Authors: Pascal T, Jarvis Network team

Date: 18th June 2024

Objective

To shut down the jEUR Credit Lines on Binance Smart Chain (BSC), Arbitrum, and Optimism in order to regain liquidity, traction, total value locked (TVL), and revenues for the protocol.

Background

The jEUR Credit Lines were deployed to meet the demand for jFIATs when the buying-side liquidity on the protocol's pools was depleted. These credit lines allowed users to acquire jFIATs by borrowing them from the protocol, with a debt ceiling set at half of the jFIATs bought from the pools to avoid depleting the liquidity.

However, with the advent of the bull market, jFIAT holders sold jFIATs to buy volatile assets, leading to users borrowing jFIATs and selling them for leverage trading. This behavior has emptied the protocol's reserves across all networks, resulting in an inability to redeem jEUR for USDC on Optimism, BNB, Arbitrum, and a worse situation on Polygon due to bad debt.

Because there is no liquidity left in the protocol, it does not generate revenues, nor do the LPs of the protocol. This represents a significant missed opportunity for all stakeholders, including the LPs of the protocol, the DAO, and the token holders, as the DAO does not generate revenues through the usage of the protocol.

The jEUR Credit Lines have historically provided significant value to users by offering a low borrowing cost of 0.5% compared to the current 10-20% on USDC elsewhere. This has saved users approximately 20K per year. The protocol has already provided a lot of value to these users, and we now request that they return the favor by repaying their debts.

The inability to redeem jEUR has caused depegging and stress among holders and liquidity providers (LPs) in the secondary market. This situation has blocked LPs on platforms like Ramses, Balancer, and Velodrome from earning significant yields, impacting the overall attractiveness of the protocol.

Proposal Details

Shutting Down Credit Lines:

We propose shutting down jEUR Credit Lines on BSC, Arbitrum, and Optimism. The current borrowed amounts are approximately:

• 71K jEUR on Arbitrum
• 131K jEUR on Optimism
• 5K jEUR on BSC

Incentive for Repayment:

To encourage repayment, we will incentivize borrowers to repay within a 4-week timeframe.

Borrowers will be incentivized with a 4.5% reward in JARVIS tokens, which amounts to a maximum of $9.3K if all 207K jEUR is repaid within 30 days.

Implementation Timeline:

A communication campaign will be launched to inform borrowers about the shutdown and repayment incentives.

After the 4-week period, the Credit Lines will enter a redeem mode, allowing anyone to repay the debt of a borrower in exchange for the equivalent value of their collateral at the oracle price at the time of shutdown.

Step-by-Step Process:

• Week 1-4: Announce the shutdown and provide repayment incentives.
• End of Week 4: Officially shut down the Credit Lines.
• Post-shutdown: Enable the redeem mode for repayment and collateral withdrawal.

Rationale

The jEUR Credit Lines have historically provided significant value to users by offering a low borrowing cost of 0.5% compared to the current 8-15% on USDC elsewhere. This has saved users approximately 20K per year. However, the current market dynamics and the resulting depletion of protocol reserves necessitate a change.

Shutting down the Credit Lines and incentivizing repayments will replenish the protocol's pools, restoring liquidity and enabling the protocol to earn revenues again. The DAO earns 20% of the interests generated by the liquidity, and the protocol can also become an LP on other networks to increase TVL and revenues.

Implementation

Communication Plan:

• Inform the community and borrowers about the shutdown and incentives via official channels.
• Provide clear instructions and deadlines for repayments.

Future Plans:

Deploy a new money market on Base during the summer using Morpho Blue and the CCIP bridge from Chainlink to replace the Credit Lines.

This new setup will enhance liquidity, generate revenues, and support the DAO’s financial operations.

Stakeholders

• Borrowers: Will need to repay their jEUR loans within the 4-week period or face the redeem mode.
• LPs: Will benefit from replenished pools and restored liquidity.
• DAO: Will regain revenue streams and liquidity, enhancing the protocol's overall health.
• Community: Will see improved protocol stability and potential for higher yields.

Metrics

Amount of jEUR repaid during the incentive period. Liquidity levels in the pools post-shutdown. Revenue generated from replenished pools and new LP participation.

Budget

Maximum of $9.3K in JARVIS tokens for repayment incentives.

Conclusion

This proposal aims to shut down the jEUR Credit Lines on BSC, Arbitrum, and Optimism to restore liquidity and financial health to the protocol. By incentivizing repayments and transitioning to a new money market on Base, we aim to create a sustainable and profitable future for the DAO.

#Voting Options:

• Yes: Approve the shutdown of jEUR Credit Lines and the repayment incentives.
• No: Reject the proposal and maintain the current state.