# Overview Welcome to Kai Finance, a next-generation leveraged yield platform on the Sui Network. Kai Finance offers innovative yield farming solutions for both passive and active investors. Whether you prefer steady, low-maintenance income or want to explore strategies with higher yield potential, our platform provides secure, transparent access to the best of DeFi. All smart contracts are [**open-source**](https://github.com/kunalabs-io/sui-smart-contracts/tree/master/kai) and [**audited**](/resources/audits). Powered by [**Kuna Labs**](https://kunalabs.io)**.** ## How Kai Finance Works Our dual-vault system serves different investment styles while optimizing capital efficiency: #### [Single Asset Vaults](/vaults/single-asset-vaults) * For steady, low risk returns without active management. * Deposit assets to provide liquidity for leveraged farming. * Returns are earned through interest from Leveraged LP Vault users. #### [Leveraged LP Vaults](/vaults/liquidity-provider-vaults) * For active investors aiming to enhance yields. * Borrow liquidity from Single Asset Vaults to farm LP pairs with up to **11x leverage**. * Gain increased exposure without the need for full collateral upfront. ## Why Choose Kai Finance? Kai Finance goes beyond traditional lending platforms by seamlessly combining **high-yield farming** with **capital efficiency**: This approach fosters a mutually beneficial ecosystem: * **For Passive Providers**: Enjoy boosted returns generated by leveraged farming strategies. * **For Active Users:** Access up to 11x leverage to amplify returns through direct liquidity pool participation. Kai Finance also provides a developer friendly [SDK](/resources/sdk) written in TypeScript, allowing seamless integration of our leveraged yield farming features into your Sui based applications. From interacting with single asset vaults to building custom LP strategies, the SDK is open source and thoroughly documented, helping you get up and running quickly. ## Explore More For a comprehensive understanding of our platform's principles, we invite you to review our [whitepaper](/resources/whitepaper). It details the core mechanics of the Kai Leverage protocol, including concentrated liquidity and margin safety principles. Please review the [Risk Disclaimer](/resources/risk-disclaimer) section before getting started. Understanding the potential risks is important before making any deposits. ## Need Help? If you need assistance, please refer to our [Getting started](/introduction/getting-started) section or join [Discord server](https://discord.com/invite/XV2xYZjReX) to connect with our team & community. # Getting started Welcome to Kai Finance! Here's how to get started based on your experience level: * **New to Sui?** Check out the [How to Connect](/introduction/getting-started/how-to-connect) section to set up your wallet and connect to the Sui network. * **New to DeFi?** Head to the [LP Pools – The Basics](/introduction/getting-started/lp-pools-the-basics) section for a simple introduction to DeFi and how liquidity pools work. * **Familiar with DeFi but New to Kai?** Explore the [First Steps](/introduction/getting-started/first-steps) section to see what makes Kai unique and how you can get the most out of it. * **Experienced with Kai Finance?** Jump straight into the action with our [How to Deposit](/vaults/single-asset-vaults/how-to-deposit) or [How to Create LP Position](/vaults/liquidity-provider-vaults/how-to-create-lp-position) guides for step-by-step instructions. * **Want to receive real time notification about your LP positions?** Check our step by step guide on how to [**Connect your Telegram to Kai Finance**](/vaults/liquidity-provider-vaults/how-to-connect-telegram) to receive instant alerts about your LP positions. Stay updated on position health, liquidation risks, and range status in real-time. # How to Connect Get started with Kai Finance: a guide to setting up your wallet, funding it, and beginning your DeFi journey on Sui. To start using Kai Finance or any other app on the Sui Network, you’ll first need a Sui wallet. **Don’t worry - it’s quick and easy!** Let’s walk through the steps to get you set up and ready to dive into DeFi on Sui. **First, download any Sui-compatible wallet**, like the official *Sui Wallet* or *Metamask Sui Snap.* If you already have a Sui Wallet up and running, you can safely skip to [#id-5.-connect-wallet](#id-5.-connect-wallet "mention")step. In this tutorial, we'll be focusing on setting up and using the Sui Metamask Snap.\ \ **Note:** *For the best experience, we recommend using Google Chrome as your browser.* ## 1. Click "How to Connect" Click on the ***How to Connect*** button on [kai.finance](https://kai.finance) homepage.

Press "How to connect" button

## 2. Visit suisnap.com Clicking on the [suisnap.com](https://suisnap.com) will take you to the Sui Metamask Snap website.

Click on "suisnap.com"

## 3. Prepare Wallet MetaMask is a popular crypto wallet extension for Chrome that supports multiple networks, including Sui. If you already have MetaMask installed, you can skip this step. If you're new to MetaMask, follow along to get set up. ### 3.1. Install MetaMask Wallet Extension

Click on "Install Metamask"

Click on the ***Install MetaMask*** button and install the MetaMask wallet extension. ### 3.2. Create New Wallet Click on the ***Create a new wallet*** button and follow the instructions.

Click on the "Create a new wallet" button

**IMPORTANT:** *Make sure to securely back up your seed or secret recovery phrase (a 12-word phrase generated during wallet setup). This phrase is your only key to access your wallet and funds, so **never share it with anyone, especially online.** Avoid storing it as plain text on your computer, and ensure you have at least one physical copy safely stored. **If you lose your seed phrase, you lose access to your crypto.*** **Note:** *As an extra layer of security, we suggest you note down the wallet address displayed after setup. Then, take an extra precaution by removing the MetaMask extension from Chrome and reinstalling it. Instead of choosing **Create a New Wallet** on reinstall, click **Import an Existing Wallet** and enter the saved seed phrase. Confirm that the address matches the one you noted before - **this way, you’re sure your backup works!*** ### 3.3. Install Sui Snap Now that MetaMask is installed, you can connect to [suisnap.com](https://suisnap.com) to install the Sui MetaMask Snap - a tool specifically designed to make MetaMask compatible with the Sui Network. Click on the ***Connect*** button and follow the instructions. Accept the terms, allow the Snap’s connection request, and enable the requested permissions to complete the installation.

Click "Connect" button

Successful Snap installation

## 4. Fund wallet Currently, your wallet is empty, so let’s walk through the next steps to fund it with some tokens.

Your Sui wallet on suisnap.com

### 4.1. Acquire SUI token To start transacting on the Sui Network, you’ll need some SUI tokens in your wallet to cover transaction fees. There are two main ways to acquire SUI: 1. If you already have a wallet on other chains, use the [first method](#id-4.1.1.-pay-for-transaction-with-dynamic-fees). 2. If you hold your assets on a centralized exchange (CEX), go with the [second](#id-4.1.2.-withdraw-sui-from-cex). #### 4.1.1. Pay For Transaction With Dynamic Fees Typically, being without a network’s native token would leave you unable to transact. However, on Sui, having only USDC or another token in your wallet won’t stop you. [Aftermath Finance](https://aftermath.finance/trade) has implemented a Dynamic Fees feature to address this. To get started, bridge some assets over to your wallet (step[#id-4.2.3.-bridge-assets](#id-4.2.3.-bridge-assets "mention")). Then, return to the Aftermath Finance DEX and connect your wallet.

