Jet Staking and the #JETdrop— Two More Steps Towards Jet Governance

Jet wasn’t founded to operate as a basic domestic carrier, it was founded to push the envelope, run the engines hot, build more formidable aircraft and blaze new flight paths in DeFi. In this post we will cover how Jet’s upcoming governance and tokenomics developments will affect you, give you the tools you need to raise from the ranks of passenger to pilot and participate in the long-term vision of Jet Protocol well beyond our maiden voyage. Jet Core has refueled over the holidays for some big updates:

• Our first governance proposals,
• Signal voting,
• The Jet Airdrop, and
• The launch of Jet Staking

#JETdrop Incoming — What’s Next?

Upon the release of the JetGovern app, users will be able to claim their airdrop, examine and vote on proposals, and stake JET tokens. All airdropped JET tokens will be automatically staked within the staking/governance module by default as a nudge to users to keep their newly dropped JET in the staking system preparing for the upcoming signal vote for collateral onboarding additions to Jet Protocol. To support voting and reward distribution mechanics, all staked JET are subject to an unbonding period of 29.5 days.

Should a JET holder wish to move their tokens once claimed and staked, a user must initiate unbonding of their staked tokens in order to be able to remove them from the module. During the unbonding period, staked JET will remain held in the insurance fund (described below) and will not accrue additional airdropped tokens or be available for voting on proposals.

A Deeper Look Into Jet’s Staking and Voting Engine

We chose not to subsidize our lending and borrowing markets with yield farming rewards at the beginning — the goal at this stage of the protocol was to deliver our model of cross-margin borrowing and lending. For this reason, we only used blue chip crypto assets with liquidity on Serum, which is where we liquidate undercollateralized positions to. Boosting TVL by attracting yield farmers with JET tokens from the treasury would leave the DAO more flat footed in the future with a lack of deployable tokens to incentivize participation and usage of specific products and features to come.

Jet DAO’s current treasury still sits untouched, and can be deployed specifically to initiatives which strengthen the long-term health of the protocol. In this case, Jet’s governance goals require that we have a diverse and engaged set of users with JET tokens participating in the process and voting. The earliest and most active users of the protocol are the first (but not the only) people who should be weighing in on and voting on new collateral types and other voting proposals. Now that governance and voting is around the corner, we want as many engaged participants from the community as possible to be able to vote on how the protocol evolves. The airdrop with staking is a tool for us to do this.

The first important feature we want to highlight of the Jet Protocol post mainnet launch is a brand-new system for staking JET tokens. Staked JET will receive a portion of the allocated airdrop tokens over a fixed period. These tokens will be derived from the Jet Association treasury for a period of 180 days. Over this period, stakers can receive a share of the .75% of total JET token supply allocated to the ongoing airdrop. The proportion of this airdrop received per user with staked JET will vary depending on the overall participation rate in the staking program.

Additionally, Jet Protocol fees may be turned on at a later date and collected by the protocol to be locked in a tranche for governance driven usage. In addition to receiving the entirety of their share of the potential JET airdrop, those who stake their JET are eligible to vote on DAO governance. More info on Jet Governance structure and process will come in a later post.

The following table summarizes the staking airdrop program:

Staked JET as an Insurance Fund For Protocol Protection

We’re piloting our way through the skies of DeFi and unfortunately accidents can occur. While Jet Protocol undergoes regular code review, audits, and developer best practices, there’s always a non-zero likelihood that the system could either be subject to a code exploit or the fail-safes could cease to work during unexpected market conditions. Staked JET makes up the junior tranche of the Jet Insurance Fund, which backstops the protocol, protecting depositors against losses in the event of an incident. Subject to governance processes, the protocol treasury may also provide relief in these instances.

Socializing losses across the Jet Protocol user base is something we wish to avoid in the long term, so in the event of the following types of incidents we will deploy insurance funds in the event of protocol-wide loss. These funds could be mobilized via governance on issues such as:

• Code exploits which target total value locked or individual users funds
• Oracle or liquidation failures which cause bad debt to cause the system’s functionality to stop working

We envision that in the future, and subject to governance, only a portion of staked JET will enter the insurance fund, with the rest being actively managed by Jet DAO governance.

Protocol Revenue and the DAO Treasury

One of the cornerstones of Jet’s tokenomics is the distribution of protocol fees to ecosystem participants. To-date, Jet Protocol has not initiated any fee collection, which means all interest paid by borrowers has been delivered directly to depositors. But now that Jet Governance is being launched with the DAO formation underway, it’s crucial that token mechanics fall in line with the interest of the protocol as well as depositors.

