Five Tested DeFi Strategies to Earn More SOL This Bull Market

Thinking about making more money on Solana? Most people believe that investing their money in crypto staking would bring them profit. But what if they can earn more using the same SOL portfolio?

That is where DeFi strategies come in. They are a combination of multiple features, such as staking, lending, and looping, to maximize yield.

This article highlights five Solana-based DeFi protocols you can use to boost your SOL holdings. The step-by-step approach in this guide will make it easy for traders of all expertise levels to tap in.

How Do DeFi Strategies Work

In the early days of DeFi, a typical user is one who stakes, lends, or borrows crypto on a decentralized application (dApp). The goal? To earn some yield on top of their existing holdings.

However, the DeFi sector has gone beyond simply staking and waiting for returns. Users can now explore diverse options to increase earnings with seemingly little capital. How? Through DeFi strategies.

A DeFi strategy is not a new feature. Instead, it is a combination of different DeFi features, such as lending, borrowing, swapping, staking, and restaking, to boost yield.

To make the process as easy as possible, most DeFi protocols, including the ones discussed in this article, allow users to access these strategies with a single click. This saves them from spending time manually clicking through lengthy steps to achieve one aim.

There are different types of DeFi strategies. This article highlights two strategies, namely the debt-based looping strategy and the liquidity-routing strategy.

The debt-based looping strategy involves borrowing a crypto against collateral to repurchase more of the same crypto. Under this strategy, an investor’s profitability depends heavily on their risk appetite. Those who use higher leverage position themselves for substantial profit or loss. Platforms offering this strategy include Jupiter, Kamino, and Project 0. This strategy suits users who wish to use risk-based leverage to boost yield.

The liquidity-routing strategy involves depositing assets into a pool that uses an algorithm to route your capital to places where it is most needed. This strategy is common among restaking protocols like Sanctum. Hence, it is no surprise that users receive receipt tokens representing their stake in the protocol. Sanctum, for instance, offers INF to users. This strategy suits conservative traders with zero risk tolerance.

In some cases, a user can combine different strategies to boost their earnings. Jito is an example, combining the liquidity-routing and debt-based looping strategies.

5 DeFi Strategies to Increase SOL Earnings

This article will dive into DeFi strategies that can be implemented on the following Solana-based protocols:

1. Jupiter Lend
2. Kamino Finance
3. Project 0
4. Sanctum
5. Jito

Note: We will use Phantom, a Solana Web3 wallet, to illustrate these DeFi strategies. Still, anyone can replicate the process on Solana-supported digital wallets.

Jupiter Lend: SOL Multiply

APY: 5.7%

Leverage (Multiplier): Up to 16.3x

Jupiter, a Solana-based decentralized exchange (DEX), offers various services, including Multiply. This feature under Jupiter Lend allows traders to use automated leverage to increase their exposure to a cryptocurrency with a single click.

Imagine wanting to hold more SOL than you actually own. You go to a lending platform, deposit your collateral (SOL), borrow an amount of stablecoin (USDC) less than your collateral, go to a swap page to exchange the USDC for more SOL, and deposit that SOL into the lending platform to increase the position.

Jupiter Lend’s Multiply feature automates this entire process through a single transaction.

Interestingly, using liquid staking tokens like JupSOL or JitoSOL enables holders to increase their earnings even more. As a result, the extra earnings can cover the borrowing cost.

Here’s a step-by-step guide on how to purchase JupSOL and loop it using Jupiter Lend’s Multiply feature:

• Go to the built-in browser (Explore section) on Phantom and enter Jupiter’s official website.
• Connect your Phantom wallet to Jupiter in the top-right corner.
• On the homepage, swap SOL for JupSOL.
• Click the Lend tab on the homepage, then select Multiply from the features lineup at the top of the page.
• Locate the JupSOL/SOL vault from the list of loops.
• Enter the amount of SOL or JupSOL you want to deposit.
• Adjust the Multiplier slider to your target leverage (e.g., 1.1x, 4.8x, 15.9x).
• Click the Multiply option to create the position.

Kamino Finance: Kamino Multiply

APY: 2.01%

Leverage: Up to 7.7x

Kamino Finance is a DeFi protocol that enables on-chain services, such as lending, liquidity provision (LP), and leverage trading. The platform has a dedicated section called Kamino Multiply for users who want to earn more SOL through DeFi strategies.

Here’s a step-by-step process to use the Kamino Multiply tool:

• Go to Kamino Finance’s website and select its Multiply page.
• Connect your Phantom wallet to the platform.
• Search for the JITOSOL or JUPSOL vault and open the result with SOL as the Borrow Token. (Hint: The correct one has SOL Loop as its Strategy).
• Enter the amount of crypto you want to deposit (JITOSOL, JUPSOL, or SOL).
• Set your desired leverage using the bar.
• Review the trade parameters and execute.