Click on "Gas" option in the settings

In the top-right corner, open "Settings" and select the “Gas” option from the menu.

Select wanted token to use instead of SUI

Choose the token you’d like to use for fees - such as wUSDC or any other supported token you’ve bridged. Now you can pay for transaction fees with wUSDC, swap for SUI, and skip the typical hassle of needing a network’s native token first. #### 4.1.2. Withdraw SUI From CEX If you already have an account on an crypto exchange, for example [Binance](https://binance.com), that supports Sui Network, it's possible to buy some SUI and withdraw it to your newly generated Sui address.

Copy your Sui address

### 4.2. Acquire Additional Tokens In addition to SUI for transaction fees, you’ll likely want to have other assets like USDT or USDC to deposit into Kai Finance. There are a few ways to acquire these assets - let’s explore the options. #### 4.2.1. Swap SUI on DEX If you’ve already deposited some SUI tokens, you can easily swap them for other tokens using a decentralized exchange (DEX) like [Cetus](https://app.cetus.zone). Just connect your wallet, enter the desired amounts, and complete the swap.

Press "Connect" button

Select "Sui MetaMask Snap" from the wallet list

#### 4.2.2. Withdraw Native USDC With native USDC support on Sui, you can now withdraw USDC directly from exchanges like [Coinbase](https://coinbase.com) and [KuCoin](https://www.kucoin.com/) to your Sui wallet. Simply copy your Sui address, go to the withdrawal section on your exchange, and transfer USDC directly to Sui. #### 4.2.3. Bridge Assets In addition to native USDC, other assets on Sui are available as **wrapped, bridged versions.** This means that, unlike native assets, original token is locked on its native chain, and a wrapped token (bridged) is minted on Sui. Facilitating these transfers requires a bridge service to move assets securely between networks. If you’re already using MetaMask on Ethereum, you can move assets from Ethereum to Sui using either the [Wormhole Portal bridge](https://portalbridge.com/) or [Sui’s Native bridge](https://bridge.sui.io/). With Portal, you can bridge any asset, while the Native bridge currently supports bridging only ETH token. For a step-by-step guide to bridging assets using the Portal bridge, check out our tutorial: Bridging with the Sui's Native bridge follows similar steps to the Wormhole's Portal bridge. You should be able to complete it on your own by now! **Note:** *Each source chain creates its own unique bridged version of tokens on Sui. For example, bridging USDT from Solana results in a **different token version** than bridging it from Ethereum. Since the most widely used bridged tokens in the Sui ecosystem are ETH-based, **we recommend using Ethereum for bridging** as well. If you choose to bridge from another chain, be mindful of potentially low liquidity for those token versions on Sui.* ## 5. Connect wallet You’re all set to connect your wallet and start exploring Kai. Congratulations, and welcome aboard!

