Crypto in a portfolio

Our DeFi strategies use four core cryptocurrencies. Each has its own role — like team members, where everyone does their own job. In this lesson you'll learn which currency is used where and why. Once you understand this, you'll be able to evaluate any DeFi position yourself — you'll know what job each asset is doing in it.

SOL — Solana's currency

SOL

Solana is one of the fastest cryptocurrency networks in the world. SOL is this network's "fuel" — without it, you can't carry out any operation.

SOL — like gasoline for a car

Just as a car needs gasoline, the Solana network needs SOL. Every operation (a transfer, a swap, borrowing) costs a tiny slice of SOL. But here's the difference — this "gasoline" costs less than 1 cent.

Key numbers

What matters	SOL
Transaction speed	Under 1 second
Transaction cost	Under $0.01
Market position	Top 5 largest cryptocurrencies

Why SOL in our strategy?

SOL is used as collateral — like real estate for a mortgage. You "put down" SOL, and you can borrow money against it.

Deposit SOL into Kamino as collateral
Earn ~6% APY — just for holding it
Borrow USDC against this collateral
Put the borrowed money to work elsewhere

Why not Bitcoin?

Bitcoin is the largest cryptocurrency, but it doesn't fit DeFi strategies:

The Bitcoin network is slow (10 min. per block) and expensive
Bitcoin has no smart contracts (programs that manage money automatically)
SOL and ETH have large DeFi ecosystems with hundreds of programs

Solana ecosystem protocols

These protocols run only on the Solana network:

Kamino — lending and collateral
Orca — liquidity providing (LP)
Meteora — alternative LP
Jupiter — currency swaps

ETH — Ethereum's currency

ETH

Ethereum is the first and largest smart contract network. ETH is this network's currency. It's the second-largest cryptocurrency after Bitcoin.

Ethereum — like the biggest shopping mall

If Solana is a fast, cheap market, Ethereum is the biggest shopping mall in town. It has the most shops (protocols) and the most shoppers (liquidity). But getting in (transactions) costs more.

Key numbers

What matters	ETH
Transaction speed	~12 seconds (mainnet)
Transaction cost	~$0.01–0.30 (mainnet), under $0.05 (Arbitrum)
Market position	Top 2 largest cryptocurrencies
DeFi size	Largest DeFi ecosystem in the world

Why ETH in our strategy?

ETH is used as alternative collateral on Aave. This lets us avoid depending on a single network:

Deposit ETH into Aave as collateral
Earn ~3–5% APY for holding it
Borrow USDC against this collateral
Runs on Arbitrum — cheaper than the Ethereum mainnet

Arbitrum — cheaper operations

Ethereum mainnet operations cost cents (~$0.01–0.30) in quiet periods, but the price shifts with network load and can spike many times over during a peak — worth checking etherscan.io/gastracker before a larger operation. Arbitrum is like a "highway" running alongside Ethereum:

Bundles hundreds of operations into one and submits it to Ethereum together
Cost drops to under $0.05 and stays stable even when the mainnet is congested
Same security as Ethereum
Aave runs on Arbitrum — that's why we use it

Ethereum ecosystem protocols

These protocols run only on the Ethereum/Arbitrum network:

Aave — lending and collateral
Uniswap V3 — liquidity providing (LP)

USDC — the stable dollar

USDC (USD Coin) is a stablecoin whose value is kept at $1.00. It's issued by Circle, a US-regulated company.

USDC — like a digital dollar

Imagine you have $100 in the bank. The bank gives you 100 tokens you can use online. Each token is always worth exactly $1. That's USDC — a digital dollar.

How does USDC hold its $1 value?

For every USDC token, there's $1 of real money in Circle's bank accounts:

Cash in US banks
US government bonds (very safe investments)
Audited monthly by independent auditors

What matters	USDC
Price	Always ~$1.00
Issued by	Circle (US-regulated)
What backs its value	100% backed by dollars and bonds
Where it runs	Solana, Ethereum, Arbitrum, and other networks

USDC's role in the strategy

USDC is the main workhorse of our strategies:

Borrowed from Kamino/Aave against SOL/ETH collateral
~2/3 of the USDC goes to Orca — providing liquidity (LP — Liquidity Providing) and earning trading fees
~1/3 of the USDC goes to Deribit — for protection and extra income
The fees earned come back as USDC — and go back to work (compounding — profit on profit)

Why not USDT (Tether)?

