Exploring Use Cases Of jFIAT Money Market On Polygon: In Conversation With Jarvis Network
Following the launch of the jFIAT pool on Polygon, Carlo Mazzaferro — Engineering Lead at Midas Capital, sat down with Pascal Tallarida, Founder of Jarvis Network, for a conversation on the diverse use cases of the pool. The duo talked about the Jarvis jFIAT pool, various strategies that can be deployed through the pool, and the many synergies both projects are working on.
Here are some highlights of the conversation.
The Many Use Cases Of Midas X Jarvis
Carlo: The first thing we can talk about is how Midas and Jarvis have worked in the past, and briefly about the new pool as well.
Pascal: To begin things, I would like to remind everyone that we do non-USD stablecoins, which are all overcollateralized with USDC. Users can buy and sell them at Chainlink price feeds without a price impact. Therefore, it is not like a traditional AMM where you have slippage or price impact. Here, for example, we check the USD price from Chainlink and execute all the trades at this price. Irrespective of trade size, this will always be executed without price impact. Therefore, it means that all our synthetic stablecoins somehow have the same liquidity as USDC.
To give an example, if you have $10,000 worth of jEUR and you want to buy wrapped BTC, two transactions will take place. First, the $10,000 of jEUR will be sold for $10,000 worth of USDC. There is a minimal fee of 0.1%, but I will leave it out right now for ease of calculation. Then, the 10,000 USDC will be swapped for wrapped BTC in a traditional AMM. Because we convert jEUR for a good amount of USDC, the price impact of exchanging $10,000 of iEUR for 10,000 USDC is exactly the same.
One of the use cases that we worked on at the beginning was to do on-ramping and off-ramping of people directly from their bank accounts to DeFi. If you have, for example, 20,000 Euros, and you want to go directly to Polygon or BNB, you could use our partner Mt Pelerin, a Swiss entity. They are accepting Euros and selling jEUR. So it is very convenient if you don’t want to have a centralized exchange as a point of entry in DeFi. You could literally send money from your bank account to the bank account of Mt Pelerin, and they will send the assets to your crypto address, and there are no fees, so it is a 1:1 ratio.
Then the second thing that we started working on, which is somehow connected to Midas, is to help other stablecoins with their stake and liquidity. As I said, our non-USD stablecoin can be converted to USDC at Chainlink price feeds. If you are a stablecoin issuer, let’s say you are Mimo, which is a Euro stablecoin working exactly like DAI from Maker. So, people need to deposit collateral in the vault, and they can mint PAR, which represents EUR. But for PAR, they need to create a pool on AMM in order to have liquidity. Basically, they have a farming program where people deposit PAR and USDC. But for arbitrage, it is not easy to perform, so the peg and liquidity of PAR were not perfect.
To help you understand, we have a pool with PAR and jEUR. Now when you want to go to PAR to USDC or PAR to BTC, you can, of course, use the route that Mimo has created in their pools. However, most of the time it is actually very efficient to actually go from PAR to jEUR using our pool and then from jEUR to whatever you want.
This project and other projects we have created with many different stablecoins are used as a bridge toward USDC liquidity. Also, to attract capital in those pools, we have liquidity mining programs, and this is where Midas comes into play. The third use case we have started working on is to give people the opportunity to have a loan denominated in their local currency so they do not face exchange currency risk, and we support different collateral.
We have classic collateral such as Bitcoin, ETH, and USDC, while you can also deposit, as collateral, liquidity tokens that you get when you deposit into Curve. For example, as I mentioned earlier about the PAR-jEUR pool on Curve. So you can deposit your liquidity into the Curve pool, and you can deposit the LP tokens into Midas, where Midas will deploy a strategy, and you will earn a yield from our yield farming program. Also, you can use this as collateral to borrow whatever you want.
