Jet Protocol (JET) Research Report | AscendEX
IEO Auction: October 13th, 2021
Primary Listing: October 14th, 2021
Overview: Jet Protocol is a borrowing and lending protocol built on Solana. AscendEX is excited to be partnering with Jet Protocol ($JET) for its primary listing, as well as a direct token investor.
What is Jet Protocol (JET)
Jet Protocol is a decentralized non-custodial lending and borrowing protocol built on Solana, optimized for high throughput and low-cost capital markets products. The protocol will allow users (lenders) to deposit supported tokens into lending pools to collect interest and will enable other users (borrowers) to take out loans in supported tokens. Accordingly, the protocol can create rules to govern aspects such as collateralization ratios, supported tokens, and a variety of other needs.
Jet users can borrow against over-collateralized debt positions and may incur debt up to predetermined ratios as mandated by community governance. If the value of a user’s deposited collateral falls under the specified ratio, their position may be liquidated by external actors, such as traders, or any users who can call the smart contract. Additionally, Jet will introduce interest-rate products, secondary markets on Serum, and facilitate ongoing, community-driven lending product research & development.
While borrowing and lending is a critical component of any DeFi ecosystem, up until now, most of these on-chain protocols have been limited by high friction, high cost, low throughput layer-one networks. Additionally, high collateral ratio requirements have effectively excluded many retail participants from engaging with the protocols. Addressing this, Jet Protocol is built on Solana due to its speed and low fees, enabling more efficient trading, tighter collateral ratios, enhanced oracle data, and more efficient centralized exchange-like liquidations.
Lending / Borrowing in Crypto
At a fundamental level, credit and money markets increase the productivity of capital by strategically reallocating it from individuals without an immediate use case to those with an immediate use case. By extension credit markets are created where prospective borrowers increase are able to their access to capital and prospective lenders are able to increase their access to yield.
Lending and borrowing protocols have emerged as a crucial puzzle piece of DeFi for their versatility across numerous decentralized applications. Specifically, lending and borrowing through protocols like Aave, Compound, Curve, etc. enable users to receive collateralized loans with synthetic liquidity that can be deposited into additional yield generation mechanism. As a result, the original loan can be paid off and, in some cases, users can capture a spread between the yield being earned and the interest needed to service their debt.
Users who want to become lenders simply supply (deposit) tokens to a particular money market and as a result they receive interest on their deposited tokens according to the current supply rate (i.e., APR). And vice versa, users who want to become borrowers simply supply (deposit) collateral and then are eligible to take out a loan at a specified collateral rate.
Despite the limitations of existing layer-one networks like Ethereum, multiple borrowing and lending protocols such as Aave, Compound, and MakerDAO have had massive success, with deposits among those totaling as much as $50B in early September.
Solana’s Growth
Solana kicked off August with exciting price action not only for the network’s native asset, but also for newly listed altcoins in the surrounding Solana ecosystem — Port Finance, Solrise, and Sunny Aggregator to name a few.
With Solana emerging as a prominent layer-one network, its decentralized finance ecosystem has seen rapid innovation and growth, with a central limit order book decentralized exchange (Serum), AMMs (Saber, Raydium, Orca), Yield Aggregators (SolFarm, Sunny), borrowing and lending (Port Finance), and more. The development and growth of these protocols has led to total value locked (TVL) on Solana quickly appreciating to ~$9B from a mere $2B in mid-August 2021. For many emerging layer-one networks, total locked value serves as a proxy for network usage as it represents the amount of liquidity on a network at any point in time. On Ethereum, the equivalent figure totals ~$123B, indicating the Solana DeFi ecosystem is still in its early days.
Existing Jet Protocol UI
The existing Jet Protocol user interface (UI) is easy to digest for new and existing decentralized finance users looking to lend or borrow. Moreover, the Jet interface positions its supported assets in the middle of the screen, and underneath this a user can select the type of transaction they’d like to complete — either to lend or borrow capital.
By doing so, Jet users can easily visualize their existing positions on the platform and access all relevant information. Displayed also are critical figures such as the total locked value (TVL), collateralization rate, the total deposit value and the total borrow value.
