jUSDC & jGLP Smoothpaper

"Since its inception, Jones DAO has strived to bring the best possible DeFi strategies to market. With GLP, Jones saw an opportunity to create something that no one else had conceptualized: a dual token system with MAXIMIZED Delta of GLP and minimized risk to GLP volatility."

jUSDC & jGLP Smoothpaper

Introduction

As many observant Jonesies know - Arbitrum is home to a protocol that towers over others in terms of volume & TVL: GMX.

This protocol is so prolific in part because of its novel token system, GLP. The GLP token is an index of ETH, BTC, stablecoins, and other assets, which generates yield based on trader activity and fees accrued to the GMX platform.

Many protocols have endeavored to create the leading strategy for GLP yield through various iterations, but none have been sustainable, transparent, or efficient enough to covet the title.. until now.

Introducing the Jones GLP & USDC vaults, two symbiotic DeFi strategies based on GLP!

Our Motivation

Since its inception, Jones DAO has strived to bring the best possible DeFi strategies to market. With GLP, Jones saw an opportunity to create something that no one else had conceptualized: a dual token system with MAXIMIZED Delta of GLP and minimized risk to GLP volatility.

The Jones GLP and USDC vaults add value to the ecosystem in three primary ways:

  1. They allow users with various risk appetites to access real yield from GLP.
  2. They decrease the risk of GMX LPs fleeing to capture spot market movements, thereby increasing the availability of sticky liquidity for GMX users.
  3. They deliver a similar volatility profile to major crypto assets through jGLP’s leverage, allowing users to capture the full upside of token price appreciation while earning 30-60% APY in real yield.

We will get into how they accomplish these value-adds later on in this article, but let’s first dive into the structure of these two vaults.

jUSDC Vault Architecture

The USDC Vault forms the foundation of the overall jUSDC/jGLP system. First, it’s important to remember that jUSDC is not a stablecoin, but accrues stablecoin yield. The jUSDC Vault provides one of the best sources of transparent, sustainable stablecoin yield in DeFi.

Here’s how it works:

  1. Users deposit USDC into the jUSDC Vault and receive jUSDC in return
  2. The jUSDC Vault lends to the jGLP Vault to provide leverage for its GLP position
  3. The jUSDC Vault receives incentives from lending to the jGLP Vaults and delivers that yield to depositors

It’s as simple as that - our jUSDC Vault simply provides the leverage to our jGLP Vault.

But what about controlling the leverage?

Our jGLP Vault automatically rebalances to keep leverage and risk within algorithmically defined ranges. Your deposits are automatically protected from liquidation. jUSDC is expected to provide far more attractive yield than other stablecoin options available today.


jGLP Vault Architecture

Our jGLP Vault generates transparent, amplified GLP yield for depositors. As noted above, the jGLP Vault works closely together with the jUSDC Vault.

Here’s how it works:

  1. Users deposit GLP or any GLP basket token into the jGLP Vault and receive jGLP in return
  2. The jGLP Vault borrows USDC collateral from the jUSDC Vault to mint more GLP, thereby gaining leverage on its GLP position.
  3. The jGLP Vault automatically balances leverage to remain liquidation-proof
  4. The jGLP Vault delivers amplified and transparent yield to depositors

Again, the jGLP Vault only borrows from the jUSDC Vault to gain leverage on its position.

Keep in mind: the amount of jGLP that can be minted is dependent on how much jUSDC is available.

This is done to safely manage leverage and ensure that jGLP collateral is always healthy.

Risks

Remember, no DeFi strategy is risk-free. While we have designed the jGLP and jUSDC Vaults to be as safe as possible, risks still remain. General risks include:

  • Stablecoin de-peg events (underlying USDC)
  • Smart contract hacks (including GMX and GLP)
  • Market movements/price risk


NOTE, none of this paper is to be construed as financial advice or a recommendation of any kind.

Always DYOR.


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