With the emergence of decentralized finance, borrowing and lending assets was not left out of the various innovations that has occurred in these systems. An application of this financial instrument was developed by the Jet Protocol team. As described on the website, “Jet Protocol is decentralized borrowing and lending protocol built for speed, power and scalability on Solana. Solana is one of the fastest blockchain protocols with fees as low as $0.00025 per transaction. Jet Protocol building their DeFi solution on the network shouldn’t be a surprise.
Insuring Funds in the Protocol
It’s well known that security issues can cause loss of funds in a protocol DeFi. Even though the code has been properly audited, it is still possible for a breach to occur. Some amount of JET staked has been set aside in an insurance fund. If an event such as code exploits or liquidation failures occurs, the insurance fund will be deployed to combat the loss of funds.
Understanding Liquidation and C-Ratio
Liquidation is a process where a borrower’s position is closed because the amount guaranteed by their collateral supplied is not sufficient to continue the trade. The possibility of being liquidated can be calculated using the Collateral-to-Loan (C-ratio) system.
C-ratio = collateral value / borrowed value
You can think about it this way:
If you have $1000 worth of SOL and you deposit it as your collateral to borrow $500 worth of USDC, your C-ratio:
= (1000/500) * 100 = 200%. This means your collateral is more valuable than the loan and you won’t be liquidated. But once your c-ration is getting to 150%, the co-pilot will give you a warning alert. (Have you forgotten you are in JET Protocol?).
Protocol Revenue and DAO Treasury
The current mode used in the distribution of revenue generated by the Protocol through interest received from borrowers is by sending them directly to the lenders/depositors. The future plan is that 20% of the interest earned by depositors will be set aside for the DAO treasury. And this fund for the DAO will be distributed among the stakers, borrowers, JET token buyback etc.
Practical Usage of the Protocol
This is a short tutorial on how to deposit assets and also borrow on the Solana blockchain network using the Jet Protocol.
Click on the Connect Wallet button and select the wallet of your choice.
The Cockpit is the dashboard section of the Protocol. The total liquidity available for each of the assets on the protocol is displayed here. Users can also see their wallet balance (of the assets on the dashboard), the amount they have deposited or borrowed etc.
I deposited $7.56 worth of SOL. (You will get a Success message at the bottom of the page as shown below.)
You can withdraw your funds from the protocol whenever you want to but the funds available to withdraw will be the total left when the collateral for a loan has been deducted. If you have received no loan, then you can withdraw all you have deposited.
To borrow the maximum amount of an asset you are allowed to borrow, slide the pane to 100%. The MAXIMUM BORROW section displays the amount you are entitled to borrow.
You can use the BORROW feature the get access to some tokens that you do not have but wants to use for some trading activities. For example, if you have 500 USDC and 5 SOL and you need about 10 SOL to make a particular trade, instead of swapping your USDC for SOL and then you go into that trade, you can deposit the 500 USDC in Jet Protocol as the collateral to borrow the SOL needed. And after the trade, you can then return the SOL borrowed and take out your USDC serving as the collateral.
After borrowing the maximum possible amount of SOL, I went to the REPAY section to pay it back. The transaction might fail as it happened to me multiple times with the Transaction Canceled popup message below the page.
Click on the REPAY section, you can drag the sliding pane to fit the percentage of the amount you are going to pay back then approve it in your wallet.
As the name implies, Flight logs are the records of all the lending and borrowing activities that has taken place in your wallet. Activities such as Deposits, Withdrawals, Borrowing and Repayments of borrowed funds. You can see the timestamp of the trading activities done.
In the Settings section, you can change the Theme of the app to Light or Dark mode. You can switch wallet accounts, change the language to the one you prefer and you can select the Explorer of your choice (e.g., Solana Beach, Solana Explorer, Solscan).
Jet Protocol was founded by Wil Barnes and James Moreau in April, 2021. Wil, the CEO is an experienced software engineer who has worked for PwC, ConsenSys, MakerDAO and many other companies. James is the COO, with his background leading different tech company’s communities and their ecosystem. The team consists of more than 15 people with expertise in backend, frontend, UI/UX expertise and many more.
The team closed a seed round funding of $4.85 million in June 2021. A follow-on round of investment was announced in November, 2021. This investment round was backed by Alameda Research, DeFiance Capital, Paradigm, Parafi Capital and more.
Jet Token ($JET) and Allocation
The token created for the Jet Protocol has the following use:
1. For Governance and Voting on the direction of the Protocol.
2. For Rewards to those with locked JET tokens on the protocol.
JET Token has a total supply of 1,700,000,000 JET and the current circulating supply is 156,257,200 JET. The token has the following allocation process:
· 25.47% is under the control of the DAO and they are to be released linearly over the course of 24 months.
· 25% is for the Team and Advisors
· 21.47% of tokens are allocated for the Project Contributors
· 15% for Seed Investors
· 10% for Follow-On Investors
· 3.06% for IEO and Market Makers
Jet protocol is one the best lending and borrowing financial services offered on the Solana network and it is growing fast. With a good user interface, even a beginner who doesn’t know about the lending and borrowing processes can easily make use of the protocol, most especially after reading this guide.