Acquiring Strategic Assets through Bond Issuance — JPEG’d
Securing liquidity and establishing yield opportunities for a protocol’s user base has not gotten any easier. In fact, it’s become much more difficult. The Curve/Convex ecosystem has highlighted that Pool 2 incentives are not optimal to secure liquidity, and instead DAOs must acquire CRV/CVX to participate in The Curve Wars — a prime example of a strategic asset. For most DAOs, this has become the new reality.
In this case study, we dive into the journey of JPEG’d, an NFT lending and borrowing protocol, as they faced these very challenges and became a top 5 holder of CVX amongst DAOs through bond issuance.
The Challenge
Unlike most NFT Finance platforms, JPEG’d was created by DeFi-natives and their vision is to bridge the gap between DeFi and NFTs. The protocol functions similar to MakerDAO where borrowers deposit collateral (in this case, NFTs) and loans are issued through minted tokens such as PUSd (their stablecoin synthetic) and pETH (their ETH synthetic).
While sharing core mechanisms from the most battle-tested DeFi protocol is ideal in certain aspects, it introduces the challenge of securing significant liquidity for each loan asset. Otherwise, users are left with little functionality of their borrowed funds without being able to seamlessly trade into other assets, off-ramp, and so on. Furthermore, the protocol’s growth potential is constrained as many borrowers prefer to become a liquidity provider and earn yield rather than actively managing borrowed funds.
The Solution
Shortly after their protocol launch, they turned to Bond Protocol to help establish their liquidity on Curve. Instead of buying CVX on the open market and putting sell pressure on their native token, the DAO passed a proposal to deploy a bond market. Their 30-day program allowed participants to bond their CVX tokens in exchange for JPEG tokens at a discount. Bonds were vested over 5 days, and the protocol easily accumulated $961,189 worth of CVX at point-of-bonding. The average discount was 8.28%, clearly an attractive rate for participants as there were 138 bonds in total.
This acquisition of CVX tokens enabled JPEG’d to boost yield and bolster liquidity for their users, which then resulted in a revenue flywheel as the DAO profits from interest earned on borrow positions. Sitting at ~$48m, their treasury is now the largest in NFT Finance and one of the largest in the entire space. We’re ecstatic that bonds played a critical role in this outcome.
Significant growth in key protocol metrics after bond market deployment are displayed below:
Closing Thoughts
JPEG’d’s journey showcases the power of acquiring strategic assets through bond issuance. They became a top holder of CVX amongst DAOs and created a revenue flywheel early on in their protocol’s lifecycle. This unique case study demonstrates how even just one strategic bond program can play a pivotal role in driving growth, enhancing liquidity, and establishing a strong treasury.
Below are resources that can help you get started with Bond Protocol:
- Gitbook
- Preparing for Bond Market Deployment
- Configuring Bond Market Deployment
- Monitoring Bond Market Deployment
If you need any assistance or have further questions, do not hesitate to join our community!
Bond Protocol is the permissionless on-chain bond marketplace. Our mission is to power sustainable treasury growth and support protocols to acquire strategic assets, including their own liquidity.
