Lending and borrowing jFIATs on Market
We are excited to unveil that jFIATs are now accessible to be borrowed, lent, and used as collateral on their own isolated market on Market, a multi-chain money market protocol. Combined with jFIATs’ on-chain liquidity and fiat on and off-ramp, it opens up a new world of possibilities!
Market
Market was the first permissionless and isolated money market on Polygon, and it is now deployed on Fantom and Avalanche, with a combined TVL of ~$160M ($15M on Polygon).
Isolated markets mean that the risk of a market is contained within the market, and if any issue should arise, it will not contaminate the other markets, and therefore the protocol.
This segregation allows for riskier assets to be lent and borrowed or used as collateral.
Jarvis Forex Market
Market has launched a new isolated market, the Jarvis Forex Market, allowing users to access various synergistic opportunities.
Earn interest
Users can supply their assets to earn interests when they are borrowed! Users can earn interest by depositing Jarvis Network’s stablecoin jEUR, jGBP, jCHF, jCAD, jSGD, jJPY, and Qi DAO’s stablecoin MAI.
Leveraging our 0-fee fiat on and off-ramp powered by Mt Pelerin, it enables users to deposit Euros from their account to Polygon, and start earning interests on it. A real on-chain savings account!
Use as collateral
Users can use deposited assets within Market as collateral to borrow other assets!
In addition to the stablecoins mentioned above, users can deposit the Beefy Jarvis vault tokens moo2cad, moo2jpy, and mooJRT-ETH. These are yield-bearing tokens that are earning yield while being used as collateral.
Each asset bears a different risk (volatility, liquidity) and therefore they all have different Loan To Value (LTV) parameters, from 35% to 80%. An LTV of 70% means that one can borrow up to 70% of the value of their collateral.
Users can deposit an asset to earn yield from interests or incentives, while using the very same assets to borrow others. More collateral type like JRT, WBTC, WETH or MATIC would be added in the future.
Borrow
Users can borrow jFIATs and MAI against deposited collateral. This enables a few use cases:
- Shorting: users can deposit MAI, borrow jEUR and convert them for USDC on jarvis.exchange, without any price impact; this allows for shorting EURUSD.
- Hedging: users can deposit moo2cad, borrow jCAD and convert them for USDC, effectively shorting CADUSD; this allows to (partially) hedge one’s exposure to the Canadian dollar against the US dollar.
- Off-ramping: users can borrow any jFIATs and exchange them for their fiat equivalence using Mt Pelerin; this allows for cashing out many currencies while keeping the exposure to their collateral and to the yield some collateral may generate.
- Leverage: users can borrow MAI or jFIATs and use them to participate in yield farming programs, or to swap them for another asset; this enables leverage.
- Looping: users can borrow MAI or jFIATs against a mooToken to reinvest them in the same mooToken, creating a loop; these loops allow for leveraged yield farming.
jFIAT Direct Deposit Module (DDM)
We have developed recently a new contract to mint uncollateralized jFIATs, with the purpose of depositing them into money markets.
Uncollateralized jFIATs can directly be deposited in Market, to supply jFIAT and keep the interests low. Since borrowing jFIATs would require depositing an asset as collateral, jFIATs taken out from Market will all be over-collateralized.
Only the governance can mint jFIATs through this method, and jFIATs can only be deposited within whitelisted smartcontracts. This enables a new revenue stream for the treasury, and can help scaling the demand for jFIATs.
Risks
The Jarvis Forex market bears several market, economic and technical risks.
Collateral risks
Some collateral types are less liquid than others, or are more volatile than others, creating a few risks:
- in some circumstances this could demotivate liquidators to liquidate under-collateralized loans since the collateral could not be sold without a big slippage, creating a risk for the lenders; this is the case with the 2jpy pool that contains JPYC, which has low liquidity.
- in some situation, a borrower may prefer to do not repay the loan and to choose the liquidation instead; this happens when the liquidity of the collateral is very low, and it is more economically logical to give up on the collateral instead of repaying the loan. It can even be an intended behavior by a bad actors, who can see it as a way to exit from a bad position.
- for low liquid assets, prices could be manipulated easily to trigger a liquidation or to be able to borrow more assets.
These risks exist but are mitigated by using a low LTV for risky assets, and by using a combination of Chainlink and TWAP for the price feed (the lowest price is being used to avoid bad actors to artificially inflates the price to borrow more assets).
Liquidation risks
Liquidators make sure that the market is safe and properly collateralized. But as seen above, liquidators could meet issues doing their work:
- for a liquidator to liquidate an under-collateralized loan, they would need to repay the said loan, and therefore need a source of liquidity for acquiring them. It is possible that the liquidity of the assets dried out or becomes very low, making it impossible for liquidators to properly secure the market.
To remidy to this risk, the liquidity of the assets borrowed needs to increase and flash loans should be made possible using money market, liquidity pools. We will also be working on our own flashloans contract to mint uncollateralized jFIATs or to borrow jFIAT from a pool, for arbitrages and liquidations.
Smart contract risks
Of course, using the Jarvis Forex market includes accepting all the risks related to each protocol and assets being used: Market, Beefy, Jarvis, Curve, Chainlink, QiDAO, JPYC, and CADC (fiat-backed stablecoins).
