Kamino has onboarded xBTC (OKX Bitcoin), kicking off the xBTC growth initiative. This growth initiative is designed to rapidly scaling xBTC adoption in Solana DeFi, centered around Kamino’s Lending and Liquidity products.
To kick off, over $150,000 in monthly incentives will be distributed for users deploying xBTC on Kamino, in collaboration with OKX, Global Dollar Network (USDG), and Jito.
In the post below we dive into:
- Scaling xBTC on Kamino
- Phase 1 of the Growth Initiative
For specifics on how rewards are structured, jump to the bottom section of this post.
Scaling xBTC on Kamino
OKX recently announced the launch of xBTC, with a focus on scaling it across high-throughput chains such as Solana. Since its launch in May, xBTC has grown to ~$80M in circulation, with the vast majority being on Aptos.
Today, however, marks the start of the large-scale xBTC rollout on Solana, and Kamino will sit at the heart of it. Solana still lags far behind EVM in terms of BTC adoption, with wrapped assets like WBTC, for example only recently becoming natively issued on Solana.
We believe that BTC on Solana is still in its infancy and that, over the coming months and years, it will experience considerable growth on the network. New entrants such as Zeus Network are offering Solana-focused BTC infrastructure, and BTC DeFi is coming to Solana imminently via projects like Lombard and Solv.
xBTC, issued directly via OKX, presents an immense scaling opportunity for BTC in Solana DeFi, and as a collateral asset on Kamino in particular. Kamino has proven highly effective at scaling new assets on the network, and has become the home of any new asset seeking to grow its footprint in Solana.
With over $3.5B market size, secure, open-source smart contract infrastructure, a formally verified codebase, and over $1.5B active borrows, no platform is better positioned to facilitate the growth of xBTC in Solana DeFi. Here’s how we’ll do it:
xBTC Onboarding
xBTC is being onboarded to the Main Market on Kamino Lend, where it will be established as a core BTC asset on Kamino alongside xBTC.
In addition, we’re launching three xBTC Liquidity Vaults, enabling users to earn automated yield by providing xBTC liquidity: xBTC-xBTC, xBTC-JitoSOL, xBTC-USDG.
Kamino xBTC Growth Initiative
Kamino’s goal is to scale xBTC on Solana via an aggressive growth initiative. The goal of this initiative is two-fold:
- Grow productive usage of xBTC on Kamino Lend
- Establish deep on-chain liquidity for xBTC on Kamino Liquidity
Initiative Overview
In phase 1 of the Growth Initiative, rewards will be distributed across the following products:
- xBTC Supply with USDG Borrows on Kamino Lend — $70,000 USDG per month
- xBTC-JitoSOL Liquidity — $10,000 JTO + $10,000 USDG per month
- xBTC-USDG Liquidity — $60,000 USDG per month
Liquidity rewards are fairly simple, provide liquidity, and earn rewards. On Kamino Lend, however, the rewards system is designed specifically to scale productive usage of xBTC, while simultaneously growing USDG adoption. Below we get into the details.
Lending Rewards Criteria
- A position must contain xBTC collateral and USDG debt
- In a position with multiple collateral/debt assets, only the weighted amount of USDG borrowed against xBTC is considered
Lending Rewards Calculation
There are two APY values to consider:
-
Max APY
This is the value shown in the market list, and refers to the maximum possible APY a user can earn on their debt:
farm apy = total rewards per year / total USDG debt backed by xBTC in market -
User APY
This is the actual rewards a user is earning on their debt based on their collateral/debt composition:
user apy = farm apy * ( user USDG debt backed by xBTC1 / total user USDG debt )
Where user USDG debt backed by xBTC is calculated as:
user USDG debt backed by xBTC = user xBTC collateral / user total collateral * total user USDG debt
A user’s reward amount thus considers the weighted amount of USDG borrowed against xBTC in their position, in relation to total USDG borrowed against xBTC in the market.
We’ll cover a few examples below:
Rewards Examples
Let’s assume the current farm APY (i.e. max possible APY) = 10%
Example #1:
Position with only xBTC collateral and USDG Debt
- xBTC Collateral = $100
- USDG Debt = $50
user apy = farm apy * ( user USDG debt backed by xBTC / total user USDG debt )
user apy = 10% * ( 50 / 50)
user apy = 10%
In this scenario, the user earns the Maximum APY value on their debt. With 50 USDG Debt debt, the user would earn 5 USDG annually. At a 10% Borrow APY, for example, their USDG rewards would offset 100% of their annual borrow cost.
Example #2:
Position with SOL and xBTC collateral, and USDG Debt
- SOL Collateral = $50
- xBTC Collateral = $100
- USDG Debt = $50
In this scenario, we first calculate how much of the user’s USDG debt is backed by xBTC:
user USDG debt backed by xBTC = ( user xBTC collateral / user total collateral ) * total user USDG debt
user USDG debt backed by xBTC = (100 / 150) * 50
user USDG debt backed by xBTC = 33.33
This means, out of the total 50 USDG debt, 33.33 USDG is backed by the xBTC collateral. We can then calculate the user’s APY:
user apy = farm apy * ( user USDG debt backed by xBTC / total user USDG debt )
user apy = 10% * ( 33.33 / 50 )
user apy = 6.6%
In this scenario, the user earns a 6.6% APY value on their debt. With 50 USDG debt, the user would earn 3.3 USDG annually. At a 10% Borrow APY, for example, their USDG rewards would offset 66% of their annual borrow cost.
Example #3:
Position with xBTC collateral, and USDG and USDT Debt
- xBTC Collateral = $100
- USDG Debt = $50
- USDT Debt = $20
In this scenario, the user is borrowing at a 70% LTV, but is earning rewards on only the USDG portion of their debt. In practice this comes down to the same calculation as Example #1, where the user earns:
user apy = farm apy * ( user USDG debt backed by xBTC / total user USDG debt )
user apy = 10% * ( 50 / 50)
user apy = 10%
In this case, the user earns 10% APY, but only on the USDG portion of their debt, so 5 USDG annually. Were the user to switch their USDT debt to USDG, they would be earning 7 USDG annually.
This rewards initiative thus encourages users not only to deploy xBTC into Kamino, but to borrow USDG against it, thus leading to a net increase in borrow activity on the protocol, and potentially attracting additional USDG deposits.