Project 0: Loop Strategies

Leverage: Up to 7.7x

Describing itself as a DeFi-native prime broker, Project 0 is a protocol that lets users access Jupiter, Kamino, Velocity DEX (formerly Drift), and other DeFi platforms from a single portfolio using a unified credit.

Here’s a step-by-step guide to access Project 0’s DeFi strategy:

• Open Project 0’s official website and connect your Phantom wallet.
• Go to the Strategies tab from the list of services.
• Open the corvusSOL/SOL looping strategy from the dashboard.
• You will be prompted to swap any available crypto for corvusSOL on the Asset Swap page. Input the amount you wish to swap.
• Input the amount of corvusSOL you want to use for the DeFi strategy in the next slide.
• Select SOL as your Borrow asset.
• Adjust the Leverage lever based on your desired risk appetite.
• Deploy your strategy.

Sanctum: Multi-LST Infinity Looping

APY: 5.52%

Sanctum is a liquid staking protocol that allows users to access multiple liquid staking tokens (LSTs). It also supports custom LST creation among validators, dApps, and crypto firms.

Unlike Jupiter and Kamino, which use debts and loops, Sanctum takes a different approach. It uses the liquidity-routing path, letting users earn more SOL without borrowing. Instead, users deposit SOL or any LSTs they have into the pool and receive INF tokens. This makes them eligible to earn from staking and fees.

Here’s a step-by-step guide to access Sanctum’s multi-LST Infinity looping:

• Open Sanctum’s official portal.
• Connect your Phantom wallet.
• Open the Infinity section from the home screen.
• Select the asset you want to deposit. It can be SOL or any LST you have.
• Input the amount you wish to deposit.
• Review and complete the trade.
• You will receive an amount of INF tokens in your Phantom wallet, usable across Solana DeFi.

Jito Finance: Leveraged Restaking Loops

Jito Finance is a liquid staking protocol that lets users stake SOL and receive its receipt token, JitoSOL. In turn, users can use JitoSOL across supported DeFi platforms to maximize earnings over time.

Unlike Jupiter and Kamino Finance, which offer clear-cut features for looping SOL to earn more, Jito users harness restaking to earn more SOL on their existing holdings. Here’s a step-by-step guide explaining this:

• Go to Jito’s Restaking page.
• Connect your Phantom wallet to the dApp.
• Select from the available vaults, such as kySOL or ezSOL (Choose a vault with high TVL that accepts JitoSOL or SOL).
• If you don’t have the base asset, you will be prompted to acquire it on Jito’s staking page.
• Deposit your JitoSOL or SOL into the vault. You will automatically receive an equivalent amount in the vault receipt token (VRT), such as kySOL or ezSOL.
• Open a lending protocol that supports VRT collateral, like Kamino Finance or Velocity DEX.
• Supply the VRT as collateral to borrow regular SOL
• Swap the SOL for JitoSOL on Jupiter
• Deposit the JitoSOL back into Jito Restaking’s vault to mint more VRTs.

Factors to Keep in Mind While Using DeFi Strategies

Regardless of the strategy, dApp, or blockchain you use, here are important factors to bear in mind while using DeFi strategies:

Risks

For debt-based looping, users need to borrow and use different leverage levels. If prices drop, users risk being liquidated to cover their debts. However, this depends on the leverage they set. As a result, it is crucial for users to be mindful of their leverage while executing looping DeFi strategies. To be on the safe side, most traders use low leverage and borrow amounts significantly lower than their collateral.

Also, like every DeFi protocol, there exists the risk of a security breach if users fall prey to phishing exploits or the dApp gets hacked.

Yields

When selecting a DeFi strategy, users need to determine the earnings they would make from it. They can do this by checking the annual percentage yield (APY) on each loop/strategy. This way, they can deduce how much they would earn when depositing their assets into that protocol.

However, it is worth noting that the APY generally fluctuates. One cause is when too many people use a specific looping strategy. This triggers an increase in the cost to borrow SOL on that loop. If the APY to borrow becomes higher than the APY earned from staking, the loop backfires, causing users to lose SOL instead of earning it. As a result, users need to monitor the APYs for the looping strategies they use.

Fees

Users spend transaction fees for every single loop they execute. Although network fees are significantly cheaper on blockchains like Solana, users still need to be cautious about the protocol and network fees. This is especially necessary when they execute multiple loop actions or high-leveraged trades. As a result, they get to see substantial yield from their strategy instead of using a large chunk to cover fees, or worse, covering more fees than they actually earned.

Conclusion

DeFi strategies are a game-changer in the world of finance, enabling users to make their money work twice or thrice as much. Notwithstanding, these strategies bear their risks. As a result, readers need to get acquainted with DeFi basics and do their research to enable them to make the right financial decision.

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