S/JWLUSD

JWLUSD is a type of token that follows the dual token liquid staking mechanism.

Minting

JWLUSD is a stable token that can be minted using either USDC, USDT or DAI. JWLUSD is not growing in value and is always worth the same as the backing (a mix of USDC/USDT/DAI).

JWLUSD can make use of POL by minting 1.1 JWLUSD per deposited stablecoin. This does not mean JWLUSD is not 1:1 backed. JWLUSD is 1:1 backed. Please read up on how POL works, what it does, and how the backing is ensured.

Staking

Staking JWLUSD will give the user SJWLUSD, which is appreciating in value against JWLUSD multiple times per day.

The stablecoins used to mint JWLUSD are being deposited into the Hatom Money Market. The lent and collateral activated stablecoins generate rewards. Unlike SJWLEGLD, which gets its revenue from EGLD staking that is only being paid out once per epoch/day, SJWLUSD appreciates in value more frequently. The rewards from lending + collateral activation on Hatom are being accounted for in the SJWLUSD-JWLUSD ratio multiple times per day.

SJWLUSD can be transferred between wallets too. This allows you to trasnfer your ownership to another wallet, without having to unstake your SJWLUSD.

Rewards

Rewards for JWLUSD staking stem from these sources:

  • The assets used to mint JWLUSD are deposited into Hatom Money Markets (and if possible, collateral activated) to generate yield.

Because of the difference in staked stable tokens to existing stable tokens, the APR for the staked tokens is typically higher.

Unstaking

Unstaking SJWLUSD for JWLUSD is possible instantly and at no additional fees.

Swapping

You can swap JWLUSD at varying market rates on Ashswap. If the price of JWLUSD is below it's intrinsic value, it may make sense to arbitrage the price difference.

Redemption/Unbonding - Unbonding NFT - Redemption Fees

JWLUSD is redeemable in a 1:1 ratio for it's backing. This means, upon redemption, you will receive a mix of stablecoins. Example: If the current backing of JWLUSD consists of 40% USDC, 30% USDT and 30% DAI, when you redeem $100 JWLUSD, you will receive $40 USDC, $30 USDT and $30 DAI. The unbonding period for JWLUSD is 10 epochs.

When unbonding, you receive an NFT from JewelSwap. UJWLUSD NFT This is a so-called unstaking NFT You can use this NFT to send it to a different wallet, sell it on NFT Marketplaces. You need the unstaking NFT to claim your redeemed after those 10 days. The NFT proofs your ownership of the unbonding JWLUSD.

Most of the time, there are no fees associated with redeeming JWLUSD. A dynamic fee mechanism may decide to start charging a small fee when redeeming JWLUSD. This mechanism adds a redemption fee in case of high redemption requests.

This is to prevent bank-run scenarios, protect leveraged farms from forced closure, protect JWLUSD LP liquidity, allow liquidity to be removed from POL if needed and also stabilize the SJWLUSD APR. The intention of this mechanism is solely to protect users.

More Information on the JWLUSD dynamic fees redemption mechanism

If many redemptions are happening at the same time or the volume of the redemptions is high, the ratio between existing stable tokens and staked stable tokens will quickly diminish. This in turn will make the APR of SJWLUSD fall very quickly.

Furthermore, a high influx of redemption requests can lead to the forced closure of many leveraged yield farms, utilizing JWLUSD.

Assuming JewelSwap has to force close a lot of leveraged farms that utilize JWLUSD, the following might happen:

  • Lost assets due to swap fees and slippage when closing the farm

    • This impacts the farmer, since he did not want to close the farm and now it had to be closed and some of his profit was eaten by swap fees and slippage

  • Liquidity in the affected Liquidity Pool is now lower

    • Depending on how many leveraged positions had to be closed, liquidity could be impacted significantly

      • Which increases slippage when swapping and affects all other liquidity providers as well

  • Price changes may lead to liquidation

    • Because of the forced closure of some leveraged farms, other farmers that did not have their farm closed may see themselves closer to a point of liquidation

      • Or in the worst case, their farm has to be liquidated because of the forced-closure of the other farms

Moreover, while Hatom's lending protocol has dynamically rising borrow fees to disincentivize a high utilization rate of lent funds, we need to ensure that we can withdraw enough stablecoins from lending, when needed. Extreme market scenarios with extremely high utilization rates of stablecoins on Hatom are rather rare, but possible. By putting more stress onto Hatom's lending protocol by withdrawing large sums of stablecoins during these market scenarios, we are not helping the situation.

To prevent these scenarios, a dynamic fee may be put into place by the system to disincentivize mass-redemptions to protect stakers, farmers and prevent bank runs.

Fees

30% of the generated rewards from stablecoin lending are kept by JewelSwap. 70% are going to SJWLUSD.

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