In addition to the interface that Jet offers, the team has integrated support for the following Web 3.0 Solana-compatible wallets: Phantom, Sollet, Solong, Math Wallet to allow for as many retail participants as possible.
Adoption
The adoption of Jet Protocol has amounted to ~$8.4 million in total value locked during the initial 24hrs. Incentivizing TVL has commonly been a chicken and egg problem, and AscendEX is excited to see that Jet has been able to kick things off in a strong capacity.
As more liquidity is added to Jet’s TVL, retail users will become more incentivized to join the protocol; particularly, the risk of missing out on being an early Jet user is too large for Solana DeFi participants to sacrifice. As the saying goes, liquidity beget liquidity.
Jet Token Economics & Emissions (JET)
Jet Token Economics
JET is an SPL based utility token, with the following current and planned functions:
● Staking on AscendEX (at TGE) for X% APR
● Liquidity Mining on Orca (2 weeks after TGE) for Y% APR
● Governance for $JET token holders to vote on and propose new implantation to Jet Protocol
The protocol’s native token will innovate on the tried-and-true governance models from existing protocols and will continue to adjust its approach towards community ownership and engagement as the protocol grows.
Jet Token Emissions
Below is an area chart representing the market capitalization of Jet Protocol (Y-Axis) by the number of days after TGE (note, each 30 days represents one month; chart scaled for nine months).
For additional context, the area chart above calculates market capitalization by multiplying number of JET tokens that will be available for sale priced at the IEO by a pricing of $0.04 (note this assumes price action following IEO is neutral and does not change). On the X-Axis is the number of days after primary listing to display in aggregate a nine-month timeline. On the Y-Axis is the notion market capitalization priced according to the IEO at $0.04.
Jet Protocol Partnership with AscendEX
AscendEX is pleased to be a strategic investor in Jet Protocol and is excited to be a partner for the IEO and primary listing of JET under the trading pair JET/USDT. Details are as follows:
Commentary:
As a centralized exchange, AscendEX is fundamentally chain agnostic, and closely tracks the development and evolution of different blockchain network ecosystems across the board. That being said, AscendEX is constantly striving to back the most promising projects within the most exciting ecosystems and feels that Jet Protocol clearly represents one such project. Over the past few months, the Solana ecosystem has seen dramatic growth as DeFi has seen rapid adoption, and we at AscendEX believe Jet, as a top tier lending and borrowing protocol, provides the foundation for a healthy and functioning decentralized financial ecosystem. More than just an idea, Jet Protocol is made possible by a high-quality team and community, and AscendEX is thrilled to be investing alongside new and former backers including CMS Holdings, Sino Global Partners, Alameda Research, ParaFi, DeFiance, MGNR, and Robot Ventures. Bridging CeFi and DeFi, AscendEX seeks to foster and facilitate the formation of DeFi ecosystems and will integrate directly with JET to offer staking and liquidity mining.
Token Generation Event (TGE):
Like all cryptocurrency projects, Jet Protocol will start its lifecycle with a token generation event (“TGE”). While the precise mechanics of a TGE vary from project to project, all TGEs involve the creation of tokens operating on a blockchain and therefore symbolizes a project’s launch to the public market.
This transition from primary to secondary markets is a critical milestone for a project because it serves as a “liquidity event.” A liquidity event is a fancy way of saying tokens can be freely traded.
Listing on a CEX, AscendEX in this case, represents the first instance of widespread price discovery for a token. Price discovery refers to the process of determining the appropriate price of a token, and by extension, the value of its network, and the project as a whole. For the sake of simplicity, think of price discovery as a debate that occurs between buyers and sellers. The goal of this debate is for each side to reach consensus on a token price that fairly reflects the asset’s value, or utility.
In order to help early-stage digital asset projects, AscendEX works to design and facilitate a smooth TGE process by ensuring fair and orderly markets at the commencement of trading. By doing so, retail market participants can express their estimations of a token’s value by buying tokens they believe to be undervalued and selling tokens they believe to be overvalued. As each side of the debate voices their opinion of the token’s fair value, they influence the price of the token and subsequently cause volatility. The opinions of buyers and sellers are dynamic and multidimensional, and in aggregate help determine a token’s fair market value.
Appendix
For more information regarding Jet Protocol, see below:
