solvers, outbidding each other to win the trade, that the user gets the best price for their swap. This is where Kamino’s Limit Order product changes the game for users:

Surplus & Tips

By eliminating MEV, Express Relay enables tips to be settled at the protocol level. On Kamino Swap, this means users are rewarded with value that would usually be leaked to bots. To win a Limit Order auction, a searcher must provide a tip. On Kamino, this tip goes to the Limit Orders user.

In addition, depending on arbitrage opportunities, searchers can execute transactions at even better prices than the user asks for. We refer to this as the trade “Surplus”, and Limit Order users will keep any surplus on their transactions.

In summary, three things are important to to note:

  1. Via Kamino Limit Orders, a user always gets their asking price - never less
  2. Orders fills will be reliable, and grow even more so as the searcher network expands
  3. For every swap, a user always receives a tip on top of their asking price, and can even receive a surplus as well

Kamino Swap: Limit Orders

To give everyone access to this infrastructure, Kamino has built a UX-friendly Limit Order front-end that is simple, smooth, and provides valuable features for traders. The Kamino Swap UI has been optimized to provide maximum clarity to users via simple UX and comprehensive tooltips. Nonetheless, below we’ll walk through the new Limit Order product and some of its core features.

First, we’ll dive into the flow to place an order:

Placing an Order

Placing an order via Limit Orders works almost exactly like a typical token swap.

1. Select Tokens

First you select your input and output token (i.e. what are you buying/selling).

Note that the first Beta tokens are SOL, USDC, and USDT, more tokens will be onboarded over the coming weeks.

2. Select Price

In addition, you can select the price at which you’d like to place your order.

Selecting a buy price below the market price means you buy at a discount. Selecting a sell price above the market price means you sell at a profit. Kamino Swap enables orders like these to get filled with extreme precision, which means right when the market price approaches your limit price, you should be filled virtually instantly.

For each order, you can also see a summary of how much you’ll gain buy buy/selling at a price below/above market price.

  1. Market Price Explained

If you select market price directly, the price will default to ±0.1% above or below market price. This is to allow your order to get filled as efficiently as possible.

  • Sell orders are placed at the current “Bid” price in the market, i.e. the price at which market makers should automatically buy.
  • Buy orders are placed at the current “Ask” price in the market, i.e. the price at which market makers should automatically sell.

By default, the “market” price is set at ±0.1% above/below what is currently recognized as the “mid” price (the exact middle between the Bid and Ask). This value is a default, and may be optimized over time based on historical data and execution efficiency between different token pairs.

My Overview

Kamino Swap gives you a full overview of all your open and past swaps, the tips and surplus you’ve earned over time, and your current claimable tips. We’ll dive into all of this below.

1. Open & Recent Orders

As soon as you open an order, it will appear in your Open & Recent Tab. Any open orders, as well as all orders placed within the last 15 minutes, remain in this tab.

There are 3 statuses for orders on Kamino Limit Orders:

  • In Progress means an order has yet to be filled, or has been partially filled. In the “Filled” column you can keep track of how far an order has been filled
  • Cancelled means you’ve manually closed your order while none of it has been filled
  • Filled means an order has been fully filled, or you’ve manually closed a partially filled order

When an order has been filled, whether partially or fully, you will have received a tip for the order.

2. Tips

Every filled order on Kamino Swap is accompanied by a tip that goes directly to the user. When you place a limit order, searchers compete to win an auction for your order, and add an extra SOL value called “tips.” These tips are paid directly to you as an incentive, making your trade more rewarding.

When placing orders, your tips will accrue, and you can claim them whenever you want.

Note that the tip value displayed in the UI includes the rent you can claim back for each order you’ve opened on Kamino Swap. For more info on how rent works, read here).

3. Surplus

Due to the nature of Pyth Express Relay, various searchers compete to fill your orders on Kamino Swap. This means that auctions often become competitive, often resulting in you receiving more value than you actually asked for in your order.

This additional value is referred to as a “Surplus” on your order, and you as the user receive the entire surplus directly into your wallet. Quite simply, you receive more than you paid for.

As shown in the above UI snippet, you can see your total Tips and Surplus earned over time via Kamino Swap. This will continue to accrue with sustained usage of the Kamino Swap product.

Looking Forward

Kamino and Pyth are fully aligned in their goal of providing value for Solana DeFi users by offering useful products powered by innovative and secure infrastructure.

Both projects have a deep commitment to offering best-in-class user experiences, and we believe this is embodied in the design of both Express Relay and the Limit Order product. The Kamino Swap journey has just begun, and additional products to be added to the Swap product suite are already in development.

We believe that an ecosystem as vibrant as Solana simply needs a venue where traders can exchange assets at any size, at the best possible rates—without sacrificing funds to price impact, slippage, or MEV—and Kamino intends to build the products that enable it.

Note that the Limit Order beta kicks off with SOL and USDC, and the goal is to add many, many more tokens will be added over the coming weeks.

#betterthancex

12 Likes

Wow, this is truly impressive—excellent job from the team once again! I’ve been with you guys for more than 2,5 years now (if I remember correctly) and I want to keep it that way.
Has the team thought about how this could be used to support Kamino token? For instance, by allocating 10% of the tips to token holders as claimable rewards? I think Kamino as a platform is maybe the best platform on whole cryptosphere but yet token is still quite undervalued compared to the potential and size of Kamino.

1 Like

it’s technically impressive but is this anything the ecosystem needs or wants? I could see a bunch of Ethereum MMs coming across to play in this new market but does that actually grow the ecosystem? Not really for mine. Profit seeking professional traders are never net positives to an ecosystem unless they’re trading at margin (which this isn’t).
At best they improve trades a bit and remove minimal profits. Normally they’re profitable and all those profits are net extractive i.e., they don’t grow the transaction volume.
Maybe I’m wrong. Maybe a swarth of new users will want to come to Solana for this new way to swap the existing assets.

I’m hoping that there’s more retail focused and net new features coming to be built on top of this.

1 Like

If you manage to build a permissionless orderbook on Solana where orders actually get filled, then we will have the onchain nasdaq dream back, which disappeared with Serum collapse.