With the introduction of our staking module, protocol fees will become a source of revenue for the DAO to directly bolster the staking returns and long-term benefit of those JET holders staked and participating in governance.

The initial parameters set forth by Jet Protocol are not static, and can be changed via governance as the protocol’s performance and health is evaluated on a rolling basis. The initial fees, once turned on, will be as follows:

• 20% of interest earned by depositors will be earmarked specifically for the Jet DAO treasury.
• No origination fees on borrowers.

Right now these fees will accumulate in the Jet Protocol treasury. In upcoming releases the protocol will disburse revenue directly to ecosystem stakeholders and participants. This budget will be controlled via governance, and the initial perpetual reward program will likely see protocol revenue distributed as follows:

• 10% used for Jet buybacks. These JET tokens will be returned to the DAO treasury and can be administered by DAO governance.
• 10% returned to the treasury in the same asset it was collected in.
• 40% distributed to JET stakers.
• 40% distributed to borrowers.

The Goals and Details Around The Initial JET Airdrop

When we announced the upcoming first $JET airdrop during our community call, we did so with the premise that we should broaden the distribution of JET tokens beyond Jet’s investors, IEO participants and those who have been able to buy JET to date. An airdrop to signal our values surrounding early participation in the testing of the devnet and mainnet iterations of the protocol was the best, first pass at this.

The snapshot of the airdrop has been taken retroactively, with the last considered slots as 945111098 on devnet, and 107081196 on mainnet. This covers the period up to 16 November 2021. This focuses the airdrop on the protocol’s earliest and most actively engaged users.

We used the following factors to determine the distribution of the airdrop to eligible users:

• The time-weighted average USD value of deposits into any pool on mainnet.
• The time-weighted average USD value of loans from any pool on mainnet.

The financial activity on mainnet was used to calculate a raw score for each mainnet user, by adding together the deposit and loan scores. We wanted to reward both depositors and borrowers equally, because the former showed a lot of trust in our protocol by placing their funds into our pools, and the latter are the real drivers of value on the platform as the payers of interest on loans.

For mainnet users who also participated in testing on devnet using the same wallet, we applied a bonus score of between 10% and 20% depending on the extent of devnet activity.

As one might expect, these scores follow a power-law distribution, with a small number of whales having significantly larger scores than the majority of users whose scores are clustered together. So as a final step to make the airdrop as fair as possible, we re-scaled the scores using the natural logarithm, to make the distribution closer to uniform.

The following table summarizes the airdrop distribution:

Assuming a JET price of 0.35 USD per token, the distribution of the the USD airdropped to each recipient looks like this:

We hope that users will agree we’ve succeeded in delivering a fair distribution of tokens not dominated by whales.

Another Leg Completed In A Long-Haul Flight

We know a lot of people in the community are excited about the opportunity to be a part of the JET airdrop as well as being able to stake their tokens to the governance module — we have so much more to share in upcoming weeks about the nuts and bolts of how we envision governance evolving over time. We intend to keep a full record of all details regarding public knowledge of the platform, tokenomics and governance on the Gitbook documentation page which can be found here: https://jetprotocol.gitbook.io/jet-protocol/

The upcoming dates and next-steps of action for the airdrop as well as posts detailing the governance process and important dates around that will be available on our Blog, Twitter, Substack and Discord. Please be sure to subscribe to these mediums of communication in order to get the latest news and updates on what’s next.

Update: There has been some confusion regarding the airdrop terms since this post has gone live. To clear this up — users who exclusively used Jet on devnet without using mainnet at all from the same wallet address as well will not be eligible for airdrop rewards. A high number of what we suspect to be spam bot accounts were created during devnet which were never to be seen again using mainnet after this. This created a difficult task to tease out genuine vs. spam devnet addresses, hence why we weighted people who used mainnet plus devnet usage rather than having devnet usage alone be a criteria. Thank you for your understanding.

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Disclaimer: This airdrop is only available to non-U.S. persons. This airdrop has not been registered under the U.S. Securities Act of 1933 (“Securities Act”), as amended, and may not be offered or sold in the United States or to a U.S. person (as defined in Regulation S promulgated under the Securities Act) absent registration or an applicable exemption from the registration requirements.

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