Click "Connect wallet" button

Select your wallet from the wallet dropdown

# LP Pools – The Basics When you provide liquidity in a DeFi pool, you’re (most often) putting up two assets (like SUI and USDC) so other people can trade between them. In return, you earn a small fee on each trade. This process is automated through something called an **Automated Market Maker (AMM)**, which calculates prices based on the amount of each asset in the pool. **What’s Uniswap V3 All About?** Uniswap V3 introduces a concept called **concentrated liquidity**. Instead of spreading your assets evenly across all prices, you focus them within a specific price range, where most trading happens. This way, you earn more fees with less capital. But, if the price moves outside your range, your position goes "out of range" and temporarily stops earning fees until the price returns to your range. **Key Concepts to Remember:** 1. **Price Range**: Choosing a price range is essential. A narrow range can give higher returns but is more likely to go out of range. A broader range keeps you in the game longer but might earn lower fees. 2. **Impermanent Loss**: This is the risk of earning less compared to just holding the tokens. If prices fluctuate a lot, the pool rebalances your assets, which can lead to a temporary loss. However, fees you earn can help make up for this loss over time. 3. **Stable vs. Volatile Pairs**: Stable pairs (like USDC-USDT) are safer with lower impermanent loss but often offer lower returns. Volatile pairs (like SUI-USDC) can give higher returns but carry more risk due to price swings. **Bottom Line**: Providing liquidity in a pool is a way to earn passive income, but it requires choosing the right price range and understanding the risks, especially with volatile pairs. Think about your strategy: are you aiming for higher returns with some risk, or stable but slower gains? # Copy of Liquidity Pools Starter Pack ## AMM & DEX Blockchain technology enables Decentralized Exchanges (DEXs), allowing users to trade assets directly without intermediaries. Traditional order books posed challenges on early blockchains due to high transaction volumes. The solution? Liquidity Pools where assets are pooled together and exchanged at a rate set by an on-chain formula. Originally introduced by Bancor, this concept was refined by Uniswap and other platforms, giving rise to the Automated Market Maker (AMM) model in use today. ## Uniswap V3 Liquidity Pools Kai Finance’s Leveraged LP Vaults use Uniswap V3 Liquidity Pools, an advancement that enables concentrated liquidity, allowing providers to focus their capital within a custom price range. Unlike earlier models, which spread liquidity uniformly across all price levels, Uniswap V3 lets users allocate funds only to relevant price intervals where trades are most likely to occur. This concentrated approach maximizes capital efficiency, enabling liquidity providers to earn more fees with less capital. ### Price Range Choosing a price range in Uniswap V3 pools is essential to maximizing returns. For instance, in a SUI-USDC pool with a current price of 2 USDC per SUI, a provider might select a narrow price range of 1.9 to 2.1 USDC. This allows them to capture trading fees as long as the price remains within these boundaries. Uniswap V3 further divides price ranges into *ticks*, or small intervals, that allow precise management of liquidity. As trades move between ticks, liquidity is activated or deactivated based on the current price, ensuring funds are used as efficiently as possible. If the price moves outside the specified range, the position goes “out of range” and stops earning yield until it re-enters. This ability to focus liquidity at particular price levels is especially effective in pairs with predictable price behavior, like stablecoins. **Choosing a Price Range** Selecting the right price range depends on your market outlook and risk tolerance: * **Narrow Range:** Concentrating liquidity within a tight range can yield higher fees, as capital is utilized more effectively. However, it also increases the likelihood of going out of range, especially in volatile markets. * **Broader Range:** A wider range provides greater stability by keeping the position active longer but typically generates lower fees due to less concentrated liquidity. Consider your strategy when setting a range: are you expecting price stability, or are you prepared for fluctuations? Stable asset pairs (e.g., USDC-USDT) generally benefit from narrow ranges due to their low volatility, while volatile pairs may require broader ranges to accommodate price swings. ### Impermanent Loss Impermanent loss occurs when the asset ratio in your position changes due to price fluctuations, leading to a temporary imbalance when compared to simply holding the tokens. For example, if SUI’s price rises in a SUI-USDC pool, a liquidity provider may withdraw with more USDC and less SUI than if they had held SUI alone. This imbalance arises as the pool continuously rebalances tokens within the chosen range to reflect market prices. #### Out of Range Impact If the price of an asset moves beyond your chosen range, the position goes out of range, halting fee generation but retaining the assets. For example, if the price exceeds the upper boundary, your position may hold mainly USDC, as the pool has “sold” SUI on the way up. Conversely, a drop below the range results in a position holding primarily SUI. This rebalancing contributes to impermanent loss, as the asset distribution diverges from a simple hold strategy. Fortunately, if the price eventually returns to the original level, impermanent loss can be offset. Staying in active pools for extended periods allows accumulated fees to counterbalance shifts in asset ratios, potentially preserving or enhancing your position’s value. #### Stable vs Volatile Pools For pools with stable pairs, like USDC-USDT, where asset values remain closely aligned, impermanent loss is typically minimized, making them suitable for high-leverage strategies. Volatile pairs, such as SUI-USDC, carry a higher risk of impermanent loss due to significant price fluctuations. However, these pools often offer higher APYs to compensate for the increased risk, allowing providers to capture higher yields when managed strategically. # First Steps So, you’re familiar with DeFi but curious about what options are available on Kai Finance? Let’s break it down: * **Option 1: Passive Income with Single Asset Vaults**\ If you prefer a “set it and forget it” approach, **Single Asset Vaults** are ideal. They provide a steady, passive return, with profits generated from interest paid by users borrowing funds to create leveraged positions in LP Vaults. During periods of high asset utilization i.e. high interest rate, it’s advantageous to provide liquidity to Single Asset Vaults, and enhance your passive income. * **Option 2: Active Strategy with Leveraged LP Vaults**\ For users seeking higher returns, Kai offers Leveraged LP Vaults, allowing you to open larger positions in Cetus LPs using borrowed funds from Single Asset Vault liquidity. This approach maximizes potential yield, while the Kai Leverage Protocol ensures safety and transparency. When asset utilization is low i.e. the borrowing cost is low, leveraging the cheaper liquidity from Single Asset Vaults can be a smart way to earn more. * **Option 3: Best of Both Vaults**\ You can combine both strategies: deposit in Single Asset Vaults to earn passive returns, and then leverage that liquidity to create LP positions. Why? Kai Finance receives additional liquidity incentives from the Sui Foundation, boosting returns when you use Single Asset Vaults. By using Kai, you’re eligible for these incentives on top of the usual LP farming fees, which you wouldn’t receive by depositing directly into Cetus. # Single Asset Vaults Earn passive income through simple, one click, no fees, Single Asset Vaults. ## How it works Single Asset Vaults provide essential liquidity for Kai's Leveraged LP Vaults, where active users can borrow funds to amplify their positions. As borrowers use leverage, they pay interest on the borrowed amount, benefiting Single Asset Vault providers. When liquidity utilization approaches capacity, interest rates rise, incentivizing new deposits and stabilizing liquidity, much like traditional lending platforms. ## Key features * **Beginner-friendly**: Ideal for newcomers, offering a “set it and forget it” approach. * **Single asset, lower risk**: No exposure to impermanent loss, making it a straightforward choice for stable returns. * **Auto-compounding**: Rewards are reinvested every 30 minutes, maximizing your returns without manual intervention. * **Market-Driven Returns:** Rewards grow in proportion to the performance of active LP Vault participants. The better they are at capturing high yields, the more you earn. ## Available vaults * **SUI** * **USDC (Native)** * **wUSDC (**[**Wormhole**](https://portalbridge.com/)**)** * **wUSDT (**[**Wormhole**](https://portalbridge.com/)**)** * **suiUSDT (**[**Sui Bridge**](https://bridge.sui.io/)**)** * **USDY (Native)** * **DEEP** * **WAL** * **xBTC** * **wBTC** * **LBTC** ## Withdrawal limits Kai Finance maintains a 10% liquidity buffer to support flexibility in withdrawals. During times of high utilization - when over 90% of assets are actively used as collateral - liquidity for withdrawals may be temporarily constrained, which could impact lenders' immediate access to funds. However, significantly elevated interest rates during these periods encourage new deposits or prompt borrowers to repay, quickly restoring the pool’s liquidity balance. ## APY Adjustments In Kai Finance, APY changes don’t happen instantaneously; they adjust gradually over a period of 3-4 hours. This means that if a leveraged position is opened or closed, any impact on interest rates will reflect in Single Asset Vaults over that timeframe. ## Vault Utilization Additionally, the utilization rates of vaults are recalculated every 30 minutes. So, after depositing funds into a Single Asset Vault, it may take some time for the funds to become available for leveraged LP Vaults, especially if utilization is currently at the maximum limit. This approach balances APY stability with real-time market adjustments, creating a smoother experience for all users. ## Vault Yield-Bearing Tokens When you deposit assets into a Kai SAV Vault, you receive yield-bearing tokens in return (for example, ySUI for SUI deposits, yDEEP for DEEP deposits). These tokens represent your vault position and are your claim to your deposited assets plus accumulated yield. **IMPORTANT:** Never sell or swap these yield-bearing tokens on DEXes. Some scammers create malicious liquidity pools to trick users into selling their vault tokens for a fraction of their true value. Your yield-bearing tokens are worth the full amount of your deposit plus earned yield, and should only be redeemed through Kai Finance's official interface. Examples of vault tokens: * ySUI for SUI vault * yUSDC for USDC vault * yDEEP for DEEP vault # How to Deposit ## 1. Select LP Vault Begin by selecting the Vault you wish to deposit into. For this example, select the USDC Vault from the list.

Select Single Asset Vault from the list

## 2. Enter "Deposit" amount For this example, we’ll deposit 1000 USDC.

Enter deposit amount

## 3. Click on "Deposit" Click "Deposit" button.

Click "Deposit" button

## 4. Wait For Success notification Wait for the success notification to appear, and you’re all set! You've successfully deposited to Single Asset Vault. Congratulations!