To talk about why it is important to have a money market for us, it was the first use case I mentioned, which is to borrow money without credit risks. Quickly about my own experience, two years ago I wanted to buy an apartment where I live, in Bulgaria. I wanted to do a loan. Therefore, I locked BTC and ETH, against which I borrowed MIM, a USD stablecoin. I live in Europe, so I sold the MIM for USDC and then USDC for Euro. I was happy, but in the meantime, with the war in Ukraine and many other things, the Euro plunged. Today, I have the same debt in dollars, but because I converted my debt into Euros, and the Euro went down, to pay back my debt, I have to buy more USD. Basically, I need more euros, and it’s like my debt has increased by 20%.
This is a problem many people are facing in countries where the currency is very weak. For example, not long ago, we launched jMXN, the Mexican Peso, and we also launched an African currency. It’s those currencies that tend to go south against the dollar. If we want to bring credit to those people, we need to have a money market that supports multiple currencies. Therefore, this is the first use case. It is not the use case that is used the most now, as most of the users of the money market are DeFi users.
The other use case that may interest you way more is, of course, leverage on your liquidity mining program, or it could be leverage trading. How can we do leverage trading with the liquidity mining program, you may ask? As I mentioned about our many pools on Curve and jEUR, we also have the EURe-jEUR. So, you can deposit your assets into Curve and then deposit the received LP tokens into Midas Capital. Then, Midas will deploy your LP token into the strategy and will generate the yield. Therefore, you will be able to collect the yield from this farm.
For example, let’s say you deposit $10,000 worth of Euro or Canadian dollars, and then you can borrow money. Here you have two choices. First, when you deposit Canadian dollars, you could borrow jEUR. Then, you can either farm with the jEUR by depositing it into another pool, or you can sell the jEUR for USDC. Therefore, you will have a short position on Eur-CAD. Therefore, if you believe the Euro will go down compared to the Canadian dollar, you can do this strategy. Basically, you can go long or short on your currencies. I believe those are the major use cases.
Carlo: That’s a great overview Pascal, and there are some particular things that we love about Jarvis Network. Firstly, the ability to have these j assets being extremely liquid and having a Chainlink price feed for those and having the certainty that there’s liquidity for that trade to be executed. A lot of these synthetics can have certain problems, and having Jarvis as a platform to have these highly liquid j assets is excellent. It enables people to have exposure to their local currency, which is certainly an overlooked aspect it seems.
Another thing we care a lot about is security, and oracle risk is one of the biggest issues that we see in these isolated lending markets. Therefore, having the certainty that we can use a Chainlink price oracle which is, for all intents and purposes, probably the standard for pricing assets, ensures that all the positions that are in this Jarvis pools will always be priced correctly and the contracts that enable the transactions works, which has been the case forever. All the positions are liquidatable and can be made whole when they fall under a certain threshold. So having that baseline of security is always great for us for peace of mind.
One other thing I believe is good to emphasize is the ability to borrow against collaterals is not just the assets themselves but the LP tokens as well. We think it is a very innovative approach at Midas where users do not need to forgo the yields from holding the LP tokens or staking those LP tokens. However, they can earn those yields while also borrowing against it, which is what Pascal highlighted earlier.
We’re planning on adding more such strategies that support more LP tokens from Polygon as well as other major chains, but we are currently focusing on the former. At Midas, there are a lot of technical innovations that enable these strategies, mostly using the new ERC-4626 standard. We have created handy documentation about the ERC-4626 standard to help you understand more about it.
Pascal: There is one strategy I didn’t mention for leveraged farming. It is the most exciting way to do leveraged farming, but so far, I’ve never seen anyone doing it. Hopefully, it could happen soon. So, most of us are DeFi users, and when we do leverage, we execute it using on-chain assets. But you can also perform leverage with the real Euro, which I’ll explain how.
Recently, we launched a pool with a stablecoin called EURe, a Euro stablecoin issued by Monerium built for a better user experience. When you pass your KYC with Monerium, they issue an IBAN which is personal to you from a bank in Spain. If you send Euro to this IBAN, you have nothing else to do. As soon as your forms have been cleared, EURe is minted on the Polygon address that you have registered. In terms of UX, it is really great, and the process is extremely smooth. Once you send the Euro, within seconds of the money being received by the platform, the EURe is minted in your address. It is really the cheapest and fastest on Earth.
