TLDR
- Kamino reduces liquidation penalties by 90% to stay competitive with Jupiter Lend.
- Jupiter Lend quickly gains 13.56% market share, pressuring Kamino’s position.
- Kamino’s new liquidation system benefits users by reducing penalties for borrowers.
- Jupiter Lend’s rise forces Kamino to adapt, promoting healthier DeFi market competition.
Kamino Protocol has responded to growing competition from Jupiter Lend by significantly reducing its liquidation penalties. This move is seen as an effort to maintain its dominance in Solana’s lending market, as Jupiter Lend rapidly increases its market share. The changes benefit users and indicate the rising importance of competitive forces in DeFi lending.
Kamino Slashes Liquidation Penalties by 90%
Kamino, Solana’s largest lending protocol, has introduced significant changes to its liquidation penalty system. On September 1, 2025, the platform announced that its liquidation penalties had been reduced from 1% to 0.1%, representing a 90% decrease. Additionally, Kamino has modified its unwinding process to implement smaller liquidation increments, now at 10% instead of 20%.
These changes come in response to the rapid growth of Jupiter Lend, a competitor that launched with a superior liquidation system and lower penalties. The shift in Kamino’s system is aimed at making it more forgiving for borrowers, offering better conditions during liquidation events.
According to Kamino co-founder Marius Ciubotariu, while partial liquidation increments may help, they are not always the ideal solution for all market conditions. In declining markets, larger increments might better protect collateral values.
Kamino Faces Growing Competition from Jupiter Lend
Jupiter Lend, which launched in 2025, has quickly gained traction in Solana’s lending market. Within just one week of launching, Jupiter Lend amassed over $490 million in Total Value Locked (TVL), capturing 13.56% of the market share.
During the same period, Kamino’s TVL in SOL-denominated assets decreased by 8.75%, falling from 14.05M SOL to 12.82M SOL.
Jupiter Lend’s success is attributed to its competitive liquidation engine and low penalties. Jupiter COO Kash Dhanda recently emphasized that their superior system provides a “genuine edge” over Kamino and other rivals. This swift rise has pressured Kamino to update its systems in order to retain its dominance.
Benefits of Competitive DeFi Lending Markets
The increased competition between Kamino and Jupiter Lend is seen as beneficial for Solana’s lending ecosystem. Lower liquidation penalties and the introduction of more efficient systems ultimately favor borrowers, allowing them to avoid harsh penalties during times of market volatility.
DeFi market participants have welcomed the heightened competition, as it pushes lending protocols to continuously improve their offerings. If Kamino had not updated its liquidation system, Jupiter Lend’s rapid rise could have led to a more dominant position within the market, making it harder for Kamino to compete.
This dynamic is a clear indication that DeFi lending protocols must put users first to maintain their market share. The reduced liquidation penalties, in particular, reflect a shift towards more user-centric models that ensure fairer and more transparent lending experiences.