Transaction successful notifcation

# Liquidity Provider Vaults Boost your earnings in LP pools with up to 11x leverage. ## How it works Users can deposit tokens into dual-token LP pools and borrow up to 11x the value of their initial deposit. These vaults simplify the process of providing collateral, borrowing against it, and deploying leveraged positions in DeFi LP pools on the Sui Network. LP Vaults streamline multiple steps into a single, user-friendly interface. The liquidity used for leverage comes from passive lenders who deposit assets in Single Asset Vaults. Borrowers pay interest on borrowed funds, similar to standard lending platforms. Interest rates rise as liquidity utilization nears full capacity, making borrowing more expensive over time. ## Key features * **Up to 11x leverage**: Borrow up to 11x depending on the specific pool, enhancing your earning potential. * **Customizable risk levels**: Choose between low-risk, stable pools or high-reward, volatile pools to match your risk appetite. * **Effortless position management**: A rich, intuitive interface lets users easily track and manage their leveraged positions. * **Auto-compounding**: Rewards are automatically reinvested every 30 minutes, maximizing your yield. ## How it differs from Single Asset Vault? * **Dual-token deposits**: Users provide a pair of tokens instead of a single token, following Uniswap V3 mechanics. * **Out-of-range risk**: Since LP Vaults use concentrated liquidity, positions can go out of range, in line with Uniswap V3 pool mechanics. * **Leverage usage**: Borrowing additional funds increases exposure, enabling higher rewards but with corresponding risks. ## Protocols Kai currently integrates with the following protocols: * [Cetus](https://cetus.zone) * wUSDC-wUSDT * USDC-wUSDT * USDC-suiUSDT * USDC-SUI * USDC-USDY * DEEP-SUI * [Bluefin](https://bluefin.io/) * USDC-wUSDT * USDC-suiUSDT * DEEP-SUI * DEEP-USDC * WAL-SUI * WAL-USDC * xBTC-wBTC * LBTC-wBTC ## Telegram Notifications By connecting your Telegram account to Kai Finance, you ensure timely and relevant notifications that help you manage your positions effectively and stay ahead of potential risks. [Read more](/vaults/liquidity-provider-vaults/how-to-connect-telegram) # LP Position ## Status The current status of a position: either **open** or **closed**. Open positions are active and continue to accumulate interest, even if they aren’t generating yield (i.e., if they are out of range). Closed positions have repaid the debt and returned the collateral to the user. ## Price Range During position creation, users must set a price range for providing liquidity in the Uniswap V3 pool. The range is expressed as the price of Token A relative to Token B. Your position earns fees only when the current pool price is within this range. ### In range :white\_check\_mark: A position is considered **in range** when the current pool price is within the set price boundaries. Only when the position is in range will it generate yield. Users can close and reopen positions at any time, and once the price returns within the range, yield generation resumes. ### Out of range :x: If the pool price moves outside the specified range, the position becomes **out of range** and stops generating yield. Borrowing interest continues to accrue during this time. ## Collateral The initial amount of funds deposited into the LP Vault. This forms the base for calculating the possible leverage. Users can deposit one or both tokens required by the LP pool. In some cases, part of the collateral may remain as **extra collateral** if the deposited amounts don’t match the required ratios for the Uniswap V3 pool. ## Debt By borrowing with leverage, user creates debt which incurs interest. Interest rates depend on the asset’s utilization in the pool: * **Low Utilization:** Borrowing costs are minimal when utilization is low, keeping leverage affordable. * **High Utilization:** As utilization approaches its 85% cap, borrowing costs rise. In cases of over-utilization due to price fluctuations in Uniswap V3 pools, APY on debt can spike, making it expensive to maintain high leverage. This dynamic encourages borrowers to repay some debt or attracts new liquidity providers, helping to rebalance the pool. ## LP Size The total amount of funds deposited into the LP pool, which includes both the user’s collateral and borrowed funds (debt). ## Assets The total value of your position, including both your initial collateral and the borrowed funds. In simple terms, it’s the sum of your LP size and any extra collateral. $$ \text{Assets} = \text{LP Size} + \text{Extra Collateral} $$ ## Equity Your equity represents the value of your own capital within the position. Initially, it equals the value of your collateral, but it fluctuates as token prices change. It can be calculated as: $$ \text{Equity} = \text{Assets} - \text{Debt} $$ ## Leverage Leverage allows you to borrow additional funds on top of your collateral, increasing your exposure in the LP pool. While leverage can boost profits, it also magnifies risks, as it increases the chance of liquidation if the position's value drops. $$ \text{Leverage} = \frac{\text{Assets}}{\text{Equity}} $$ **Example**: If you use 3x leverage, you are borrowing an additional 2x on top of your deposit, so your total exposure in the pool is 3 times your initial deposit ## Margin Level Margin level measures how much collateral you have relative to the borrowed debt. It indicates the safety of your position: a higher margin level means your position is safer, while a lower margin level means you’re closer to liquidation. $$ \text{Margin Level} = \frac{\text{Assets}}{\text{Debt}} $$ * **Example**: A margin level of 1.5 means that your collateral is worth 1.5 times the debt you’ve borrowed ### How leverage and margin level relate? Leverage and margin level are inversely related. As you increase leverage, your margin level decreases, meaning your position becomes riskier. Conversely, maintaining a high margin level limits how much leverage you can take but keeps your position safer from liquidation. $$ \text{Leverage} = \frac{1}{\text{Margin Level} - 1} $$ * **Example**: A margin level of 1.5 corresponds to a leverage of 3x, while a margin level of 2.0 corresponds to 2x leverage ### Liquidation prices When using leverage, there is always a risk of liquidation if the pool price falls outside the set liquidation price range. This range has both lower and upper bounds and represents the price of Token A relative to Token B. If the current pool price moves outside this range, your position will be liquidated to repay the debt. ### Deleverage Deleveraging is an automatic process triggered when a position's margin level drops below a certain threshold, but before it reaches liquidation. In this case, a portion of the assets is withdrawn from the LP pool and used to repay part of the debt, improving the margin level and reducing the risk of liquidation. This safety mechanism helps protect the user's position by lowering leverage and maintaining the stability of the investment. ### Liquidation Liquidation is the forced closing of your position by the protocol. It occurs when the value of your equity is about to fall below the value of your debt. This process ensures that lenders are protected by repaying the borrowed funds. Liquidation can be triggered by anyone. ### Health The health metric indicates the safety of a leveraged position based on its current margin level. It compares your margin level to the initial margin requirement and the liquidation margin. A health value close to **100% indicates a healthy position**, while a value approaching 0% signals that the position is at risk of liquidation. **If the health metric reaches 0%, the position will be liquidated.** $$ \text{Health} = \frac{\text{Margin Level} - \text{Liquidation Margin}}{\text{Min Initial Margin} - \text{Liquidation Margin}} \times 100 $$ ### Interest rates The cost you pay to borrow funds from liquidity providers. Interest rates increase as the utilization of available liquidity increases, making borrowing more expensive #### Lending pool utilization is high When the majority of the liquidity in lending pools is utilized, **borrowing costs can increase significantly**. This warning informs the user that their position may become less profitable, or even unprofitable, once borrowing costs are factored in. # Price Oracle Kai Finance integrates Pyth Network as our primary price oracle solution to ensure secure and accurate price feeds for all platform operations. ## Why Oracles Matter Using reliable price oracles like Pyth, rather than DEX prices, is crucial for platform security and user protection. DEX prices can be easily manipulated through tactics like flash loans or low liquidity pools, potentially leading to exploits and losses. For example, an attacker could temporarily manipulate a DEX price to create artificial borrowing power or trigger unfair liquidations. Pyth's oracle system prevents this by aggregating prices from numerous reputable sources off-chain, making manipulation extremely difficult and costly. This is especially important for lending and borrowing platforms like Kai Finance, where accurate asset pricing directly impacts user collateral and platform stability. ## How Pyth Works Pyth is a protocol that allows market participants to publish pricing information on-chain for others to use. The protocol is an interaction between three parties: 1. *Publishers* submit pricing information to Pyth's oracle program. Pyth has multiple data publishers for every product to improve the accuracy and robustness of the system. 2. Pyth's *oracle program* combines publishers' data to produce a single aggregate price and confidence interval. 3. *Consumers* read the price information produced by the oracle program. Pyth's oracle program runs on [Pythnet](https://docs.pyth.network/price-feeds/how-pyth-works/pythnet). The prices constructed on Pythnet are transferred [cross-chain](https://docs.pyth.network/price-feeds/how-pyth-works/cross-chain) to reach consumers on these blockchains. The critical component of the system is the [oracle program](https://docs.pyth.network/price-feeds/how-pyth-works/oracle-program) that combines the data from each individual publisher. This program maintains a number of different [SVM accounts](https://docs.pyth.network/price-feeds/pythnet-reference/account-structure) that list the products on Pyth and their current price data. Publishers publish their price and confidence by interacting with the oracle program on every slot. The program stores this information in its accounts. The first price update in a slot additionally triggers [price aggregation](https://docs.pyth.network/price-feeds/how-pyth-works/price-aggregation), which combines the price data from the previous slot into a single aggregate price and confidence interval. This aggregate price is written to these SVM accounts of Pythnet where it is available for transmission to other blockchains. ## Key Features * First-party price providers with "skin in the game" * Prices are weighted based on provider reputation * Aggregates price data from 70+ major trading firms and exchanges * Sub-second price update frequency * Outlier prices are automatically filtered * Confidence intervals protect against market manipulation ## Learn more You can learn more about Pyth from the [website](https://pyth.network/) and [documentation](https://docs.pyth.network/). # Telegram Notifications Kai Finance's Telegram notification system ensures you stay informed about your LP positions in real-time through alerts sent by the Kai Finance Bot. Follow this [step-by-step guide](/vaults/liquidity-provider-vaults/how-to-connect-telegram) to link your Telegram account with Kai Finance and start receiving timely notifications. These notifications cover four critical areas: Deleverage, Liquidation, Range Alerts, and Health Status. ### 1. Deleverage Notifications Alerts you when your position is deleveraged. **Example**: *"Your position SUI-USDC \[0x123...abc] has been deleveraged on 29th Nov 12:22"* ### 2. Liquidation Notifications Notifies you when your position is liquidated. **Example**: *"Your position SUI-USDC \[0x123...abc] was liquidated on 29th Nov 12:22"* ### 3. Range Alerts Notifications Sends alerts about your position's range status. You will receive two types of notifications: * Warning alert * When your position reaches a 90:10 ratio (10% from range boundary) * Helps you take proactive action before going completely out of range * **Example**: *"Your position USDT-USDC \[0x123...abc] is almost out of range. Current price is 1.0003551 USDC per USDT"* * Out of range alert: * When your position exits the range completely * **Example**: *"Your position USDT-USDC \[0x123...abc] is out of range. Current price is 1.0003551 USDC per USDT"* Notification Rules: * For each type of alert, you will receive one notification when the condition is first met * If the position returns to range and triggers the same condition again within 12 hours, you will not receive a new alert * After the 12-hour cooldown period, new alerts can be sent if conditions are met again ### 4. Health status notifications Health status alerts keep you informed about the health of your positions and help mitigate liquidation risks. #### Warning Alert (80%) * **Trigger**: Health drops below 80%. * **Notification Frequency**: One-time notification. * **Example**: *"WARNING: Your position USDT-USDC \[0x123...abc] health has dropped below 80% (current: 63.40%)"* #### Critical Alert (50%) * **Trigger**: Health drops below 50%. * **Notification Frequency**: One-time notification. * **Example**: *"CRITICAL: Your position USDT-USDC \[0x123...abc] health has dropped below 50% (current: 23.26%)"* * **Note**: Positions with health below 50% are at a higher risk of liquidation. #### Recovery * **Trigger**: Health improves above 80%. * **Cooldown**: A **12-hour cooldown** period starts once the health goes above 80%. * During this period, you will not receive new notifications unless the health drops again after 12 hours. This system helps prevent excessive notifications while keeping you informed of critical changes in your LP positions. # How to Create LP Position ## 1. Select LP Vault Begin by selecting the Vault you wish to deposit into. For this example, select the USDT-USDC Vault from the list.