Then, when you have the EURe, you can deposit it in the EURe-jEUR pool. Firstly, the EURe has a low amount of Euro in the pool so you will have positive slippage. Then, you will deposit your LP token into Midas. Then what you should do if you want to use your leverage with your real Euros is borrow jEUR and go to Mt Pelerin, our other partner in Switzerland. For bigger amounts of more than 1000 euros, you will have to do a KYC as well. Then, you do the off-ramp and sell the jEUR you have borrowed for Euros.
For example, if you have deposited 10,000 EURe, you can borrow up to 70% of your deposit. To keep a certain margin, let’s say you borrow 6,000 jEUR from 10,000 Euros. Now, you off-ramp the 6,000 j EUR, and your exposure remains 4,000 Euros. Those 4,000 Euros are generating yield with leverage as your farm is actually 10,000 Euros. Therefore, your exposure is 4,000 Euro, but you earn a yield from your initial 10,000 Euros, earning a 2.5x yield. This is a great way to earn yield and reduce risk.
This, I guess, is not for DeFi users but for normal users that would like to earn yield without taking too much risk, and this is one of my favorite ways to do leveraged farming.
Carlo: Actually, that specific part you mentioned about the EURe-jEUR LP token, we enabled it a couple of days ago as collateral. It’s really cool also, as we were able to add that quite quickly, and it’s already being used as collateral with one of these plugin strategies on Beefy Finance. Therefore, users can also earn extra yield, and the yield was nearly 700% at the time it was deployed, obviously decreasing over time as deposits increase. But it’s currently enabled, and it is one of the assets that users can leverage on Polygon to earn those yields with the added APYs coming from Beefy Finance. We are also in discussion of adding more such pairs as well.
Another thing about Midas and the appeal to DeFi users is that we try to be as responsive as possible in terms of what people are asking us for collaterals, and we try to deploy them as fast as possible. This is something that most lending and borrowing platforms or leverage yield farming platforms cannot support.
To sum up, we like having Jarvis as a partner because there are a lot of flexible pairs that make sense and enable users to gain exposure with very low risk, and we try to make sure that we get these deployed as fast as reasonably possible. However, we’re always doing due diligence, assuming the price oracles are good and assuming that, in this case, the underlying assets EURe and jEUR are liquid enough and it makes sense to add them.
The jFIAT Pool On Polygon
Pascal: For the jFIAT pool on Midas, we have all the jFIATs, including the EUR, and the less common stablecoins such as the Mexican peso, Japanese Yen, Korean Won, and more. Of course, we don’t expect to see a lot of activities for these uncommon stablecoins for now due to 2 main reasons. First, there is no yield farming for Korean Won or Mexican Peso, but we are planning to launch it soon. The second issue is liquidity, due to which, on Midas as well, we mainly have deposited currencies that are the most demanded, such as the Swiss franc, Euro, and Japanese Yen.
Our plan is first to add other kinds of collateral, such as Bitcoin or Ethereum, so that people can borrow against more classical assets. This will ease them to do leverage trading or leverage farming. We are also waiting for Qi DAO to seed a pool with MAI. This will also enable users to long other assets. For example, users can deposit the jEUR and borrow MAI, which can then be swapped with USDC. With this USDC, you can mint jEUR, and you can deposit it again and further repeat the process. Here, you are basically going long on Euro. We are also discussing with Qi DAI the possibility of adding MAI as collateral to mint jEUR. It will simply remove one step, and users can deposit jEUR to borrow MAI and then mint jEUR with MAI to repeat.
Moving forward, our goal for the next six months will be to execute strategies to add more equity in Midas for all our assets. This will also be very important for our protocol for a few use cases that we want to enable next year. Moving forward, we will be adding more asset types and making sure there is enough equity for all the assets, even the ones that do not offer incentives yet.
Price Oracles And The Need For Reliability
Carlo: Since you mentioned expanding to different collateral types, are you also mentioning expanding to different specific currencies and specific assets, and if so, how does that usually depend on the availability of price feeds? Since we had the example of the Mexican Peso (jMXN) and you are dependent on Chainlink, and it is known for moving a bit slowly. So, is that the plan moving onto other currencies, and is there a hard dependency on Chainlink, or is there any other thing that can be done to circumvent that?
