Thoughts on airdrops and liquidity mining

The purpose of this thread is to generate discussions and identify the best way to drive usage to Jet Protocol (as it stands). Shout out to @ezio for bringing this up almost a year ago here. Seems like now is a great time to revisit.

Let’s kick off a discussion about a reward system that amounts to a retroactive airdrop (or a form of liquidity mining) with activity milestones throughout the remaining releases of Jet V2’s roadmap.

A few top-level parameters for what I have in mind to propose are:

  • The program should incentivize existing and future users of Jet Protocol to add liquidity to the protocol over time and throughout the remaining development of V2.
  • The program should also incentivize borrowers, as this, matched with sufficient liquidity, is the behavior that drives fees and value back to the protocol.
  • The program should have sufficient safeguards against opportunistic participation (gaming) and directly reward the most people who’ve added the most long-term value to the protocol.
  • Whatever the program, the rewards should be locked for a period of time.

The fact is that liquidity mining and airdrops in most forms are controversial to at least some segment of participants - there’s no truly perfect model. Acknowledging this - what options can the DAO explore? What could have done better in the last airdrop?

What do you think?

As more product features are released within the Jet V2 roadmap, we as a community must work to ensure Jet’s success and adoption in both bear market and bull market conditions. Leveraging the treasury’s funds to subsidize the use of the protocol must be a community and JET token holder decision.

Who wants to start chartering the next destination for Jet?

Please note: this forum proposal is a suggestion on what I think is the best path forward to increase the usage and utility of Jet Protocol - total numbers, parameters, timelines, and pretty much everything else is open for suggestion here.

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Great to see we are revisiting the need for liquidity mining and airdrop rewards

I think we can pickup some good points from OP airdrops.

Aside from that my some of the ideas that are on top of my head regarding further incentivization of airdrop

-People who did not sell their airdrops
-People who staked their airdrops
-People who participated in more than 2/3 of on-chain governance votes
-People who participated in on-chain governance with 2/3 of their staked airdrop
-People who supplied collateral onto JET above a certain threshold [$100,1k]
-People who have been trying out Solana DeFi be it on any other platform SLND, PORT [maybe even those who staked their native tokens on to their platforms, I think we can use this strategy to rope in more users through the wider SOL eco, a bit controversial but I encourage platform discussion on this]

Additionally might be a good idea to prolong the ongoing JET staking program by a few more months as we wait out turbulent macro times ahead. In context of liquidity mining, I say we start it, because we NEED to make more liquidity available on JET. We have less than 0.5mn in liquidity here. We simply can’t achieve our goals unless we attract liquidity on to our platform.

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Agree with these ideas. Something else to add for post-airdrop/incentives is making the tokens vesting so that they aren’t immediately dumped onto the market.

A couple ideas from existing projects:

  • Radiant Capital on Arbitrum: Vest tokens for 1-month (could be any arbitrary period) and give users the option to vest earlier if they choose but with a penalty - 50% of their tokens are rewarded to users who are staking JET
  • Aurigami on Aurora: Vest the tokens over a year with the percentage of vested tokens increasing weekly. Users can choose to receive tokens earlier, but will only receive a % of their tokens with the rest locked up an ever later date (e.g. 1.5 years)
  • Solend on Solana: Tokens vest for 1 month (could be any arbitrary period) as an option to purchase them at a 90% discount to the price.

As for the airdrop, I agree with the OP methodology of incorporating a wide net to get more users. Could even do something interesting like the Arbitrum Odyssey event

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Airdrop eligibility

I agree with @ezio in using some metrics that reward/attract users who are active participants in the Jet and Solana DeFi ecosystem. In the current market, there are fewer DeFi participants, so casting a wider net will help us attract a different range of users.

Giving an airdrop to select users on the Solana DeFi ecosystem is a good idea, but we have to discuss a few rules.

Would it be any DeFi protocol on Solana or specific DeFi protocols (i.e. larger DeFi protocols)?
Minimum amount in using other protocols? A reduced weighting in using other protocols too, as we want to prioritize the JET community.

