DeFi Gold Rush: High-yield opportunities worth watching on Solana

Original author: David C, Bankless

Original translation: Deng Tong, Golden Finance

Investing in stablecoins or Solana’s native liquidity staking token may not be as exciting as searching for the next breakout coin, but it can provide a reliable way to earn money.

Stablecoins provide price stability, while LST allows you to earn base staking rewards while maintaining liquidity. Through DeFi platforms such as Kamino, Drift, and Save (formerly Solend), you can put stablecoins and LST to work and increase your returns through yield farming strategies.

Whether you prefer passive, low-risk returns or are willing to take on higher risk for greater rewards, this article breaks down the best yield opportunities in leading stablecoins like USDC and PYUSD, as well as Solana’s leading LST, to help you find the best match for your risk profile.

USD Stablecoin

Stablecoins on Solana have seen explosive growth in this market cycle. While USDC is dominant on the chain, a unique phenomenon compared to Tether’s USDT, Paypal’s PYUSD has experienced explosive growth following its recent launch, thanks to rewards from DeFi protocols.

These stablecoins offer a relatively low-risk option for yield farming when used in DeFi protocols such as Kamino, Drift, and Save (formerly Solend). Whether you are looking for a steady income or a higher risk-reward option, these assets are essential options for those aiming to hedge against market volatility and earn a steady return.

USDC

Kamino

Kamino Finance offers a variety of yield options for USDC holders, with its main pool vault currently offering an annual interest rate of about 3.5%, which is lower than its historical 6-9% range, but still reliable, and can provide passive, low-risk returns. For higher returns, Kaminos altcoin pool offers an annual interest rate of about 7.5% on USDC, and the JLP (Jupiter Liquidity Provider) pool offers an annual interest rate of about 6.6%. Its centralized liquidity strategy makes it an ideal choice for users who want to balance risk and higher returns.

Drift

Trading protocol Drift also allows users to earn yield by lending USDC. While yields here are modest, around 3-4%, well below previous highs, they offer a stable, low-risk opportunity for those who are not seeking aggressive risk. Additionally, Drift’s insurance fund offers much higher yields, currently around 15%, from fee income from trading, borrowing, and liquidation, but is riskier because it acts as a backstop for the protocol to remain solvent.

Save

Algorithmic lending platform Save offers 4-5% APY on USDC lending in its main pool. The platform also has other permissionless pools that are not deployed by the protocol, such as its JLP/SOL/USDC pool, which currently offers an APY of 8.5% for those willing to participate in riskier liquidity strategies.

PYUSD

Kamino

PYUSD is a new entrant into the Solana ecosystem, but it has quickly gained momentum thanks to Kamino’s aggressive yield strategy. While the initial yield was as high as 30%, it has since stabilized at around 7%, the highest of the Kamino main pool stablecoins. Kamino has also just added PYUSD to the JLP (Jupiter Liquidity Provider) pool, which has a higher yield than its main treasury, at around 8.5%.

Drift

The yield on Drift’s lending vault is slightly higher at around 10%, making the platform an attractive option for PYUSD. Additionally, in its insurance fund, Drift offers an annual interest rate of around 18.5%, but keep in mind that this comes with a higher risk.

Save

The yield on Save’s PYUSD main pool is currently around 12% and appears to have increased recently, while the yields on Drift and Kamino have declined. If this trend continues, Save may be the best platform for users who want to use PYUSD without taking on additional risk.

LST Yield

Liquidity Staking Tokens (LSTs) are an important part of Solana’s staking economy, allowing users to stake SOL while retaining liquidity for use in the broader DeFi ecosystem. The three largest LSTs on Solana by market cap — JitoSOL from MEV-enhanced liquidity staker Jito, mSOL from established Marinade Finance, and JupSOL from Jupiter Exchange in partnership with Sanctum — offer base yields of ~7.5%, ~8.12%, and ~8% on staking rewards, respectively, with additional opportunities to amplify these returns through DeFi, particularly on Kamino.

For each of these LSTs, additional yield can be earned through Kamino’s main treasury or leveraged strategies. The main treasury provides passive returns on top of base staking rewards, while the leveraged yield strategy offers higher returns for those willing to take on more risk.

JitoSOL

Main Treasury Income:

Kamino offers a modest yield of 0.04% on the primary vault provided by JitoSOL, adding passive income to the base staking rewards. This option is suitable for those seeking stable, low-maintenance returns.

Leverage Benefits:

For users who want to maximize returns, Kaminos leveraged yield option for JitoSOL offers higher returns, currently up to 10.5%. The strategy uses leverage to amplify returns, but if these derivative assets decouple, the risk increases compared to just holding LST.

mSOL

Main Treasury Income:

Kamino’s mSOL Main Vault offers a yield of 0.11%, slightly enhancing the base staking rewards with passive DeFi returns. This vault is perfect for earning extra income while holding mSOL for the long term.

Leverage Benefits:

For those who are not afraid of risk and want to increase returns, Kamino’s leveraged staking strategy for mSOL can push yields up to around 14.5%.

JupSOL

Main Treasury Income:

JupSOL’s main treasury in Kamino yields 0.02%, providing a small additional return on top of the base staking rewards. While the yield is low, it provides a steady source of passive income for JupSOL holders who want peace of mind at night.

Leverage Benefits:

Kamino’s leveraged JupSOL pool has the highest yield, at about 14.7%. By leveraging staked JupSOL in DeFi, users can earn substantial returns, and this strategy is ideal for those who want to maximize staking returns while taking on higher risks.

Summarize

In summary, stablecoins and LST on Solana offer a variety of yield farming opportunities, allowing users to grow the most mature or stable assets depending on their risk tolerance.

PYUSD currently offers the highest yield opportunity among stablecoins, especially on platforms such as Drift, with APYs as high as around 18%. In terms of liquidity staking, JupSOL and mSOL currently have the highest leverage yields at around 15%, providing attractive returns for those willing to take the risk of utilizing leveraged strategies. However, be sure to monitor these vaults as their yields fluctuate regularly.

Whether you choose a lower-risk stablecoin vault or a higher-risk LST farming strategy, there are plenty of opportunities to put your assets to work in Solana’s DeFi ecosystem.

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