USDT (Tether) is the largest stablecoin, but:

Tether went a long time without disclosing where it held its money
USDC is more transparent and regulated
Many professional investors choose USDC for its safety

USDY — a dollar that earns for itself (no longer used in the strategy)

USDY (US Dollar Yield) is a special stablecoin from Ondo Finance. It's not only worth ~$1 — it also automatically earns interest.

2026 update — we switched from USDY to USDC

We used to use USDY as the borrow currency in Strategy B because of its ~4.5% offset. Since spring 2026 we use USDC instead — for greater liquidity on the Solana network, lower smart-contract risk, and faster exits during a crisis. USDY is still a good yield-bearing asset to hold, but it's no longer our borrow asset.

How does USDY work?

Ondo Finance buys US government bonds (very safe investments)
It creates USDY tokens whose value slowly rises along with the bonds' interest
USDY currently earns ~4.5% per year

What matters	USDY
Price	~$1.00+ (rises very slowly)
Issued by	Ondo Finance
What backs its value	US government bonds
How much it earns	~4.5% per year
Where it runs	Solana, Ethereum
In our strategy	No longer the borrow asset (since 2026), fine to hold passively

Why did we stop borrowing USDY?

Liquidity — USDC on Solana has several times more liquidity. During a crisis, USDY is hard to buy or sell quickly.
Smart contract risk — Circle (USDC) has been running since 2018 and is regulated. Ondo (USDY) is newer.
Exit speed — paying off a USDC loan during a crisis is faster and simpler.

The trade-off: you give up the ~4.5% offset (loan cost ~5-7% vs ~0.5%), but you gain more safety.

Which currency, used where?

Strategy A — Covered Call + LP

Currency	Where it's used	Protocol	What it's for
SOL or ETH	Collateral	Kamino / Aave	So you can borrow
USDC	LP position	Orca / Meteora	Earns fees
USDC	Options	Deribit	Protection + income
SOL/ETH	Option's underlying	Deribit	Covered Call premium

Strategy B — Multi-Layer Yield

Currency	Where it's used	Protocol	What it's for
SOL	Collateral	Kamino	Layer 1 — collateral
USDC	Loan	Kamino	Borrow asset (replaced USDY since 2026)
USDC	LP position	Orca	Layer 2 — fees
SOL	Options underlying	Deribit	Layer 3 — protection + income

The money's journey — step by step

Start: buying SOL/ETH

You buy SOL or ETH with euros through an exchange (Nexo/Kraken). This is your starting capital — like a purchase you're about to put to work.

Depositing collateral

You put SOL/ETH into Kamino or Aave as collateral. From day one you start earning ~3–6% per year (SOL on Kamino ~6%, ETH on Aave ~3–5%).

Borrowing

You borrow a stable dollar (USDC) against your collateral. You borrow conservatively — only 30-42% of the collateral's value.

Splitting the money

Send ~2/3 of the borrowed money to Orca LP (earns fees). Send ~1/3 to [Deribit](https://www.deribit.com/?reg=20922.7835&q=home) (protection and extra income).

Reinvesting profit

Every week: the fees you earned come back as USDC. Part of it is converted back into SOL/ETH and returned to the collateral. That way your position keeps growing (compounding).

Comparing the networks

	Solana SOL	Ethereum ETH
Speed	Under 1 sec.	~12 sec. (mainnet), ~2 sec. (Arbitrum)
Cost	Under $0.01	~$0.01–0.30 (mainnet), under $0.05 (Arbitrum)
DeFi ecosystem	Growing, innovative	Largest, oldest
Lending	Kamino	Aave
LP	Orca, Meteora	Uniswap V3
Stable dollar	USDC (primary), USDT	USDC, USDT
In our strategy	Primary network	Alternative + diversification

Why use both networks?

It's like not putting all your eggs in one basket. If something went wrong on the Solana network (which happened in 2022, when the network stalled for a few hours), Ethereum positions wouldn't be affected. This is called network diversification — spreading risk across different networks.

Summary

SOL — fast, cheap, the primary collateral on Kamino
ETH — safe, the oldest, alternative collateral on Aave
USDC — a stable $1 coin, used to generate yield, for protection, AND as the borrow asset (replaced USDY since 2026)
USDY — "a dollar that earns for itself" (~4.5%), no longer the borrow asset in the strategy, but fine for passive holding
USDT — an alternative to USDC; the most widely used stablecoin worldwide, but with less liquidity on Solana
Every currency has its place in the strategy — none of it is random

Quick check

What role does SOL play in our DeFi strategy?

Practice task

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