🚧Risk Disclosure: Kamino Multiply Strategy

This document helps outline the risks associated with the Kamino Multiply strategy.

Kamino Multiply offers leveraged exposure to Solana-based yield strategies, with the potential for amplified rewards through recursive borrowing and staking. While these strategies have drawn interest due to their yield potential, they also come with complex and sometimes opaque risks. This page outlines the core risks associated with Kamino Multiply, as used by The Vault through its vSOL liquid staking token, and serves as a warning to users considering participation in this strategy.

⚠️ Negative APY Risk

One of the primary risks in Multiply strategies is when borrowing rates exceed the yield generated by the looped liquid staking token (LST). In this scenario, users effectively earn less than they pay in borrow fees, leading to negative net APY. Over time, this can erode the position and push it toward liquidation.

This situation most commonly arises when:

• The borrow rate for SOL increases above the yield generated by vSOL.

• The negative spread persists over an extended duration (estimated unofficially between 30 to 60 days).

Because Kamino does not define an exact time threshold, users may not be able to calculate precise liquidation risks.

💣 Liquidation Risk

Kamino Multiply relies on leverage, which means your position can be liquidated if collateral value drops or if borrow conditions worsen.

Liquidation occurs when negative APY persists long enough to erode collateral to unsafe levels. Kamino uses eMode to increase Loan-to-Value (LTV) limits (up to 90%), reducing the margin of safety. Any adverse price movement can push positions to liquidation quickly.

Note: Liquidation typically involves 2% of collateral, but this could increase during volatility or liquidity shortages.

🧮 Oracle and Price Feed Risk

Kamino aggregates prices using multiple oracles (Pyth, Chainlink, etc.) to reduce single-point failure. However:

• Lag: TWAP and EWMA systems can delay updates during volatile events.

• Incorrect Rejections: Legitimate price movements may be rejected by price bands.

• Manipulation Risk: Despite improvements, oracle-based attacks remain possible and have historically caused millions in losses on Solana.

🧠 Smart Contract Risk

Kamino's protocol is complex and introduces several technical and smart contract-related risks:

• Previously audited high-risk vulnerabilities (now patched).

• Use of flash loans introduces additional attack vectors.

• Reliance on intricate smart contract interactions increases the surface area for exploits.

🌐 Solana Network Risk

Solana has experienced multiple outages and periods of high congestion. Risks include:

• Failed transactions due to network spam or MEV.

• Latency (20–40s ping times) and packet loss during peak periods.

• Inability to rebalance or exit positions in time.

📉 Liquidity and Market Depth

Multiply positions require ample liquidity for entry, adjustment, and exit. Solana's concentrated liquidity model may introduce:

• High slippage during market stress.

• Unfavorable liquidation outcomes.

🏛️ Governance and Centralization Risk

Kamino is governed by a multi-signature structure. Protocol parameters—including liquidation thresholds and deposit limits—can be changed by governance, potentially impacting your position retroactively.

🧬 External Dependency and Contagion Risk

Kamino's Multiply strategy, as used with vSOL, still depends on broader DeFi ecosystem stability. Potential systemic risks include:

• Smart contract vulnerabilities in interconnected protocols.

• General Solana DeFi contagion risks during major incidents.

🌍 Regulatory Uncertainty

The legal landscape for DeFi continues to evolve. Regulatory actions or restrictions may:

• Affect user access.

• Target LST platforms or leverage mechanisms.

• Require protocol modifications that disrupt existing positions.

⚠️ Incomplete Risk Coverage

This guide may not be comprehensive in identifying all risks associated with the strategy. Each user must perform their own due diligence to assess suitability based on their risk tolerance. Please visit Kamino to research, correctly identify, and assess all risks.

The Vault does not accept liability for any financial loss, missed opportunity, or position liquidation. Participation in Kamino Multiply strategies using vSOL is at your own risk.