Abstract

The market dynamics have changed and the DAO is currently lending way below market rate. This is impacting the DAO’s revenue and as a side effect impacting the demand on PUSd/pETH.

This proposal aims to raise the interest rates on the different JPEG’d vaults to bridge the gap with the current lending rates while remaining competitive and ensure fair revenue while also acknowledging our earliest users.

In a way to support future market conditions it also proposes to introduce a monthly rate change vote.

Background

The true market value for NFT lending is somewhere between 10-20% APR. JPEG'd is charging 2% APR for PUSd and 5% for pETH. Facing the current market conditions, the DAO is simply not getting enough of a fair share of market rate lending and the current rates are well below market. While attractive to new users, this is impacting the lending capacity as a side effect generating too much demand for cheap loans. Part of the duty of tokenholders, many of which are also users is to do what's best for the DAO as a whole. The DAO should be able to adapt lending rates according to the base lending rates.

This proposal suggests to adapt the current interest rates on all the JPEG’d vaults to make sure that most/all debt is paying a fair market rate while remaining competitive. Where needed and possible, a new C Vault would be opened.

While the vaults are all akin to tranche tier structures and fixed rate for no expiration the intention was not to mean they are unchangeable but rather that they are not continuously fluctuating interest rates. The market for lending has simply changed in recent months and the vault rates should reflect this change.

A market leader in the CDP lending space, Maker DAO, who also offers fixed rate lending recently raised their interest rate dramatically to reflect the changing market conditions.

The proposed rates below are still below market rates, making them still very attractive and make the yield opportunities on JPEG’d interesting for NFT holders. This will allow for all our earliest users to still benefit extremely low market rates. As a gesture of good faith, the Punks vault A, which holds our earliest user’s precious will get a first lower hike followed by incremental raises until reaching the same level as other vaults.

Moreover in order to navigate an environment with changing rates, the DAO would introduce a monthly vote on the lending rates. We believe that adaptive fixed rates would be a happy medium between offering stable rates while allowing the DAO to reassess and communicate changes to borrowers on a routine basis. Rates changes would be voted by the DAO every 24th of the current month and be implemented on the 1st of the following month.

Specification

• Update all the PUSd borrow rates for vault A to 10%, for vault B to 13%
• Punk vault A will be undergoing incremental raise first to 7% then 1% every month until 10%
• Introduce a monthly vote to determine the change in rates. Voting will go live every 24th of the current month and be implemented on the 1st of the following month.
• In case of extreme situations, the team is allowed to make adjustments unilaterally