Pascal: Interestingly, 2–3 weeks ago, Chainlink stopped two price feeds, which forced us to stop the currency. However, we can’t stop them since they are already deployed. But we removed all the viable equity, and no one can mint jCOP, the Colombian Peso, and jNGN, the Nigerian Naira, anymore. They did it because the data providers with which Chainlink worked didn’t do a good job, resulting in a bad-quality price feed that could have been exploited. This was very bad for us as it was a one-way decision. We knew that we were dependent on Chainlink, so we started working on adding another oracle API free. We have finished the smart contract that can support multiple oracles, but we are yet to integrate API free as we are working on other major developments. Moving forward, our plan is to add another oracle.
As for the new currencies, yes, Chainlink is a bit slow. We have some currencies that we want to bring on Polygon and have been waiting to do so for a while now. The most important one for us would be the Brazilian Real, which we already have on BNB. Recently, we also launched gold, and we stopped and will be relaunching it soon. The reason we stopped it is that we were supposed to work on another project which is doing tokenized gold, and the idea was to create a pool with jGold and the token, which goes by the name of Cash.
This was designed to let users redeem jGold or any other jFIAT for real gold. The idea is that if you have jEUR, you can convert it to jGold; if you have jGold, you can swap it for Cash, and if you have Cash, you can pass the KYC and have some real gold at home. The thing that we learned was that the jGold uses the price feed of one ounce of gold, while cash uses grams, which is different. We’re working on relaunching jGold, and it will be twice the price of one gram of gold. This will also be one of the assets we will add to Midas as we believe it will offer a great use case where people will be able to borrow gold and deposit their gold and borrow other assets. Of course, there will be a pool, so people will be able to deposit LP tokens of gold into Midas to borrow more gold or jEUR. The Brazilian Real and gold are the two main launches we are looking at in the near future.
Carlo: That is great! Adding gold is a great opportunity as the classic trade of having gold vs BTC for long or short opens up great possibilities, and I was not aware of the actual physical gold concept, which is also very intriguing. This is a great way of getting actual assets from the outside world in DeFi seamlessly, which is one of the best things about Jarvis. From the Midas side, we are enabling more utility on these assets to offer better opportunities to users.
A quick note on the oracles — we know how important they are, and it sometimes is a pain to wait for Chainlink, but I would also like to make a point that we are always happy to chat about other possibilities of integrating other oracle providers. We had a lot of success with, for example, DIA price oracle and a few others that are sometimes more responsive and sometimes more receptive to different price feeds.
Something that we’ve been actually working on recently is the ability to have multiple different price feeds for a single asset that they double-check against each other and make sure that they don’t deviate too much. If they do, we automate the pool borrowing, which acts as a security mechanism in the very short term. It’s one of our main concerns, not specifically for Jarvis assets as they have a particularly strong price feed, but for assets that are borrowable and, for example, are not pegged like the Jarvis assets.
I think the security and reliability of the oracle are always hard, but it’s something that we try to keep a reasonable level of security around. Another interesting thing is that we also have off-chain monitors for the oracles. Simply, they are bots that run all the oracles that we have and query them every few hours to make sure that they’re not stale and that the price doesn’t deviate from some outside source such as CoinGecko or Forex to make sure that those assets are priced correctly. So these off-chain monitors could have caught the assets that were deprecated by Chainlink. The issue of oracle securities is a big one, and we try to take the safest approach, but Chainlink is still centralized to some extent, so it’s not the easiest of solutions.
Pascal: About what you just explained, we need to have our own server to run this kind of service. However, I would always be scared if the servers were running correctly or not. We have used some off-chain tools before, and I know that there are teams out there handling this, but there’s a risk to be mitigated, so some compromise has to be made.
