That’s interesting. What kind of incentives? Or is it just providing the best borrow rates possible?
it would have to be a loss leading strategy with token incentives, i’m pretty sure
i suppose it could be called a borrow mining program
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hmm… yes. I like that.
In the last year, I’ve helped about 7 of my friends and family to learn what defi is and how it works, and how to put their money to work. It was painstakingly slow and tedious, but about half of them really went forward hard with it and got quite involved, and have done well.
I think the potential market for future defi users is MASSIVE, and we’ve only just hit the tip of the iceberg with defi on ethereum. Now there’s something that might scale in Solana, I really think that grass roots reaching out to " * Consumers who haven’t used crypto" could be super productive. Might be slow at first, but if, say, Jet, was one of the first protocols they were introduced to, I think there’d be quite some loyalty over time.
And if transaction fees are affordable… the sky is the limit.
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This is an incredibly exciting topic for conversation and one I’m super passionate about. I recently read Sino’s post about Serum (https://github.com/sinoglobalcap/investment-theses/blob/main/english/serum.md) and the takeaway for me was…dream BIG (VERY VERY BIG). Take a step back and think of the most ambitious opportunity in your space. Then do that. @adamdelsol seems to be balancing well focus + ambition and I love the contributions from @fusion @Rion and @Chubbs as well as from others.
My particular interest in consistently and repeatedly hitting high velocity PMF buckets that serve core product utility but that also build brand awareness and credibility. Imo this is FTX. FTX consistently ships high quality new products that unlocks new markets while serving existing users and compounding on its brand awareness and credibility + pace of shipment.
I think it would be super cool for Jet to focus on the bangers as collateral types - win the heavy hitters across each crypto niche. I am not a dev and so my tech knowledge is limited but my top picks for collateral types would be layer 1’s (Sol, Eth, BTC), picks + shovels (AR, LPT, FIL, LINK, GRT, YGG, Pyth when it launches), NFT’s (CP’s, BAYC, DeGen Apes, ArtBlocks), Games (Star Atlas, Axie, Aurory).
*Additional context: DeFiGod announced today a B+L for CP’s: https://twitter.com/DeFiGod1/status/1435837676289241088
I’m a noob in this space so there are almost certainly a lot of problems with the aforementioned but what I believe it can offer, if executed correctly, is convenience. A one stop shop for all assets.
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you could also include mango in this list
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Nice idea dude. We’ve been thinking about this too. Why don’t you start a thread for us to discuss possibilities?
Yes, I think so. You can make interesting structures for it, but ultimately it comes down to spending network equity to draw users to the platform. If done right, the network would increase in value by more than the equity spent.
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one thing that has come to mind recently is what happened on BZX (Fulcrum) when they launched on BSC.
The incentives for borrowing were quite good, from memory, to the extent that ALL the collateral in the stablecoin pools were used up. Any user that wanted to withdraw obviously couldn’t. Users didn’t really understand the mechanics under the hood, and were quite annoyed, as you can imagine.
Just something to keep in mind for any future borrow mining programs.
Even though I love the product, I agree with the idea that the basic borrow/lend market is so over-saturated that either you need to onboard large institutions interested in borrowing or you need to offer something unique.
Here are two ideas I haven’t seen explored much:
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NFT lending with liquidation value based on the floor price of the collection. For most collections there’s not a huge gap between the floor price and the price of the median item, so I don’t think you’re ruling out most of the collection by tying the liquidation value to the floor price. I understand it’s tricky to come up with a robust definition of floor price but there’s enough demand for this that I think it’s worth the effort to come up with something good.
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Reputation based zero collateral lending. Can imagine situations where I’d be willing to lend to a well known party as long anyone can see on chain whether they paid the loan back. For example during a period of market volatility maybe a trading firm wants borrow at a very high rate for a short period of time. For a high enough rate I’d be happy to lend to them with no recourse and just assume their reputation is too valuable for them to run off with the money.
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Love these ideas @cccv.
- We are currently testing and NFT lending and borrowing product.
- We have initial designs for NFTs-as-collateral. We will involve the community when prototyping begins.
- We have had the same idea about reputation, but are still uncertain how to design a system that cannot be gamed. Would be very interested to hear more of your ideas on this.
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Wrt to the reputation system, I was thinking more of a whitelist system which is based entirely off of reputation outside of the Jet protocol rather than a reputation score within the protocol (because as you say it’s not clear how to come up with a reputation score that can’t be gamed).
Something along the lines of: any firm/person can ask to be whitelisted and the Jet token holders (or maybe the Jet team to start) can vote on whether they’re reputable enough. Once a user is whitelisted they can request zero collateral loans with their desired parameters regarding length/interest rate/max size/etc and users can decide if they want to contribute.
If the borrower fails to repay then the token holders/team can remove them from the whitelist, but the main disincentive to taking the money and running is maintaining their reputation.
Beyond just making it easier logistically, a cool thing about doing this on a blockchain is that anyone can clearly see the terms of the loan and if they were violated. Usually when these sorts of private loans go south there’s a ton of he said she said, so it’s harder for an outside party to know what to believe, and therefore much higher risk to a lender.
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Thanks for the recent posts and welcome!
Could you give examples of the types of entities that you think would be interested in something like this?
I feel that the loans would have to be sizable in order to make it worth the time/resource cost of onboarding and administering it.
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Adam one of the most important things I’ve learned in my years of business was not how to come up with good ideas, but how important it was to measure the efficacy of any idea I implemented.
So my thought is, I’m sure you have a basketfull of great ideas about who could be targetted and onboarded, but I’d say the most important thing to do is make sure someone is measuring how many/much of each person/$ onboarded actually sticks around.