Token vesting

  1. If tokens are vested, we should enable those locked tokens to be still used in governance. They can have the same voting power as liquid tokens or have reduced voting power.
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I encourage everyone to consider @ezio’s points about stakers. They are the most loyal participants of the protocol to date and the community could make a strong argument they should be disproportionately incentivized. The protocol could apply a multiple to a user’s staking duration when emitting the tokens.

What time frame should we consider? For example, we could do one, or a series, of shorter term yield farming programs ranging from 2 weeks to 1 month. These smaller scale programs would be focused on bringing a baseline level of liquidity in order to attract users who need to borrow more than the protocol offers right now. These types of programs would give us actionable data we could use to fine tune subsequent programs.

One more idea is we could experiment with some longer time period lockups for stakers with a long term vision of the protocol that could increase voting power and proportion of incentives. We don’t need to start with anything more than 6 months, a commitment that long isn’t necessary as we’re just now exploring how to revamp JET tokenomics with the community.

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Agree with @ezio 's take.

Is it worthwhile to engage other projects (Lido, Marinade) to see if they’d like to add liquidity incentives as well? This could be in addition to any JET token rewards.

Lido offers or has offered (LDO). token on Orca, Solend, Mercurial & others. to further juice rewards. Marinade does as well on Solend.

Should the DAO consider something similar for JET?

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Hello,

Is there a 2nd airdrop confirmed? Or are you just suggesting this?

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Also, what do posters have in mind for “liquidity mining” possibilities?

I don’t disagree - so far I’d say the main limitation of doing this is technical. There’s actual smart contract (program) work that needs to be done in order to disburse rewards to participants. It’s not off the table imho, but the question is about limited dev resources and priorities (currently finishing V2/fixed-rate, fixed-term).

Weighing all options, curious what the community thinks about prioritizing finishing V2 vs. offshoot dev work like this.

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Great question and an opportunity to be super clear about a few things!

  1. The first airdrop was initiated by the core team and proceeds to support the airdrop (as well as staking rewards for JetGovern) came from the tranche of discretionary tokens earmarked for growth.
  2. The liquidity mining incentives could take multiple shapes - need to suggest more detail however we’d really like the community to propose what makes most sense to them as well. It’s all on the table.
  3. Staking rewards will not be renewed in October unless the community proposes they be and determine the parameters - we need to get some discussion going around this!
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liquidity mining would almost assure liquidity on DEXs. Need to incentive people to LP JET-SOL and or JET-USDC. Would also vote on extending staking rewards.

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coming on LM, I need to emphasize on one point. We have terrible liquidity of JET in the liquid markets. CEX liquidity is vaporware.

We should try launching a JET-USDC pool with atleast $500k in liquidity, incentivize it with LM rewards [Orca, JET] to further deepen the liquidity.

low liquidity is a serious roadblock for JET token holder growth.

For LM rewards on other assets, I think we can incentivize the growth with for deposit of assets on JET app, with time based multipliers.

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I appreciate the thorough and considerate discussion on this topic.

I think there are a number of potential initiatives here and I would like to take a moment to parse them out.

  • @jrmoreau’s initial post:
    • incentivizing protocol usage by rewarding borrowers and lenders with $JET tokens
  • @ezio’s post:
    • reward $JET airdrop recipients/holders - to attract loyal token holders
    • reward $JET token voters - to attract future gov participants
    • reward users of other DeFi protocols - to attract other DeFi customers
  • @soze’s post:
    • partnering with other protocols to incentivize lenders
  • @doger and @ezio’s comments:
    • funding a liquidity pool for the $JET token - to establish more $JET liquidity

I apologize in advance if you feel my bullet point doesn’t adequately express your initiative. Please feel free to correct me. I’m maximizing for brevity.

I’ve taken the time to pull this apart so we can be sure what we would like to address. I think all of these are valid concerns or initiatives that are worth considering.

I’m going to try to further refine this by making a short list of items to address and then I would encourage everyone to choose which item should be the priority and to make a case for it in this discussion.

  • reward borrowers
  • reward lenders
  • reward borrowers and lenders
  • reward airdrop loyalists/holders
  • reward stakers
  • reward voters
  • attract users of other Solana DeFi protocols w/ token airdrops
  • partner with other protools to incentivize collateral providers
  • initiate, fund and incentivize a $JET liquidity pool

If you could only choose one, which one would you choose and why?