Carlo: Something I wanted to mention related to the oracles is that we’ve been working on a way of scoring oracles and showing in the UI a reliability score of such oracles. It’s a hard thing to do correctly because each oracle can be different, and sometimes you have an oracle based on Uniswap V3, Chainlink, and DIA. Chainlink is great because it’s low-maintenance, and as long as the network doesn’t go down, it doesn’t go down, but it still has some granularity in terms of how secure even a Chainlink oracle is because each team has different parameters. This includes the number of validators, the heartbeat time between each check to the validator and the deviation threshold, and so forth.
It’s something that we’re going to integrate into the UI, and if people familiar with finance have something like that, we are planning on having a much more comprehensive way of scoring oracles which we believe should give the community a good indication of which pools are the safest and which ones use oracle feeds that are safer than others. That’s something that we are planning on integrating soon.
Money Printer And Closing Thoughts
Pascal: As a closing note, I’m very happy that we can work together because money markets and stablecoins are very connected. Firstly, it’s a way for the treasury to add additional income because we have launched our money printer contract, which allows us to mint and directly deposit liquidity into Midas. Also, as I said before, moving forward, for the next, let’s say, six months, the plan is to release some stuff to have even more liquidity there in order to power more use cases like leverage trading, leverage farming, and credit.
I think credit is less interesting, but to give people an opportunity to borrow in Mexican pesos or off-ramp in Mexican pesos is a great opportunity, which is why we are dedicated to increasing substantial liquidity.
Carlo: Excellent! But any details on the money printer because, as far as my understanding, you can basically mint and collateralize stablecoin with it? Anything you want to add for people to understand more or less what the money printer contract does?
Pascal: Yes! However, we have to be careful with the wording because sometimes people can jump quickly to conclusions. So it’s towards assets that are without collateral. Basically, we print jEUR without them being collateralized. It’s much like a central bank where you print out of thin air. But, the difference here is that we cannot print and put them in our pockets. The idea is that when you print them, you can only deposit them into Midas. It, of course, happens in the same transaction, so it’s entirely trustless.
For example, we print 500,000 jEUR without collateralization, and they are deposited into Midas. This is important because while they remain in Midas, they’re not in circulating supply. Therefore, if you have jEUR in your wallet, you know that those are jEUR without collateral. All jEUR without a collateral will remain in the smart contract of Midas. However, as soon as someone borrows them, they have to bring collateral in order to borrow them.
For example, they have to deposit MAI, USDC, or BTC, and they borrow from Midas. This means that the jEUR in circulation are either collateralized by us, by the protocol, or they are collateralized by money markets, in this case, Midas.
Carlo: That’s a very compelling use case, and it showcases a little bit of our synergies in terms of enabling you to increase the liquidity of a specific asset and being able to gain interest and of Midas to be able to serve as a bootstrapped mechanism almost for certain stablecoins. I believe MAI also had the same mechanism of being able to mint “uncollateralized” assets but collateralized by the pool itself. They can only stay in the pool and then enable bootstrap liquidity in a specific lending market to have really good use cases.
To conclude things, we believe it was a great discussion to have regarding the new jFIAT pool on Polygon and the future direction that the Midas x Jarvis partnership is taking. We are sure that the partnership will be extremely beneficial to everyone, and we hope to expand it to different assets in different chains.
About Jarvis Network
Jarvis Network is a set of protocols and applications on EVM-compatible chains to bridge legacy and decentralized finance (DeFi). Its mission is to build an infrastructure layer that can be leveraged by anyone to develop use cases facilitating the adoption of DeFi, and to build applications to onboard the next billions of users. Its first protocol, Synthereum, pioneers an innovative and capital-efficient manner to issue and exchange synthetic fiat currencies called jFIATs, thanks to a fully on-chain Forex market. jFIATs are stablecoins designed to be usable: they keep their peg, are highly liquid, and are scalable.
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About Midas Capital
Midas Capital is bringing isolated and customizable money markets to EVM-compatible blockchains. Enabling users, DAOs, and protocols to create customized and isolated pools for lending and borrowing any asset, Midas is building a cross-chain ecosystem that democratizes money markets. Pool creators have the flexibility to modify pool parameters (interest rate curves, oracles, collateral factors, pool fee, etc.) according to their risk appetite. With isolated pools, Midas offers stellar features for both large-scale institutions, protocols, and traditional investors.
