p49-2 jFIAT printer management

Following p49-1, we need to decide the cap of each jFIAT.

The idea is to take the 7d average amount of jFIATs minted through the liquidity pools, set the cap according to it. The cap is here to mitigate the risk of temporary drying out of the selling-side liquidity.

Example: If 5M jEUR are minted, and deposited in the money market, and all of the jEUR are borrowed, and all the borrowed jEUR are sold on jarvis.exchange, the whole selling-side liquidity for jEUR will dry out. It means that until people mint jEUR again, it will not be possible to burn jEUR (sell on jarvis.exchange); jEUR will only be able to be sold on secondary market, with slippage, creating a possible depeg.

Probability: This is highly unlikely to happen due to the following reasons:

• if all the jEUR are borrowed, the interest rate would be 358%, and the deposit APR would be 275%. This would attract a lot of liquidity to be deposited, therefore a lot of new jEUR would be minted. counterbalancing the aforementioned risk.
• 358% would be impossible to handle by the borrower for a long period of time, and they will most likely have to mint new jEUR to reimburse their loans.

You can run a simulation here: https://polygon.market.xyz/pool/7 to see the borrowing and deposit APR for a given utilization ratio of the pool.

We can see that:

• if the pool is utilized at more than 22%, the borrowing rate would be above 10%; there is not a lot of yield farming program proposing significantly more than 10% on stablecoins, therefore it should be unlikely to see a pool utilized at more than 22%.
• 50% of utilization will translate into a borrowing APR of 20%, and a deposit APR of 8%.
• 75% of utilization will translate into a borrowing APR of 30% and a deposit APR of 20%.

Most likely, we will never see 75% of utilization (since it will attract deposit, and therefore minting); very unlikely to see more than 50% also considering the opportunity cost.

Therefore:

• setting a cap of 50% means that if 50% is borrowed, only 25% of the jFIATs minted would be able to be sold on jarvis.exchange.
• setting a cap of 20% means that if 50% is borrowed, only 10% of the jFIATs minted would be able to be sold on jarvis.exchange.
• or, setting a cap of 50% means that if 22% is borrowed, only 11% of the jFIATs minted would be able to be sold on jarvis.exchange.

As we can see, there is almost no risk of full dry out.

We need to vote on the cap (between 0 and 100%) considering that if 22% are borrowed the interest rate would be 10%, if 50% are borrowed the interest rate would be 20%, and if 75% are borrowed it will be 30%.

If there is not an option that will gather 51% of the vote, we will redo the vote between the option that gathered more than 20% of the votes.