Say for example you targetted existing Eth DeFi users, and wanted to run some kind of campaign where they were given a % fee discount or bonus if they tried Jet within x time, you could measure how many tried it out, and how many of those stuck around.
If it cost $100 per user to onboard, and 10% stuck around long term, you’d then know it roughly cost you $1000 to “buy” a new user.
You just then need to compare that number with however you measure the value of said user to see if it was an effective effort. If it wasn’t, fine tune or try something else. If it was effective, just rinse and repeat.
Obviously lots of nuance in there that I haven’t covered, but I’m sure you get the oversimplified drift of my point 
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What I’m suggesting should have a very low cost of administration. Someone who wants a reputation based line of credit asks to be whitelisted and there’s a bit of upfront cost in deciding whether to approve the whitelist, but after that the idea is that a whitelisted member can just send instructions to a smart contract specifying the terms of a desired loan and users can decide whether to lend them money. Nothing else needs to be done to administer the loan since there’s no recourse outside of the social layer.
I think there would be a lot of demand for zero collateral loans since all the alternatives in the defi space are overcollateralized and that sucks for the borrower. Admittedly 99% of users don’t have enough reputation to get a loan, but maybe there are power users (a trading firm?) who would be interested in this.
Anyway, here’s one example that I run into a lot where this would be useful.
Smaller traders who spend a lot of time with their ear to the ground on discord/twitter/etc run into lots of short term lucrative liquidity mining opportunities. These opportunities generally go away within hours or days once a whale comes in but I think it’s somewhat common for a degen with a <7 figure bankroll to find opportunities along the lines of a 75-150 bp return over 24 hours.
However, if your capital isn’t in the right place at the right time then it can be impossible to execute. If you’re tied up in a bunch of shitcoins and you need an asset on solana then you can easily lose 75+ bps between exchange fees and crossing the spread turning your shitcoin into sol. On top of that there can be tax consequences that make it even worse.
For someone in this situation it’s far preferable to borrow a sol based asset with no collateral for 24 hours, execute the strategy, and then return the capital + 50 bps for example. On the flip side if the borrower is reputable enough and the loan is small enough then I’d be happy to lend for a 50 bp return over 24 hours, even if I have no non-social recourse in event of a scam.
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Here’s a project doing something similar to what I described above Introducing Sublime: The decentralized network to build and access credit | by Ritik Dutta | Sublime | Oct, 2021 | Medium
First time I’ve need someone try it.
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Point #3 from that blog post I’ve thought a lot about:
A DAO looking for capital without having to dilute their token supply
and the p2p lending solution @eyevzz is a good cursory solution for that. though, as a proof of concept it attempts to cover many use cases, while it’s actual implementation would be specific to some real world example like a DAO taking on debt to fund a short term venture
you only have 100% tokens to give out, but you could theoretically take on unlimited debt (u could dilute ofc but let’s assume both that we can’t do that and also dilution is pretty bad). mature companies often take on debt instead of doing equity raises, also they may also have no choice
a DAO of known contributors could use Jet programs/products to take on debt, it could even be crowdfunded, or they could take the debt from only people they want to (nobody wants to borrow money from some unhinged loan shark walking around with a billy club ready to kneecap u for being delinquent on your loan)
it’s clear there’s a deluge of cash out there, there’s no shortage of people ready to lending money
borrowers want options, they want to know their lenders can work with them and that they can quantify these options into a lending program
so in lieu of a huge raise of funds, a startup can raise with a smaller amount of tokens then do a debt raise
- borrower pays a fee in whatever token they want (assume it’s in the DAO token)
- borrower agrees to pay back in whatever term
- borrower can pledge some of the DAO token as collateral, or agree to dilute supply to make borrower whole
- borrower & lender get to agree on fixed interest rate of the loan, no dealing with blown up 40% interest rates on large amounts of debt
in the end if all goes well everyone is happy, DAO keeps more of their tokens, lender gets whatever they offered, and reputations increase all around
if things go bad, the covenants can be programmatic in that if the borrower defaults or certain conditions aren’t met the lender can take possession of the borrower’s pledge collateral, or in an even more novel approach, trigger dilution of token supply to make lender whole.
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Love this. The primitives to support it are in the pipeline.
@wil I think the p2p model could be used, but a debt raise also fits into the model @cccv described, which is materially what we’ve been discussing internally.
- The DAO underwrites a fixed-term loan-in-principle
- Jet depositors opt in to the loan-in-principle
- The borrower optionally has to fulfil additional criteria
- The borrower draws down the loan
This requires
- Basic staking and voting primitives
- Loan-in-principle and opt-in primitives
- Presentation layer
- Borrowers
- Depositors
- Governance
The LLC can deliver 1-4. We would have to discuss the timeline once the specs are clearer.
We are able to talk to potential borrowers, and will relay their input. DAO efforts to identify potential borrowers would be appreciated.
To convince depositors, we have to design clear, effective governance around these loans. What risk assessment should be done? How will social consequences work? Will DAO Treasury funds back the deposits?
As we get into the details there will be many choices to make.
@adamdelsol this is an excellent candidate for a DAO-managed project. If others agree, perhaps we should start thinking about how a thing graduates from a discussion to an initiative? What does it look like when the DAO wants a thing to happen?
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@PaperImperium I was very happy to see you on Jet forums in the stablecoin thread. Sorry I haven’t had time to reply there yet. I liked your perspective though, to focus on use cases.
I’d appreciate your input on the ideas in this thread, briefly: DAO-sanctioned credit facilities that depositors would opt into. Collateralization and drawdown mechanics TBD.