There’s some follow on decisions around vesting, locking and such, but I think answering the above question will help us move forward.

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MOST IMPORTANT THING FOR JET IS LIQUIDITY DEPTH.

We need to establish Liquidty mining mechanisms for borrowers & lenders. LM is an established paradigm. Can’t go against the current. Unless there is some other way to source in liquidity that is the most important thing we need.

Everything else is secondary.

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I’m not an expert on bonds, but I recall a decent amount of action for bond products on Penguin Finance.

Perhaps either do something similar or reach out to Parrot. I know they’re a bit difficult to reach sometimes, but they are another Sino company (at least they were in the beginning) so I’m assuming there could be networking done. Parrot is basically a family of products like Penguin Finance, Parrot, BunnyDucky, $PAI, etc…

I just like the idea of people getting a deal on $JET bonds since people would feel they are getting a deal (they would), but it would drive much needed attention and I’ve always believed the JET team is more interested in organic long-term growth vs. over speculative endeavors. Let me know if you guys have any thoughts on this.

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Do you have any thoughts on determining rewards for borrowers and lenders? I think we need to be strategic about spending the DAO’s $JET supply in this market and also ensuring we are planning for the long term.

Perhaps you have seen other LM schemes we should investigate?

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That’s unfortunately not something I specialize in, best left for tokenomics strategist.

but I’ recommend we should keep it under 8%, boost it up once we are serious about attracting liquidity after having shipped most features.

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Hi everyone. Thanks to @adamdelsol for summing up the various points made so far, which is very helpful. I have some (fairly rambling) thoughts/comments on the above posts, and some little ideas to share.

I did my best to organize this into sections, consistently numbered throughout the post so that replies can refer to parts and ideas more easily.

#1: Regarding JET on-chain liquidity and PMF

I respectfully disagree with @ezio that the most important thing in this thread is JET liquidity depth. Rather, the most important thing by far is meaningful activity on the protocol, AKA product-market-fit (“PMF”). We want to see data showing an uptrend in product usage (meaning that they are useful for users, and PMF exists).

On this thread, here are a few specific metrics that seem important (and that a good LM program would want to help push):

  • An uptrend in absolute value both deposited and borrowed (obviously)
  • An uptrend in users (makes the assumption that each pubkey is a user which is obviously faulty but still not useless imo)
  • An uptrend in a metric like average amounts borrowed and lent by each user on a per-capita basis
  • An uptrend in the amount of fees collected by the protocol (from interest paid to lenders)

Sidenote: With that said, whenever the initiative begins to increase JET AMM liquidity, it seems like a good idea mentioned above to apply for ORCA rewards for the pool as @ezio suggested (perhaps in addition to potential JET rewards). Jet has had a good relationship with Orca, built leverage swaps atop of Orca pools, there have been joint AMA’s between the teams, etc. And Orca incentivizes many pools - so it seems very natural to bring this up with Orca’s team.

#2: Attracting other DeFi users

As stated above, growing users and usage is paramount. From Adam’s bullet points, I’d like to go through a thought experiment with one of them –

  • reward users of other DeFi protocols - to attract other DeFi customers

This seems like a great place to start because we know for fact and can see / analyze the fact that there is plenty of value being put to use on chain.

Let’s look at a larger lending and borrowing competitor – Solend. The main pool on Solend has a total of ±$420M supplied and ±$156M borrowed. Although there are other pools with material values of assets supplied and borrowed, this main pool is by far the bulk of the platform’s TVL, so we can proceed to look at solely the main pool.

