Kamino Drops Liquidation Penalties by 90% as Jupiter Lend Grows Market Share

After dominating Solana’s onchain lending markets for years, Kamino is facing its biggest competitive challenge. 

Powered by EVM lending heavyweights Fluid, Jupiter Lend is steadily siphoning TVL away from the market leader, prompting Kamino to make some changes to its liquidation system.

How much of a threat does Jupiter Lend pose to Kamino’s crown, and why does the battle for TVL benefit users?

Kamino Minimum Liquidation Penalty Drops to 0.1%

On September 1st, Solana’s largest lending protocol announced changes to its soft liquidation system. Liquidation penalties are now 10x cheaper, dropping from 1% to as low as 0.1%. Additionally, positions now unwind in 10% increments, as opposed to 20%.

Kamino’s updated liquidation system is far more forgiving to borrowers. Partial unwinding ensures that borrowers pay less in penalties, while ensuring that positions become healthier after unwinding.

However, Kamino cofounder Marius Ciubotariu asserts that smaller partial liquidation increments aren’t necessarily the silver bullet to reducing liquidation penalties. 

Ciubotariu argues that in certain cases, like in a steadily falling market, larger increments enable more collateral to be liquidated earlier at a higher price.

As opposed to a one-size-fits-all system, Ciubotariu reinforces that lending markets should maintain a balanced and nuanced approach to executing liquidations.

Fluid co-founder Samyak Jain, the brain powering Jupiter Lend’s liquidation engine, has since called out the Kamino co-founder, claiming Ciubotariu doesn’t understand how Fluid works and has copied “Jupiter Lend’s config”.

Jupiter Lend Climbs to 13.56% Market Share

Changes to Kamino’s liquidation penalties come following the impressive debut of Jupiter Lend, which has amassed over $490M in TVL within a week of its launch. During that same period, Kamino’s $ SOL-denominated TVL has dropped 8.75%, falling from 14.05M $SOL to 12.82M $SOL, based on DefiLlama data.

Speaking previously with SolanaFloor, Jupiter COO Kash Dhanda declared that Jupiter Lend’s superior liquidation engine and low penalties gave the platform a “genuine edge” in Solana’s lending market. 

With Jupiter Lend’s market share surging to 13.56% in a matter of days, Kamino’s own liquidation penalty update is no doubt a reaction to Jupiter’s growing presence. Aiming to become Solana’s DeFi superapp, Jupiter recently flipped all rival protocols to become the biggest source of TVL on the network.

That being said, Kamino remains far and away Solana’s biggest lending market. Since launching in 2023, Kamino has successfully processed over $120M in liquidations without suffering any bad debt. While Jupiter Lend is certainly bringing fresh dynamism to Solana’s lending markets, Kamino’s sterling track record and reputation are a powerful moat.. 

Users to Benefit from Lending Market Competition

Rising competition in Solana’s lending markets ultimately benefits users and advances the sector. Without Jupiter Lend introducing cheaper liquidation penalties, Kamino may not have updated its own system to remain competitive. 

Solana’s DeFi power users have welcomed the emergence of fiercer competition between lending platforms. While Kamino has dominated the scene for several years, the rise of Jupiter Lend and emerging money markets like Loopscale, will force protocols to put users first, or risk losing market share to their rivals.

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