Turn $10k into Passive Income: Kamino Lending & Looping Strategy

Added: 2026-06-03

[00:00:00]Welcome back to the DFI 101 course. This course is made with support from the Solana Foundation and is designed to take you from a crypto investor to a crypto user. You can get into it. To start, we're going to talk about why this matters and what makes crypto lending different from traditional finance lending. In traditional banking, if you need cash but don't want to sell your stocks, you can use them as collateral for a loan. But this process can take days or even weeks. In crypto, everything happens instantly, 24/7, no paperwork required, no waiting periods, no bank hours to worry about. And although this might sound risky, there are numerous safeguards built in that we'll talk about in this video. Because here's another key difference. In traditional finance, loans are usually under collateralized. Think about a mortgage. You might only put 20% down to borrow 80% of a house's value. In crypto lending, it's the opposite. Loans are over collateralized for safety. This means that you need to put up more collateral than what you're borrowing.

[00:00:50]For example, you might need to deposit $100 worth of SOL to borrow $75 of USDC.

[00:00:55]And USDC is a stable coin equal to $1.

[00:00:58]The great thing about crypto lending protocols is that everything is automated and transparent. Your collateral is deposited into the protocol, but you can get it back anytime by simply paying off your loan.

[00:01:08]No early repayment penalties, complicated paperwork, or need to wait for a business day. Let's look at two common ways people use lending protocols. First is borrowers and then as lenders. As a borrower, let's say you're holding SOL and you believe in its long-term value, but you need some USDC for a purchase today. Instead of selling your SOL and incurring capital gains, you could use it as collateral to borrow USDC. This way you're keeping your SOL position and that long-term value while accessing the funds you need today. Even better, you don't incur capital gains because you aren't selling anything. As a lender, maybe you're sitting on stable coins waiting for the right investment opportunity. Instead of having them sit idle, you can lend them out and earn interest, taking the other side of that arrangement. Sometimes these have significantly higher rates than traditional savings accounts. Your assets start earning yield immediately and you can withdraw them whenever you want as long as there's liquidity available. All All now we're going to walk through step-by-step exactly how to do this. For this video, our tutorial is going to be on an application on the Solana network known as Camino Finance.

[00:02:04]First, let's understand the basics. When you use Solana's money market, you can either A, be a lender earning interest by providing your crypto for others to borrow, or B, be a borrower using your crypto as collateral to borrow other tokens. And note that providing your crypto as collateral is actually the same as lending it from Camino's perspective. The pool of collateral and the pool of lenders is the same pool.

[00:02:26]Let's walk through how to do both starting with lending. Step one, supplying assets, aka lending, aka providing collateral. Head over to Camino Finance and look for the borrow/lend section. You'll see a list of different tokens you can supply, each with its own supply APY. That's the interest rate you'll earn. We'll connect our wallet to Camino by clicking on the top right corner. You've seen me do this in previous videos. Connecting your wallet to DeFi websites and applications is a bit like logging into the website.

[00:02:52]It makes connecting your assets much easier. You don't have to set up accounts with each individual protocol.

[00:02:56]You get one universal account, aka your wallet, that you can use to connect to the entire Solana ecosystem. Contrast this with traditional finance where you'd have to deposit funds into every single different application you want to use. After the tutorial, choose your asset, click supply, enter how much you want to lend, and confirm the transaction. Simple as that. Your assets are now earning interest. You are free to stop there and simply earn yield.

[00:03:18]Depending on how in demand these tokens are, the interest rate, aka your yield, will go up or down. As a general heuristic, stable coin interest rates typically go up during bull markets. The reason for this is that people deposit their assets like Bitcoin and Solana and borrow stablecoins against them either to spend because their assets are up or to buy more crypto. The more people that do this, the higher the rewards for supplying those borrowers with stablecoins go. Like everything, it's supply and demand. Typically during down periods or bear markets, the interest rates for stablecoin suppliers is much lower because fewer people are borrowing stablecoins against their assets to speculate. One way to think about it is that when other people are leveraging up to trade, you can be the one providing them leverage and earn yield from it.

[00:03:57]Step two, borrowing. Once you've supplied assets, you may choose to use them as collateral to borrow other tokens. But, here's the important part.

[00:04:04]You cannot borrow the full value of your collateral. For example, if you supply $100 worth of SOL, you might be able to borrow up to $80 worth of USDC or $40 in riskier tokens like BONK. A quick word of safety. Here's something super important to understand, liquidation.

[00:04:19]Think of it like a margin call in traditional finance. If your borrowed assets increase in value compared to your collateral, or if your collateral drops in value, you risk getting liquidated. To play it safe, keep your loan-to-value ratio, or LTV, below the maximum. Track this with Kamino's position dashboards. Monitor your position regularly, consider borrowing stablecoins if you're new to this, and always maintain a safety buffer. Pro tip, before borrowing, check the position details at the top of the page.

[00:04:44]It shows how close you are to liquidation. Think of it as your safety meter. Want to exit your position? No problem. You can repay your borrowed assets anytime, and then withdraw your supplied assets from the withdraw option. Remember, while these tools are powerful, they come with risks. Start small, understand what works, and never borrow more than you can afford to manage. As a bonus, you'll see this star box in the top right corner. This is Kamino's point system, which is still active as of the time we're making this video. Doing activity on Kamino, and there's plenty to do, earns you Kamino points that could result in rewards down the road. You may get airdropped Kamino tokens or receive other bonuses for these points, although I don't specifically know what they're for. You can check out the points hub by clicking on the star. That's it. You're now ready to start using DeFi for lending and borrowing.