Select LP Vault from the list

## 2. Click "New Position" This will open your personal overview of USDT-USDC positions. Since no positions are available yet, the list will be empty. Click 'New Position' in the top right corner to proceed.

Press "New Position" button

## 3. Enter Position Details Clicking "New Position'" opens a creation window where you’ll specify multiple position details. Let’s go through each one step-by-step.

New Position window

### 3.1. Select Protocol First, select the protocol for your deposit. In this example, we’ll choose the Cetus protocol.
### 3.2. Enter Collateral Typically, depositing directly on Cetus requires both tokens in the pool’s current ratio. However, with Kai, you can deposit any amount of one or both tokens, and Kai will automatically balance it. For this example, we’ll deposit 1000 USDT and leave the USDC amount blank.

Enter collateral amount

### 3.3. Set Price Range This is a range in which the LP position will be active and earn fees. For this example, we’ll use a relatively narrow range: the current pool price is 0.99957143, and we'll set a minimum price of 0.99920035 and a maximum price of 1.
### 3.4. Choose Leverage Now for the unique feature: choosing leverage. Kai enables LP Vault depositors to amplify their positions with leverage, offering up to 11x leverage for stable pools and around 3x for volatile ones. Move the leverage slider to the far right to select the maximum leverage available, which, in this stable pool example, is close to the theoretical maximum of 11x.

Set price range

## 4. Review Position Breakdown With all the details entered, you can now review the breakdown of the LP position you’re about to create. When satisfied, move to the next step.

Check position breakdown

## 5. Click "Create Position" Click 'New Position' in the bottom right corner to proceed.

Click "Create Position" button

## 6. Wait For Success notification Wait for the success notification to appear, and you’re all set! Your first LP Vault position has been successfully created. Congratulations!

Transaction successful notifcation

# How to Connect Telegram Follow these simple steps to link your Telegram account with Kai Finance and receive timely notifications about your LP positions' status: ## 1. Click on the Telegram icon Find the Telegram icon in the top-right corner of the Kai Finance platform and click on it.

Click on the Telegram icon

## 2. Click on the "Connect Telegram" button A pop-up will appear - click the "Connect Telegram" button to proceed.

Click on the "Connect Telegram" button

## 3. **Start the chat with Kai Finance Bot** Telegram will open a new chat window with the official Kai Bot. Click on the "Start" button to begin the setup.

Click on the "Start" button

## 4. Enter your verification code The Kai Finance bot will generate a verification code. Copy the code and paste it into the input field on the Kai Finance app.

Copy verification code

Click on the "Verify Telegram" button.

Paste the verification code and click on "Verify Telegram" button

## 5. Sign the transaction To complete the process, approve and sign the verification transaction in your connected wallet.

Click on the "Sign" button

## 6. **Wait for the "Telegram connected successfully" notification** Once the verification is complete, you'll receive a confirmation message on the Kai Finance platform indicating that your Telegram is connected.

