Interest bearing tokens

Ref: Jet Protocol Whitepaper

Ref: Interest Bearing Token Proposal

Is the above proposal the same that is referred to in the whitepaper?

If so I think it’s worth exposing here so the Jet community can dig in.

My second question is if the current plan is to launch with a Jet SPL and then later upgrade the token to an interest bearing token once the implementation is released? Or will the Jet token launch be gated by the implementation?

I’m also curious to hear about tokenomics with the idea of interest bearing tokens in mind, but I understand if those details are not ready to be released.

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We explored implementing that early on but also I’m not sure interest bearing tokens are even that useful. The effort to implement seemed greater than what was gained.

The secondary markets for c-tokens are not very liquid, or they are just misleading. For example, Coingecko reports Compound’s c-USDC 24 hour volume as $14,944,288 which seems okay, but when you click the markets section here: https://www.coingecko.com/en/coins/compound-usd-coin#markets you can see that most of it originates from Compound minting the tokens.

We’re definitely open to implementing this (or a mechanism that works given Solana’s VM) if there’s a huge demand for it by the community, but Solana is different and perhaps there’s better mechanisms for tokenized interest that’s more market driven.

We are doing research on this and hope to have some more concrete specs for iterative features.

The main question is, do people really want to trade JET interest bearing tokens?

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I need to read the github proposal through more closely. I only brought interest bearing tokens up because they were mentioned in the whitepaper. I understand that nothing is for sure until it’s implemented, but does that mean IBTs are only tentatively on the roadmap?

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Ah yes, implementing that IBT spec was one of our initial goals (and IBTs still very much are!).

In short we just got deep into the development of the protocol, started experimenting with and got very comfortable with Serum’s Anchor, and then we feel we found a better way to implement these type of token structures that deviates from the original IBT spec.

Technically, the tokens that we use are interest bearing but they just aren’t tradeable. They are Program Derived Addresses (PDAs) that are owned by Jet Protocol, but are namespaced for and belong to a particular depositor. Anyone can check the SPL Token contract to see that user’s position, their token holdings, and the interest rate calculations can then be calculated on the frontend to arrive at the same results.

The Solana provided IBT spec would make use of a separate SPL program that would probably reside in the SPL library.

I talked a little bit about it in our presentation on Sino and ParaFi’s Solana Season Demo Day here: Twitch at 1:50:28 (specifically at 1:54:57)

So actually I think it’s great that you brought it up and think we should all talk more publicly about it! What does everyone think of IBTs? What do you feel is the most desirable IBT token spec?

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My understanding is that the term “interest bearing token” can refer generally to a type of token — and that within this type, there exist various subtypes. These subtypes exist to serve different use cases.

One subtype, for example, would be Compound’s cTokens.

Another subtype would be LPs, like with AMM pool&farms.

cTokens and LPs are alike in that they are “interest bearing,” yet they differ from each other in other ways.

From the Twitch stream it sounds like Jet won’t have cTokens, opting for PDAs instead. (See here for some talk about PDAs by paulx at Mercurial.)

Meanwhile, it looks like the “interest bearing tokens” mentioned in the whitepaper will be LPs of some kind.

Here’s how I’m making sense of what Wil writes above: (1) in the opening sentence of the first reply, the term “interest bearing tokens” refers specifically to c-tokens; (2) in the closing paragraph of the second reply, the term “IBTs” refers to interest tokens more broadly, including possibly some form of LP.

Wil, have I got all this right so far?

If so, as a next step it’ll be fun for me to conceive of various incentive dynamics that different IBT specs might set up.

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Part of the beauty of money is that I can look at the number of dollars I have, and I know immediately how much spending power I have.
When I look at the number of cDAI I have, I do not immediately know how much spending power I have.

So I think interest bearing tokens are over rated.

I still like them in theory though. I have sent them to people here and there. And if they exist, others can build products with them that we might not have thought about yet.

But I have always wondered, if I accidentally send my cETH tokens out of my wallet, is my compound loan going to be immediately liquidated?

sidenote: Others have speculated on the tax implications of issuing a token when you deposit into a smart contract. I don’t have a legal opinion on that; afaik no court of note has heard such a case where the matter was fleshed out.

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I’m sure jet protocol team have done their primary assignment before introducing IBTs, I want to believe IBTs is of the best interest for the community and potential jet users. I’m thinking of what else can we do with our interest bearing tokens apart from just holding @wil?
Thanks for your anticipated response.

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It’s arguable that sending away a token which would automatically liquidate a position would be a very suboptimal solution to making them non transferable if they even exist at all. I get what you mean.

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For Americans, receiving a token back from the protocol after depositing would count as a like-for-like transaction and would trigger a taxable event. That may reduce the amount of interested depositors. So that’s another advantage of not having an interest bearing token.

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We are intending some rather sweeping changes to the way on-chain lending works. Having legacy IBTs kicking around would just make it harder to sweep up and migrate everyone. Once we deploy the new world order, it would be good to reconsider this.

That’s an interesting note, @monsoon, thanks.

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