WHAT THE PROJECT IS ABOUT

This is a modest attempt at explaining in hopefully simpler terms, the complex but powerful product that Jarvis Network has been building over the past 2 years. The main protocol “Synthereum” has soft-launched on mainnet and is about to reach Polygon Network, as this personal “Lite Paper” is being written.

The TL;DR version can be found by simply reading bolded sentences.

Synthetic assets. Like Synthetix, UMA, Mirror, MakerDAO, etc, but different market segments and with a different protocol design. Synthetix for example, is purely for trading, UMA for developers, Mirror for stocks, while here the purpose is to provide a building block for DeFi.

The same way MakerDAO democratized the usage of DAI, Jarvis Network is building an on-chain Forex for people to be able to enter / exit (on-ramp / off-ramp) DeFi with their own local currency, avoid negative interests on their savings, earn yields on their stablecoins, all without holding dollars, and we do all this while fixing the liquidity problem (that is, the fact that nothing is liquid in DeFi except ETH and dollar-pegged stablecoins).

Also called “synthetic” or “synth”. It’s a token that tracks the price of something else (like DAI tracks the price of the US dollar) and can be created (or “minted”) by locking some collateral in a smart contract. So if you want to get 1000 dollars’ worth of DAI, you can create those DAI on MakerDAO’s protocol by locking at least 1500 dollars’ worth of something else (like ETH).

Technically Synthereum protocol could create any type of synthetic asset, but the current focus is on minting synthetic currencies, like a synthetic euros (jEUR), synthetic British pounds (jGBP), synthetic swiss franc (jCHF) etc, to power an on-chain Forex later down the track. They’re currently all backed by USDC. Later on, more currencies will be added, more assets usable as collateral, as well as different synth types, like stocks.

On Synthetix the Collateral Ratio (CR) is 500%, so for 1000 USD worth of any Synth needed, 5000 USD worth of SNX token must be locked. It’s not really efficient to lock 5 times more than what you want to borrow. Especially for a liquidity provider (LP) because they earn rewards on a much smaller amount than what they committed to the protocol. Commit 5000 to get rewards on only 1000.

On Jarvis, the CR is only 125% so 1000 USD worth of synth can be created by locking only 1250 USDC. The main collateral we accept for now is preferably USDC. The LP earns rewards on 5 times more than what he committed. He commits 250 and earns rewards on 1250.

Synthetix for example requires you to have collateral in SNX, which means your collateral’s value is volatile because the SNX price is volatile. If SNX’s price dumps, your collateral value dumps, and you could end up under collateralized. Rekt. On top of this, Synthetix works with a debt system labeled in crypto. This means if traders bought mostly Bitcoins (you can’t choose who’s trading against you), and the price pumps, your debt’s value will also pump. Rekt again.

At Jarvis, the preferred collateral is USDC which is NOT volatile, and there is no crypto labeled debt. It’s all in USDC so you’re safe. You can also choose who you want to trade against, as a counterparty.

Jarvis lets you create some synth by using 2 methods:

CR is 125% as I said before, so you just give 1000 USDC to an LP, he adds his own 250 USDC (or more), then he mints 1000 dollars’ worth of Synth and gives it to you. Done. No liquidation. No slippage. No bullshit. If you want your USDC back, give the same amount of synth you received back to the LP and he will reverse the process by burning the synth and giving you back the USDC collateral behind.

Synthereum lets you swap without slippage at the oracle price, between our synths and USDC. This means that any synth from Jarvis (for example jEUR) can be used to buy any ERC-20 tokens (for example SUSHI) as if you were buying it with USDC. No need to create a pool specifically for SUSHI-jEUR, since SUSHI-USDC already exists. This is possible because of an atomic swap made through a killer feature called OCLR (on-chain liquidity router).

In Crypto the 3 titans of USD pegged stablecoins are DAI from MakerDAO, USDT from Tether (Bitfinex), and USDC from Circle (Coinbase);

On top of that, legal risks due to the centralized nature of USDC is easier to anticipate and counter than technical risks (hack) inherent to DAI’s protocol MakerDAO.

So all things considered, USDC is not a bad choice. In fact, it’s the best choice because it is the most trusted stablecoin from a regulatory standpoint. That’s a big plus for potential partners dealing with FIATs such as web wallet service providers and on/off ramps. These guys aren’t allowed to deal with volatile shitcoins while USDC is seen as reassuring. It’s important for scaling.

Later down the road the plan is to put those USDC on AAVE to make them fungible and thus add a censorship-resistant layer to the USDC equation.

The synthetics are minted at Chainlink Oracle’s price. This means there is no slippage when you buy them, and they keep their peg with the underlying asset.

Ditch the US dollar if you don’t use it every day. You no longer need to buy tokens with USD. Synthereum is meant to be integrated into other applications. It lets people enter or exit DeFi by using their own local currency while still buying with the best liquidity.

This is an awesome feature to offer to your users if you provide web wallet services. The USD is not always easily available in every country, it is subjected to rather high inflation (+/- 5% ), and some people’s currency is much stronger than the dollar. The EUR performed better than the USD between 2020 and 2021, so everybody that held USD in their savings or USD pegged stablecoins instead of Euros got rekt by roughly 15%.

Beyond pure financial instrument creation, we’re also seeing the expansion of other segments such as NFTs or Gaming, etc. All of this is part of the same new financial system which requires a free flow of capital worldwide; That’s what a FOREX is for. For DeFi not to remain a niche it has to let “the other 7 billion” get in, without being forced to rely on a single currency; The US Dollar.

The protocol generates cashflow by charging fees every time a synth is created or destroyed (“minted” or “burnt”). Thus, beyond our own user acquisition scheme, the more we get integrated into other dapps, the more we’ll siphon volume from them, and the more fees will be collected. Think partnerships with leverage trading protocols, stocks trading, crypto-casinos, online gaming, etc.

Because synthetic assets are always minted at the Chainlink oracle price (the “real” price), there will always be price differences between Synthereum and DEXs like Uniswap, Sushiswap, etc, but also between different stablecoins like EURS, sEUR, jEUR, etc. This creates arbitrage opportunities (almost free money) and helps to maintain the peg of various assets.

You could, for example, generate a native yield (aka excluding mining rewards) without suffering impermanent loss (IL) by providing liquidity on a euro-denominated pair such as a EURS-jEUR pool. Doing such, you would also avoid negative interest rates, and hedge yourself against the dollar’s inflation.

Liquidity Providers are rewarded in many ways:

The JRT farming program will start on Polygon in September. You will receive JRTs as a reward for minting jFIATs and providing liquidity for them.

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