Success notification

Status after successful connection

Message after successful connection

# Terminology Page dedicated to definitions and explanations of terms in documentation ### Vault The name of the Vault, consisting of the names and symbols (e.g. **SUI or USDC-USDT**). ### TVL (Total Value Locked) The total amount of funds currently locked in the Vault. This represents the total value of assets provided by all users. ### APY (Annual Percentage Yield) APY represents the actual rate of return on your investment over a year, taking compounding into account. This means APY includes the interest earned on both the initial principal and the interest that accumulates during the period. As a result, APY is always higher than APR, assuming there is compounding. ### Deposited The amount of funds the user has deposited into the specific Vault. This represents the user's contribution to the Vault's total liquidity. ### Earned The total rewards the user has earned from participating in the specified Vault. ### Performance fee A operational fee collected by Kai Finance to support platform development, maintenance, and to ensure the smooth running of the protocol. This fee is only applied on the profits generated through your investments, aligning our interests with yours in maximizing returns. ### Allocation Each Vault can be allocated across multiple strategies, which are predefined sets of rules that determine how the Vault’s assets are managed. The Allocation section displays how the Vault's assets are distributed among these strategies. ### Uniswap v3 Uniswap V3 allows users to provide liquidity for pairs of tokens within custom price ranges. Liquidity providers (LPs) can concentrate their funds in specific price ranges where they expect most trading to occur, increasing capital efficiency. As trades occur, fees are earned based on the liquidity provided in the active range. ### Protocol The decentralized exchange (DEX) in which the position is deposited. It operates as an Automated Market Maker (AMM) on the Sui Network, allowing users to trade and provide liquidity without the need for a central order book. ### Collateral The initial amount of funds deposited into the LP Vault. This forms the base for calculating the possible leverage. Users can deposit one or both tokens required by the LP pool. In some cases, part of the collateral may remain as **extra collateral** if the deposited amounts don’t match the required ratios for the Uniswap V3 pool. ### Extra collateral This is the portion of collateral that isn’t deposited into the LP pool due to the specific asset ratio requirements of Uniswap V3 pools. For example, if the provided collateral doesn't perfectly match the required ratios for the pool, the excess is held as extra collateral. ### Debt The amount of borrowed funds added to your collateral for the LP pool. Borrowed debt increases your position size and enables you to use leverage to potentially earn higher returns. ### LP size The total amount of funds deposited into the LP pool, which includes both the user’s collateral and borrowed funds (debt). ### Assets The total value of your position, including both your initial collateral and the borrowed funds. In simple terms, it’s the sum of your LP size and any extra collateral. $$ \text{Assets} = \text{LP Size} + \text{Extra Collateral} $$ ### Equity Your equity represents the value of your own capital within the position. Initially, it equals the value of your collateral, but it fluctuates as token prices change. It can be calculated as: $$ \text{Equity} = \text{Assets} - \text{Debt} $$ ### Price range During position creation, users must set a price range for providing liquidity in the Uniswap V3 pool. The range is expressed as the price of Token A relative to Token B. Your position earns fees only when the current pool price is within this range. ### In range :white\_check\_mark: A position is considered **in range** when the current pool price is within the set price boundaries. Only when the position is in range will it generate yield. Users can close and reopen positions at any time, and once the price returns within the range, yield generation resumes. ### Out of range :x: If the pool price moves outside the specified range, the position becomes **out of range** and stops generating yield. Borrowing interest continues to accrue during this time. ### Leverage Leverage allows you to borrow additional funds on top of your collateral, increasing your exposure in the LP pool. While leverage can boost profits, it also magnifies risks, as it increases the chance of liquidation if the position's value drops. $$ \text{Leverage} = \frac{\text{Assets}}{\text{Equity}} $$ * **Example**: If you use 3x leverage, you are borrowing an additional 2x on top of your deposit, so your total exposure in the pool is 3 times your initial deposit ### Margin level Margin level measures how much collateral you have relative to the borrowed debt. It indicates the safety of your position: a higher margin level means your position is safer, while a lower margin level means you’re closer to liquidation. $$ \text{Margin Level} = \frac{\text{Assets}}{\text{Debt}} $$ * **Example**: A margin level of 1.5 means that your collateral is worth 1.5 times the debt you’ve borrowed ### How leverage and margin level relate? Leverage and margin level are inversely related. As you increase leverage, your margin level decreases, meaning your position becomes riskier. Conversely, maintaining a high margin level limits how much leverage you can take but keeps your position safer from liquidation. $$ \text{Leverage} = \frac{1}{\text{Margin Level} - 1} $$ * **Example**: A margin level of 1.5 corresponds to a leverage of 3x, while a margin level of 2.0 corresponds to 2x leverage ### Liquidation prices When using leverage, there is always a risk of liquidation if the pool price falls outside the set liquidation price range. This range has both lower and upper bounds and represents the price of Token A relative to Token B. If the current pool price moves outside this range, your position will be liquidated to repay the debt. ### Deleverage Deleveraging is an automatic process triggered when a position's margin level drops below a certain threshold, but before it reaches liquidation. In this case, a portion of the assets is withdrawn from the LP pool and used to repay part of the debt, improving the margin level and reducing the risk of liquidation. This safety mechanism helps protect the user's position by lowering leverage and maintaining the stability of the investment. ### Liquidation Liquidation is the forced closing of your position by the protocol. It occurs when the value of your equity is about to fall below the value of your debt. This process ensures that lenders are protected by repaying the borrowed funds. Liquidation can be triggered by anyone. ### Health The health metric indicates the safety of a leveraged position based on its current margin level. It compares your margin level to the initial margin requirement and the liquidation margin. A health value close to **100% indicates a healthy position**, while a value approaching 0% signals that the position is at risk of liquidation. **If the health metric reaches 0%, the position will be liquidated.** $$ \text{Health} = \frac{\text{Margin Level} - \text{Liquidation Margin}}{\text{Min Initial Margin} - \text{Liquidation Margin}} \times 100 $$ ### Interest rates The cost you pay to borrow funds from liquidity providers. Interest rates increase as the utilization of available liquidity increases, making borrowing more expensive #### Lending pool utilization is high When the majority of the liquidity in lending pools is utilized, **borrowing costs can increase significantly**. This warning informs the user that their position may become less profitable, or even unprofitable, once borrowing costs are factored in. ### Status The current status of a position: either **open** or **closed**. Open positions are active and continue to accumulate interest, even if they aren’t generating yield (i.e., if they are out of range). Closed positions have repaid the debt and returned the collateral to the user. ### APR (Annual Percentage Rate) APR reflects the simple interest rate earned on your investment over a year. Unlike APY, APR does not account for the effects of compounding. ### APY (Annual Percentage Yield) APY represents the actual rate of return on your investment over a year, taking compounding into account. This means APY includes the interest earned on both the initial principal and the interest that accumulates during the period. As a result, APY is always higher than APR, assuming there is compounding. ### PNL (Profit and Loss) This represents the net financial outcome of your position over a 24h period, showing whether your position has gained or lost value. # FAQ ## Single Asset Vaults ### Where does the yield come from? Yield in Single Asset Vaults (SAVs) is generated in two ways: 1. **Borrowing Interest:** Active farmers borrow assets from SAVs to open leveraged LP positions. They pay interest on these borrowed funds, which goes to the SAV depositors. 2. **Sui Foundation Incentives:** Additional yield comes from liquidity incentives funded by the Sui Foundation, boosting returns beyond what borrowers pay. You can see the breakdown of APY components by hovering over the tooltip in the app. Thanks to this dual-source model, both passive and active users enjoy some of the highest APYs on Sui. ### **You said there are no withdrawal limits, so why can’t I access my full deposit right away?** Kai Finance maintains a 15% withdrawal buffer in Single Asset Vaults. When utilization nears 85%, LP borrowing is temporarily paused to reserve liquidity for withdrawals. If utilization reaches 100%, withdrawals may be temporarily unavailable. During these periods, interest rates rise to encourage borrower repayment and attract new deposits, helping restore liquidity and re-enable withdrawals. ### **Why do I see a slightly smaller amount on withdrawal?** If you notice a difference in the dollar amount shown in the UI after a deposit or withdrawal, it’s likely due to minor differences in price estimation sources. Transaction values always use the actual values. ### **Is the performance fee already included in the APY?