Looking at the main pool and sorting by amount supplied, the top assets supplied are:

  • USDC - $105M
  • SOL - $100M
  • USDT - $30M (note the significantly lower amount than USDC)
  • mSOL - $70M (incentivized by Solend and Marinade)
  • stSOL -$76M (incentivized by Solend and Lido)

Now let’s look at the amount borrowed for each of those same assets:

  • USDC -$63M (incentivized by Solend)
  • SOL - $67M (incentivized by Solend)
  • USDT - $19M (incentivized by Solend)
  • mSOL - $520k (tiny amount compared to supply!)
  • stSOL - $4M

I want to mention a couple things that come to mind looking at this data, which we can learn from:

#2.1:

The largest incentives in the main pool are incentivizing USDC borrowing - users are able to borrow for only 0.06% net rate accounting for SLEND rewards at the time of this writing.

As USDC is by far the most-used asset in DeFi, I suggest that JET should consider following suit and using the LM program to boost USDC borrowing the most out of any borrowing. Solend seems to confirm this experimentally.

USDT borrowing also logically makes senses to boost imo, but it is apparent from combing a platform like DefiLlama that USDC is used much more ubiquitously and in higher concentration in DeFi (this is again evidenced on the amount of USDT vs USDC captured by Solend listed above, as well as the fact that Solend incentivizes the USDT pool with less than 50% of SLEND emitted to USDT borrowers as opposed to USDC).

In the case of stables, I believe it makes more sense to incentivize borrowing, as we can expect the average user to have more demand for stables than borrowing other assets and potentially more complicated strategies. Sure, there is a segment that want to borrow all assets. And that’s great!

But imo boosting stable borrowing only (and not lending) limits the cost to the DAO treasury and is still helpful. Lowering costs to borrow stables is the most apparent case of a “borrow incentivization fly wheel” (boosted APYs for borrowing stables → cheaper net borrowing costs → more borrowers → higher rates → more depositors flock to the platform as deposit rate rises.

#2.2:

The staking derivatives on Solend have much more supply than borrowed. mSOL has almost nothing borrowed relative to supplied! And yet…Solend is paying out 2.42% APY to StSOL depositors, and 1.06% for mSOL. These rewards are made up of SLEND rewards (analogous to JET rewards for the sake of discussion here), and to a larger extent proportionally with incentives from Lido and Marinade.

Consider that Jet will earn protocol revenue from a chunk of the interest paid to lenders. Thus, if Jet had a similarly massive supply of staked SOL derivatives, the protocol would earn a lot of steady fees from the interest paid to depositors - The protocol would still make good revenue here, even without much borrowing activity!

To me, this means that the JetDAO should indeed consider boosting supply APYs of mSOL and stSOL by eventually facilitating those projects to juice rewards, either with core team development or as a community developer bounty if there are not enough resources in the medium term.

The important question here imo: How much do we need to boost APYs for depositors on those assets? How can JET easily drain some of the liquidity from Solend?

Simply by ensuring that the rate paid to depositors is higher than on Solend and blasting a marketing campaign about it. Ideally by getting some “juice” from Lido/Marinade, but also by pushing the rate another ±0.5 - 1% (or even 2%+) higher than Solend’s rate by a JET LM program as James suggested. This would require additional research into the historical rates at Solend to see what amount makes the most sense to incentivize for Jet without needless waste. We could also dynamically adjust rates based on what the rates are at Solend but I think that may create some deeper risks/attack vectors.

That would be a hell of a targeted marketing campaign though, and if users were depositing for idle yield, why wouldn’t they switch for higher yield from a respectable audited competitor? We all know how serious wide-eyed yield-hunters are about squeezing as much as possible from their capital (particularly in a bear market where lending on a protocol is a relatively safe option for yield).

I just wanted to specifically draw attention to the fact that there is a material amount of protocol revenue in something as simple as being the default DeFi lending and borrowing platform for staked SOL derivatives.

#2.3:

Note that Solend incentivizes SOL borrowing in proportion less than USDC, but more than USDT. Again, I think this is a well-made and calculated move by Solend that Jet can learn from. As the native asset to Solana, SOL is obviously the bread-and-butter of many active and non-active users of the chain. It makes sense to incentivize SOL one way or another (again, perhaps assuring that Jet rates beat Solend rates?) to try to pull some of those SOL borrowers and depositors towards Jet.

