J-DAP#: Liquidity Incentive Program

[suscd]

Requested Voting Parameters:

• Community Feedback: 4/11 thru 4/16 (5 days)
• Formal On-chain voting: 4/17 thru 4/24 (7 days)
• Program Start: With release of Jet’s Fixed-term Lending Markets on Solana Mainnet

Incentive Program Overview:

The following sections detail the specifics and operations of this incentive program.

Parameters

Timeline - Liquidity Mining

• The program will run for a total of 4 years. For the purpose of distributing rewards as epochs, the program uses 2,116,800 minutes as max time (adding 9 additional days to the program past 4 years).
  • t_max = 2,116,800
• The start date of the program will occur when Jet Fixed-term Lending Markets are deployed on Solana Mainnet
  • t₀ = tbd
  • The program will distribute rewards in epochs that span 30 days (or 43,200 minutes)
    • t_epoch = 43,800
    • epoch_max = 49

Timeline - Retroactive Governance Rewards

• A one time, retroactive airdrop will be made to users that participated in Asset Onboarding proposals. The airdrop is based on the following dates:

  • Asset Onboarding Proposals prior to 2023-04-30

    • Estimate: 19 proposals

  • Rewards distributed on: 2023-06-01

  • Rewards must be claimed by: 2023-08-30

Funds

• 137,700,946 JET tokens from the DAO treasury
  • 67,050,473 JET to providers acting as lenders
  • 67,050,473 JET to providers acting as borrowers
  • 3,600,000 JET to governance participants

Logic

Required Action - Liquidity mining

• A user acts as a lender or borrower in Jet Fixed-term Markets, with their user liquidity score exceeding 0.25% of the total liquidity score for a given epoch.

Reward - Liquidity Mining

// Score for each open order

let open_order_score = order_size * exp(-abs(order_interest_rate - mid_market_rate) / mid_market_rate)

// Sum all the open order scores for the minute sample

let q_sample = sum(open_order_scores)

// Scale the sampled score for open orders based on the market tenor, biased towards longer tenors

let q_scaled = q_sample * (1 + sqrt(market_tenor_days) / 30)

// Get the final score for a user in the 30-day epoch by summing all the sampled scores during that period

let q_score = sum(q_scaled)

• Rewards must be claimed within 90 days of the epoch pay-out, or funds will be returned to the JetDAO treasury.
• In the case that a market only has liquidity on one side, the mid_market_rate will be defined as the best bid (ask) divided (multiplied) by two.

Required Action - Retroactive Governance Airdrop

• A user historically has voted in Asset Onboarding proposals in JetDAO Governance prior to 2023-04-30, where their voting threshold is above 1000.

Reward - Retroactive Governance Airdrop

// Get the user score by summing the recorded vote weights and adjusting by the amount of proposals

// the user participated in relative to the total number of proposals voted on.

let user_score = sum(casted_vote_weight ^ (1 / 3)) * user_vote_count / total_proposal_count

• Rewards distributed on:
  • 2023-06-01
• Rewards must be claimed by:
  • 2023-08-30

Incentive Success

A successful outcome of this incentive program is defined as:

• Average liquidity of $250K within 300 basis points on each side of every market.

Implementation

Communication

• A forum post will be published announcing the start date of the incentive 3 days in advance of the rewards starting.

Funding Source

• Funding for this incentive will be provided by the JetDAO Treasury.

Technology

• On-chain data and tools will be used to determine user rewards.
• All rewards are distributed via the Jet Governance airdrop system.

Operations

Participation Verification

• Verification will be completed using on-chain data.
• All information is publicly available and can be verified independently using on-chain tools.

Reporting

• A forum post will be published announcing the distribution of rewards for each epoch of the program, notifying users to claim their rewards within the 90 day window.

Technology

• The Jet Governance system will distribute rewards.

Depreciation

Communication

• A forum post will be made at the start of the final rewards program epoch signaling the end of the program.
• A forum post will be made 60 days after the end of the final rewards program epoch informing users that they have 30 days left to claim their final rewards.

Funding

• All funds that were unclaimed during the life of the program will be returned to the JetDAO treasury.

Technology

• The incentive program will automatically conclude at the predetermined date. No further actions are required.

Incentive Program Outcome Tracking

An archive of the data from this incentive program will be stored at a link in this proposal to document the outcomes of the effort.

Linking archive URL TBD.

[ivan]

Looks good to me.

In the number of proposals, J-DAP-18 should not be counted, since it was an errored proposal.

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Asset Onboarding Proposals prior to 2023-03-31

In my opinion 2023-04-30 would be better. So that participation is more encouraged.

• Formal On-chain voting: 4/17 thru 4/24 (7 days)

Would fit in this timeline.

[Marco]

Good catch @ivan - There are three cancelled proposals on Realms. I’m not sure if this was already contemplated or not.

[eyevzz]

Thank for this, @suscd. It seems like a good approach to attract liquidity to the fixed rate markets.

One thing I’m wondering about is whether we might want to tilt the rewards slightly toward loan requests, ie borrowers acting as makers. There are three reasons I think this might be valuable:

1. Lenders providing liquidity through loan offers will additionally benefit from the interest accrued when their offers are filled, while borrowers will be interest payers. Therefore in a sense the all-in incentives with symmetrical rewards are actually tilted toward lenders.
2. Borrowers are the primary source of value for the protocol because their willingness to pay interest is the source of all yield for lenders, so it is particularly important to incentivise their participation.
3. Origination fees are effectively applied to borrowers in the sense that a borrower looking to borrow $1000 for one year actually has to borrow $1005 to account for the $5 fee to the protocol.

In terms of implementation, we could simply tilt the allocation of tokens between lenders and borrowers from 50-50 to 47.5-52.5 or even 45-55.

Alternatively, or in addition, we could consider a JET-denominated fee rebate. For example, on the same schedule as the proposal, borrowers could be paid one JET per USDC they paid in origination fees.

[ivan]

I looked at Jet Gov Dashboard with “all” filter.
There aren’t the cancelled proposals included.
In my view, 18 proposals are valid.

Regarding the Dashboard, a sort by J-DAP-# would be nice (new to old sorted as default).
Currently it refreshes every x seconds and the sorting getting mixed up randomly.

[suscd]

I’ve adjusted the date for including votes up to 2023-04-30.

I don’t think it’s currently necessary to adjust reward weight to favor borrowers more.

I would like to put this up for a vote.

[jrmoreau]

The governance committee (spoke with @adamdelsol) agree to this @suscd - please go ahead

[suscd]

This proposal has been submitted for a vote: Jet | Governance

[Marco]

On-Chain Results - Liquidity Incentive Program

Dear Community:

The On-Chain vote for the implementation of the Liquidity Incentive Program in Jet’s Fixed Debt Markets concluded yesterday.
The poll to implement the Liquidity Incentive Program concluded with a 76% majority and 1.34M JET tokens in favor of the proposal.

In case you want to review the On-Chain poll, please go to this link.

Thank you very much to everyone who participated in the vote!

[arian]

Hello, could you provide an overview of the allocation of the retroactive governance airdrop for the participants?