** Yes, the APY you see is what you get. The performance fee is already deducted. This ensures that the displayed APY reflects your actual yield after fees, providing full transparency. ### Why are SAV interest rates different from LP interest rates? SAV interest rates differ from LP rates because the SAV APY consists of two components: the interest rates paid by borrowers and Sui Foundation liquidity incentives. ### Why did I receive less APY than displayed? The APY shown represents the current rate, which fluctuates based on market conditions. If you tracked a lower return (for example, 17% when 20% was displayed), it's because the rate varied during your deposit period. The displayed APY is always the current rate, not a historical average. ### What should I do with the yTokens (like ySUI or yUSDC) in my wallet? Can I sell them? No, do not sell or swap yield-bearing tokens like ySUI or yUSDC. These tokens represent your claim on your original deposit plus any yield earned in Kai’s vaults. If you sell them on a DEX, you risk losing your entire position for a fraction of its value. Some malicious actors may create fake markets to exploit this.\ To redeem your assets and rewards, always use Kai Finance’s official interface. Your yTokens are only valuable when redeemed through the vault, not on external markets. ### My withdrawal transaction failed. What should I do? This usually means our RPC (the node handling your Sui transactions) is temporarily down. Wait a moment and try again, it typically resolves quickly. ## Liquidity Provider Vaults ### Is up to 11x leverage really safe? Kai Finance employs multiple levels of security to ensure leveraged positions are safe to use: * **Collateral and Margin Requirements**: Each position is backed by strict collateral and margin level checks. Leveraged positions are only allowed when they meet or exceed predefined safety levels. * **Predictable Margin Function**: Our system’s margin level behaves predictably within chosen price intervals, ensuring that positions remain secure as long as prices stay within these ranges. * **Deleveraging Mechanism**: If a position approaches unsafe levels, our deleveraging feature automatically reduces the position’s size to maintain stability without triggering a liquidation. * **Safe Liquidation Protocol**: In cases where liquidation is necessary, our process aims to recover debt fully and fairly. Liquidators are incentivized to maintain healthy positions, reducing risks for everyone involved. * **Oracle Price Protection**: With real-time price data from the Pyth Network, Kai Finance protects against price manipulation, preventing forced liquidations due to sudden or artificial price shifts. For the full technical breakdown, refer to our [Whitepaper](/resources/whitepaper), where you can explore the math and safety protocols behind our leverage system in detail. ### How can I tell if my leveraged LP position is profitable? Profitability occurs when trading fees in the liquidity pool exceed your borrowing costs. A positive APR indicates that your position is generating profit. Currently, however, the PnL and APR metrics are sensitive to fee fluctuations and may sometimes show negative values. For a more accurate check, take note of your initial deposit amounts and compare them to the position’s Equity. If your Equity minus initial deposits is positive, then your position is in profit. Since trading fees are collected periodically, waiting a few hours after opening the position can give a clearer view of profitability as fees accumulate. ### **Are rewards auto compounded? Why is there a manual claim option for pending rewards?** Yes, rewards are auto compounded every two hours. If you do nothing, your rewards will continue to compound automatically. Manual claiming is just an additional feature. Previously, there were cases where closing a position left some unclaimed rewards if the auto-compound had not triggered. To fix this, we now auto-claim rewards, ensuring that when you close, you receive everything owed to you. However, you now have more flexibility: * You can manually compound at any time if you prefer. * If you want to claim rewards without compounding them, you can do that too. * You can even auto-convert claimed fees and rewards into a specific token of your choice. ### I'm having trouble closing my LP position. What should I do? This can happen for a few common reasons. Here's how to troubleshoot: **1. Aggregator issues**\ Some aggregators (used for token swaps during withdrawal) can be unreliable.\ **→ Try selecting a different aggregator in the interface.** **2. Large swaps and slippage**\ If you're trying to withdraw a large leveraged position (especially with high leverage like 11x), the swap may fail due to price impact or slippage.\ **→ Try withdrawing smaller portions of your position and increase your slippage tolerance if needed.** **3. Illiquid rewards**\ If you've opted to "convert rewards to" another token, and those rewards are in illiquid DEX tokens, the swap can fail.\ **→ Try unchecking “convert rewards to” and claim tokens without swapping. You can swap them manually later.** **4. RPC issues**\ RPC nodes are used to send and confirm your transaction on-chain. If they're down or congested, transactions may not go through.\ **→ Wait a moment and try again.** If none of these work, please reach out via our Discord for further help. ### What are the liquidation margins for LP Vaults? Kai Finance uses different liquidation thresholds depending on the pool type: * 1.06 for stable pairs * 1.31 for volatile pairs If a position’s margin level falls below these values, it becomes eligible for liquidation. ## General ### How does the protocol generate revenue? Is it only from SAVs? Yes, Kai Finance earns revenue solely from performance fees on Single Asset Vaults. There are no additional protocol fees on LP positions or borrowing. ### Did you raise any funds or external investments? No, Kai Finance is fully self-funded. We operate with minimal overhead, relying only on server costs and our own time. We don’t need external capital to build or sustain the project, and we have no plans to raise investments in the near future. ### Do you have plans to launch a token? We’ll start considering it once we reach $100M in TVL. If we do launch, it won’t be just another cash grab, any token would need to bring real utility and long-term value to the protocol. # Links **Email:** **Twitter**: **Discord**: **Github**: **Kuna Labs:** **Bug bounty:** [**https://hackenproof.com/programs/kai-finance-yield-protocol**](https://hackenproof.com/programs/kai-finance-yield-protocol) # SDK Kai SDK is a developer friendly toolkit written in TypeScript, designed to help you integrate Kai Finance’s core functionalities into your Sui based applications. With this SDK, you can seamlessly interact with single asset vaults, manage leveraged yield farming positions, and even create your own custom LP strategies. Everything is open source and fully documented, making it simple to get started and ensuring a secure, reliable experience. Github: NPM: # Whitepaper *Concentrated Liquidity with Leverage* provides an in-depth look into the principles, mechanics, and technical architecture of our platform, including our innovative approach to leverage in concentrated liquidity (CL) protocols. This document formalizes key concepts such as margin levels, asset allocation, and debt structures within leveraged CL provisioning, and explores the mathematical models that ensure safety and capital efficiency in our system. ## Key Higlights * **Formalized Principles of Leveraged CL**: A clear, structured approach to leverage in CL protocols, addressing both capital efficiency and risk management. * **Spot Price Manipulation Resistance**: Demonstrates how by using our leverage model, supported by real-time data from [Pyth Network](/vaults/liquidity-provider-vaults/price-oracle) oracles, spot price manipulation can't force unnecessary liquidations or bad debt * **Kai Leverage Protocol**: Details the unique mechanisms behind Kai’s leverage model. We hope this article will be useful to DeFi practitioners, including liquidity providers, protocol designers, risk analysts, and security researchers. \ \ You can view the full whitepaper [here](https://bit.ly/kai-cll). # Smart Contracts All Kai Finance smart contracts are open source and are hosted here . You can also look them up on [Move Package Registry](https://www.moveregistry.com/): * Single Asset Vaults: [@kai/sav](https://www.moveregistry.com/package/@kai/sav) * Leverage: [@kai/leverage](https://www.moveregistry.com/package/@kai/leverage) # Audits ### [MoveBit](https://movebit.xyz/) {% file src="/files/OJFik4yCgKhi8u1v3g95" %} Kai Single Asset Vaults Audit Report - Movebit {% endfile %} {% file src="/files/TeMjngRnGgKdqHPazGc8" %} Kai Leverage Audit Report - MoveBit {% endfile %} ### [Asymptotic](https://asymptotic.tech/) Link: ### [Ottersec](https://osec.io/) {% file src="/files/oQjCffboKPXNngW8gYh4" %} # Bug Bounty Security is a top priority for Kai Finance. Our smart contracts are audited, open source, and continuously monitored — but code is only as strong as the testing it undergoes. To further strengthen safety, Kai Finance has launched a public **bug bounty program** on [HackenProof](https://hackenproof.com/programs/kai-finance-yield-protocol). ## Scope The program covers all deployed Kai Finance smart contracts on Sui. Critical vulnerabilities, high-risk findings, and meaningful improvements are eligible for rewards. ## Rewards * Critical findings: **significant rewards** * High severity findings: **moderate rewards** * Other valid submissions: evaluated case by case Exact payout tiers and details are available on the [HackenProof program page](https://hackenproof.com/programs/kai-finance-yield-protocol) ## Participation * Review the scope and rules on HackenProof. * Submit findings directly through their platform. * Valid submissions are triaged, validated, and rewarded according to severity. ## Why a bug bounty? * **Transparency:** Open invitation to the security community. * **Resilience:** More eyes on the code = stronger guarantees. * **Ecosystem safety:** Protecting users and liquidity across Sui. If you are a security researcher or white-hat hacker, we encourage you to participate. 👉 [Start on HackenProof](https://hackenproof.com/programs/kai-finance-yield-protocol) # Brand Assets ## Kai Finance ### Brand kit {% file src="/files/gVabdy57BfrXFkCuIx5I" %} ### Logo