#2.4:

Considering how much TVL is on platforms like Solend (any many others, but this post is already too long) – What about airdropping users of other lending protocols JET proportional to their historical usage of those lending protocols (relative to other users)? This would be a “targeted” LM program that would aim for the heavy hitters in DeFi. I still think the LM should reward the little guy as well, but this is one angle to consider (esp since research shows that a relatively small group of DeFi power users control most of the capital). Further, the LM could also give a slight additional bonus to heavy borrowers since that is the ideal behavior that Jet should encourage the most (borrowing drives up rates, attracting more lenders to the platform).

#3: A time-degrading boost that is replenished by optimizing ideal behavior for the protocol

This covers ideas like adding a JET reward base multiplier based on staking a relative value of JET compared to value of a user’s deposits/borrows, including a time component that degrades the bonus continually unless the user takes action to replenish the full bonus through a behavior that benefits the protocol, etc.

The above would look to the end user similarly to how AAVE LM rewards worked, but AAVE just gave equal AAVE (now OP) rewards them indiscriminately to every single lender and depositor - Jet can optimize for more specific behavior that helps the protocol by considering each app user’s relative value of JET staked, or by considering their voting history, etc.

I think the secret sauce here is to include a bonus/incentive for borrowers and lenders that is dependent upon them having JET staked (and perhaps on them being active voters, at least in part).

Just throwing some casual numbers out – for example, if value of the JET they stake is equal to ±10% or more of their borrowed (or deposited/lent) amount, they get a JET bonus for borrowing and depositing, thus reducing their borrowing interest costs and/or boosting their interest earned from lending. Could do tiers as well (ie a tier for 5% of app value staked, 15%, etc). Again, these numbers are totally random and I am using them to share an idea. The actual values would require some deeper thinking, consideration, and discussion.

Ie, to keep the max boost for your LM incentives on borrows and deposits, the user needs JET staked equal to x% of your borrows or deposits, AND this bonus degrades slowly over time but is replenished (in part) by votes (or staking more JET). I’m imagining more or less a veCrv-like system here that would incentivize users to stake and restake continuously + vote for maximum benefit.

I also think that this ties in nicely with @wil’s point above about providing a multiple to users based on their staking duration.

#4: Partnering with other protocols vs a community developer bounty

From Adam’s bullet points:

  • partnering with other protocols to incentivize lenders

Marinade has stated their openness to add to rewards for mSOL depositors, so why not start with them since Jet has a good relationship?

The main constraint here is developer resources.

But at the same time, it is self-evident that the juiced rewards from Lido and Marinade would pair very nicely with Jet’s own LM program and help pull in users.

Perhaps a good starting place is to test the waters of community contribution by offering a grant for the dev work necessary? While bringing up community grants this is a slight digression from the thread at hand, it’s actually related to this discussion because partnering with Lido and Marinade (and potentially other projects!) for the sake of attracting more users and usage would reduce the strain on JET token incentives from this LM program.

#5: Which Jet products should we focus on discussing LM for?

I understand that the upcoming Jet Fixed Term product will be the most novel from a DeFi perspective and most useful to the largest amount of users.

So perhaps our discussion should expand consider whether the LM program that is created should devote to both the current lending pools as well as the fixed term product? In what proportion? Should we should consider thinking ahead to bolster participation in the new app when it is ready, in addition to the traditional “pools” model that exists now?

In closing:

I want to make it clear again that these ideas are just early stage ideas and not thoroughly researched yet; but rather ideas I wanted to share for the sake of discussion.

I’ve been loving the activity in this thread and wanted to contribute to it and do my part to keep the discussion rolling. I’d be happy to see these ideas tweaked into something even better for the protocol, or shot down completely for better ideas. If any of these inspire thoughts (or even better, a post) from any community members, I will be glad I posted. Thank you for reading!

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Too many points to reply to @K-Jetta but I want to focus on your question about which Jet Protocol product to incentivize - let’s just lay that out.

  • Cross-margin pooled lending (Jet V2-beta, live currently)

  • Leveraged Swaps (live currently)

  • Jet’s fixed-rate/fixed-term product (in active development, not live)

Right now, based on the roadmap these are the only options.

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Are you down to create a proposal thread on here to extend the staking rewards for whatever amount of time? That might be an easy, low-barrier first step.