Jet Protocol: Fixed-Rate Lending Takes Flight on Solana

TL;DR

Jet Protocol is an open-source, non-custodial borrowing and lending protocol built on the Solana blockchain. It enables users to lend and borrow crypto assets at fixed rates for fixed terms, bringing more capital efficiency and flexibility to Solana DeFi. Jet Protocol is governed by the JetDAO, a decentralized community of JET token holders, contributors and developers.

What is Jet Protocol?

Jet Protocol is aiming to become the go-to platform for fixed-rate, fixed-term lending and borrowing in Solana DeFi. While most DeFi lending protocols today offer variable rates that can fluctuate significantly, Jet enables users to lock in stable rates for a set period of time. This gives both lenders and borrowers more predictability and control over their DeFi positions.

Under the hood, Jet Protocol is an evolution of the token-lending program found in the Solana Program Library (SPL). The Jet team has expanded this foundation with innovative new features like isolated lending pools, interest rate curves, and an on-chain order book for matching lenders and borrowers.

The end result is a powerful yet user-friendly decentralized lending platform that makes the most of Solana's high speed and low cost blockchain infrastructure. By focusing on capital efficiency, Jet unlocks new flexibility for Solana DeFi users to manage their digital asset portfolios.

How Jet Protocol Works

At its core, Jet Protocol facilitates collateralized crypto loans between lenders and borrowers. Lenders can earn attractive yields by depositing assets like SOL, USDC, and other major tokens into Jet liquidity pools. Borrowers can draw loans from these pools by posting collateral from a range of supported crypto assets.

The key difference with Jet is that these loans are issued and repaid on fixed terms, rather than the open-ended model common with most DeFi lending protocols. When initializing a loan, borrowers select their desired loan amount, collateral, interest rate, and duration (e.g. 30 days). This is posted as an order to Jet's on-chain order book.

Lenders can then choose to fill these loan orders to earn the specified interest rate over the loan's term. If a loan order is not fully filled, any lender can supply partial funding. Multiple lenders can fund a single loan, and individual lenders can fund multiple loans, making Jet highly composable and flexible.

Jet's fixed-rate loans are over-collateralized, meaning borrowers must deposit collateral worth more than the value of their loan. This protects lenders in case of borrower default or significant collateral price swings. If a loan's collateral falls below the required minimum, it may be liquidated to repay lenders.

Jet has developed innovative liquidation mechanisms to handle undercollateralized loans. Bot operators continuously monitor loans and can trigger liquidations to earn a liquidation bonus. Jet also allows for negotiated liquidations, where a borrower may accept a lender's liquidation offer to close a loan position.

The JET Token and JetDAO

Jet Protocol is governed by the JetDAO, a decentralized autonomous organization that includes all JET token holders. The native JET token acts as the protocol's governance token, entitling holders to propose and vote on changes to Jet's parameters.

JET has a fixed supply of 1 billion tokens, distributed between the project team, early investors, a DAO treasury, and an allocation for community airdrops and liquidity mining rewards. A portion of the interest paid by borrowers is also converted to JET and distributed to lenders staking their JET tokens.

The JetDAO is responsible for major protocol decisions like adding new collateral asset types, adjusting interest rate models, setting liquidation parameters, and funding grants for development. Jet follows a formal governance framework that is enforced by on-chain voting through the JET token.

What Makes Jet Protocol Unique?

Jet Protocol stands out among Solana lending protocols for its focus on fixed-rate, fixed-term loans. While variable rate lending is the norm in DeFi, Jet believes there is strong demand for the predictability and lower risk of fixed rates, especially among institutional users.

Another differentiator is Jet's hybrid order book model, which allows for more flexibility and efficiency in matching lenders and borrowers. By supporting both single-term loan orders and interest rate curves, Jet caters to a wider range of lending strategies.

Jet is also natively built for composability within the Solana DeFi ecosystem. Through an integration with Serum, Jet enables the use of Serum DEX margin positions as collateral. Jet has also partnered with other leading Solana projects like Saber, Kin, and Raydium on cross-app liquidity and rewards programs.

Jet Protocol Security and Audits

As an open-source and non-custodial protocol, Jet Protocol has made security a major priority. Jet's smart contracts have undergone extensive security audits by leading blockchain audit firms. The protocol also operates a bug bounty program to surface any potential vulnerabilities.

One key security feature of Jet Protocol is the use of isolated lending pools. Unlike protocols that use a single shared pool, Jet maintains distinct pools for each supported collateral asset. This compartmentalization protects the overall protocol from contagion in the event of outsized losses in any single market.

Jet has also implemented a number of economic safeguards, including conservative collateral factors, liquid secondary markets for seized collateral, and a backstop insurance fund. These measures are designed to protect lenders and ensure the protocol can weather significant market volatility.

What's Next for Jet Protocol

Following the launch of its core lending and borrowing functionality, Jet Protocol is focused on expanding its feature set and user base. Near-term roadmap objectives include introducing tokenized fixed-rate debt via interest-bearing NFTs, expanding cross-chain asset support, and optimizing the JET staking rewards system.

Further down the line, Jet is exploring adding fixed-rate structured products like collateralized debt obligations (CDOs) and credit default swaps (CDS). The protocol is also building out its integrations with other Solana DeFi platforms to enable new use cases like fixed-rate yield farming incentives.

Through these initiatives, Jet aims to cement its position as the premier capital-efficient lending solution in Solana DeFi. With strong backing from top investors, a seasoned team, and a quickly growing user community, Jet Protocol is well-positioned to continue innovating on its mission to make DeFi more accessible and attractive to mainstream users.