Kai Finance - visual signature

Kai Finance - visual signature short

Kai Finance - logo

Kai Finance - logo short

Kai Finance - symbol

## Kuna Labs ### Logo

Kuna Labs - logo with text transparent

Kuna Labs - logo transparent

# Risk Disclaimer ## General Risks Leveraged yield farming offers significant opportunities for returns but comes with inherent risks. Understanding these risks is essential for making informed decisions on Kai Finance. Users are encouraged to be vigilant and fully understand the dynamics of leveraged positions, price ranges, and liquidity conditions to maximize both security and yield. * **Smart Contract Risk:** Despite rigorous security audits and best-in-class security measures, smart contracts are not immune to vulnerabilities. Any flaw in the code could potentially lead to loss of funds. * **Underlying Asset Risk:** The performance of vaults is linked to the underlying assets. Changes in value or characteristics of these assets can influence returns, especially for volatile pairs. * **Operational Risk:** Technical issues, including network outages, could impact access to funds or performance within the yield strategies, affecting returns or liquidity. * **Regulatory Risk:** The regulatory landscape for cryptocurrencies and DeFi platforms is continuously evolving. Future changes in regulations may impact the operation of Kai Finance and its vaults. ### Single Asset Vaults Risk #### Extreme market events A significant market downturn or a black swan event, such as a major stablecoin depeg, could lead to widespread liquidations. **This may impact the returns and liquidity of Single Asset Vaults**, particularly if the event affects multiple assets simultaneously. In such events, Kai Finance’s **liquidation mechanisms are designed to prioritize repayment to Single Asset Vault lenders**, helping secure their funds first. The platform’s automated risk management tools, including proactive auto-deleveraging, add a layer of protection, though they **cannot fully guarantee against losses in extreme scenarios.** ### Liquidty Provider Vaults Risk #### Interest Rate Volatility When demand for borrowed funds increases, interest rates rise, which can erode the profitability of leveraged positions if borrowing costs exceed yields. Kai Finance offers real-time interest tracking, enabling borrowers to monitor costs closely and make timely decisions. Elevated rates also incentivize new deposits or loan repayments, which help stabilize utilization levels and borrowing costs. #### Leverage and Liquidation Risk Leveraged positions increase both potential gains and potential losses. When market prices move unfavorably or the collateral’s value drops, **borrowers risk liquidation if the collateral value falls below the borrowed amount**. Kai Finance’s **auto-deleveraging** mechanism manages exposure as margin levels approach critical thresholds, aiming to reduce liquidation risk. However, sharp price drops or prolonged out-of-range periods **may still result in partial or full liquidation**. In volatile pairs, maximum leverage caps are set lower to mitigate these risks. #### Price Range, Out-Of-Range Risk and Impermanent Loss Leveraged LP Vaults on Kai Finance use concentrated liquidity pools, such as Uniswap V3, which require setting a price range. **If the pool price moves outside this range, the position stops generating yield but continues to accrue borrowing costs.** Volatile price movements may also lead to impermanent loss, impacting returns compared to holding assets directly. Kai Finance provides tools for real-time monitoring and adjustment, allowing users to track price range status and impermanent loss. Choosing a broader price range can reduce out-of-range time, though it may result in lower yield. For highly volatile pairs, Kai enforces lower leverage caps to control risk in turbulent markets. #### Extreme Market Events During severe market downturns or black swan events, such as a stablecoin depeg, leveraged positions face rapid value declines, increasing the likelihood of full or partial liquidation for highly leveraged positions. Kai Finance’s liquidation structure is designed to first prioritize the repayment of liquidity to Single Asset Vault lenders, which means that **leveraged borrowers may bear a greater share of the impact during extreme events.** Auto-deleveraging and proactive liquidation mechanisms work to minimize these losses; however, **significant reductions in position value may still occur if the market remains volatile over extended periods.**