Author(s): @0x_Alex, @Dydymoon, @Théo

Summary

This proposal aims to create a risk-framework enabling the Jarvis DAO to use the money printer also called (AMO) under specific circumstances

Context

Jarvis Protocol has the ability to mint and burn jFiat via the multisig, this is often referenced as “money printer” or “AMO” that stands for Algorithmic Market Operations”. A lot of other protocols are using this mechanism: Maker, Frax, Angle, Mimo, Inverse to name a few.

A few weeks ago, the P-87: Treasury Management Part 1 was approved, which will be followed by a second part to improve the POL strategies depending on this risk framework.

Additionally, the Jarvis Treasury has already $200K from the money printer located: $100K on Optimism + $50K on BSC + $50K on Arbitrum.

Rationale

This proposal aims to define a risk framework enabling the use of the MoneyPrinter for POL “Protocol Owned Liquidity” strategies, enabling the Jarvis treasury to grow.

When using the Money printer, uncollateralized JFIATs are minted (AMO). The focus to use these funds will be providing liquidity in stable pools and only on concentrated liquidity to limitate the depeg risks, incentivized by leveraging strategic assets owned and creating vote incentives on different chains.

Money Printer Utilization

Minting: Jarvis DAO multisigs can print jFIATs using the money printer & deposit in a protocol approved by governance for a defined strategy (c.f Risk Framework)

Burning: Jarvis DAO multisigs signers can burn jFIATs without requiring additional governance votes to react quickly in case of emergency (i.e: protocol hack).

jFIATs minting criterias

This section focuses on the main criterias to be analyzed for a new strategy consideration which includes POL deployment with the money printer to avoid bad debt.

However the DAO can still create vote incentives, use its strategic assets to vote & add POL from the treasury without the following requirements.

Base Requirements

For a proposal allocating jFIAT on a POL strategy to be valid, the underlying protocol must meet the requirements below:
Total TVL: >= $5M Protocol Existence: >= 3 months old on mainnet Security: Smart contracts audit(s) & verified on a block explorer.
Protocol Tokenomics: Design explained, documented & known/similar to a well known model: ve(3,3), ve, vl etc.

Rationale for the base requirements above:

Total TVL: High TVL displays a high level of trust from users in a protocol. The 10M threshold is a way to filter out 88% of the protocols. According to DeFi LLama only 114 Dexes have a TVL >5M$ out of the 1000 referenced. A higher threshold wouldn’t allow POL strategies on Retro and Ramses that represent more than 35% of Treasury Strategic Assets.

Protocol Existence: The longer a protocol is around the more resilient it is. The threshold of 3 months was set to avoid POL Strategies on completely new protocol while still having the opportunity to be early. This could allow POL strategies to be live on Liquis (P88 - Join Liquis as a launch Partner) in 1 month from now.

Security: It is mandatory for a protocol where we deploy POL Strategies to have been audited (cf links in the table below). Having contracts verified on a block explorer is an extra safety measure making the protocol more resilient as anybody can check.

Protocol Tokenomics: This criteria is to avoid setting POL strategies on protocols with unknown tokenomics that can put jFIATs at risk.

Money Printer proposed limitation & rationale:

Total value jFIAT minted & allocated:

Across all chains: A simple rule to avoid overexposure would be to estimate a “theoretical backing” for the JFIATs printed by the value of the semi-liquid treasury.

Considering the low demand on the market for JRT we put its value at 0 to be on the safe side Considering the low activity on secondary marketplaces for veNFTs, the ve3,3 positions are also estimated at 25% of their face value, resulting in an interesting discount for buyers. vlAURA are included because of their 4 months lock, which is minimal compared to MAV/APW lock durations

At the beginning of Oct23 we can consider that this represent $110K:

By chains: Mitigate the risks associated with side-chains like BSC plus we took the data from l2Beat which shows that Arbitrum is more decentralized than the others. This split is also enabling a diversification of the Total jFIAT printed in terms of chains. (and also on protocols) NB: We have excluded on purpose Polygon to avoid extra risks as this is where most of the debt of Jarvis is located.

The table above assumes that the total money printer is allocated to the max capacity of each chain, since the DAO is planning to deploy liquidity everywhere.

However, if the DAO decides to allocate less than the maximum on some chains, or to focus on mainnet liquidity for example, the above rule can be updated in a future proposal to remain flexible on the treasury strategies.

By protocols: Limit exploit risks by never going over 17% of all the JFIATs printed in one protocol.

This threshold is enough to fully leverage the unique strategic assets currently held on specific L2s ( veVELO for Optimism & veRAM for Arbitrum), but this also creates an additional safety filter for Ethereum Mainnet which requires diversifying the jFIAT printed in at least two protocols.

Any change in terms of protocol eligibility because of TVL decrease, tokenomics change or new contracts deployment, it will be communicated in the Treasury channel and signers will update the strategies according to the governance decisions.

DAO Strategic Assets overview & Protocols according to the framework above

The above table can be found in the first tab here. Currently, protocols that meet the Base requirements to deploy POL strategies are the following: Aura, Ramses, Velodrome, Thena.

Pros:

Grow jFIAT liquidity Grow Jarvis DAO treasury Optimize strategic assets management

Cons:

Counterparty risks (Bugs, Exploits, Depegs, DAO debt) Requires an active monitoring of liquidity positions

Means:

Set up another DashBoard to automatically monitor the three limitations (Across all chains, By chains, By protocols)

Technical Implementation

According to the above risk framework proposed, the treasury should burn $100K of AMO and rebalance to avoid reaching the threshold max printer capacity and the max by chain

Next Steps:

Prepare Treasury Management part 2: POL strategies & amounts allocated for each protocol

#Voting Options: Yes, Implement the Money Printer risk framework No, rework proposal Abstain