Thread by @RyAn__0x

_ @JPEGd_69 $JPEG

A MEGA Threadoooor 🧵 highlighting my thoughts and research on the upcoming JPEG'd protocol. The protocol that likely needs no introduction, lead by the whale himself @Tetranode 🐳

1/ What is JPEG'd?

With first mover advantage in the space, JPEGd is a decentralised lending platform enabling borrowers to use their NFT's as the collateral for their loan. Truly bridging the gap between NFTs and DeFi.

2/ With liquidity being one of the most important aspects of every market and asset, it seems a natural progression for DeFi to tap in to the illiquid nature of NFTs, allowing investors to further leverage their assets whilst maintaining ownership for long term appreciation.

3/ JPEG'd is positioned as an entirely new DeFi primitive, of which they are labelling as NFDPs (non-fungible debt positions). Enabling NFTs holders to open NFDPs using their NFT asset as collateral.

4/ At first, lending will only be available for Crypto Punk holders. IMO this is a safe and sensible approach to ensure the protocol runs successfully. Crypto Punks are also amongst the most liquid NFTs with the highest capitalization.

5/ Crypto Punks - @DefiLlama

6/ In future, @JPEGd_69 plans to expand to all NFTs, including #EtherRocks #ArtBlocks, #DinoPals, #Autoglyphs and #BoredApeYachtClub

Bullish for NFT's

7/ Solving a problem?

It's understandable why until now, it has not been possible to borrow against NFT assets. Think... illiquid asset, market volatility, pricing difficulties, and impractical oracle feeds to name a few.

Lets look at how JPEG'd makes this possible 👀

8/ How it works and how to use? 👇

Initially, JPEGd will allow users to borrow up to 33% of their Cryptopunk value. Holders will deposit their punks as collateral into the JPEG'd vault and be able to mint a stable coin called $PUSd.

9/ The cost of this will be a competitive Interest rate of 2%, along with a 0.5% withdrawal fee. In order for holders to withdraw their collateral asset from the vault, the full debt plus any outstanding accrued interest must first be repaid.

10/ Punk Valuations:

Aliens will be valued at 4,000 ETH, Apes at 2,000 ETH, and all other punks will be valued at the punk floor price, derived from their custom built @chainlink oracle. This oracle will be essential to maintain stability of borrowing and fair liquidations.

11/ This custom oracle will measure the Time-Weighted Average Price (TWAP) of both sales and floor prices to create a blended price that will be used to value floor punks.

12/ With a fair and true collateral valuation feed for floor prices, debt positions will allow 32% of the collateral value to be drawn and liquidations will occur if the debt/equity ratio is 33% or above.

13/ For Punk holders with a higher-than-floor valuation, a price will be proposed and agreed on by both the holder and the DAO (Governance token holders).

14/ In order for the holder to increase their credit limit, they will be required to lock-up the $JPEG token for a minimum of 1 year. This is where things get interesting for the $JPEG token.

An example of the lock-up figures are below 👇

15/ If the holder and DAO both agree a particular Punk is worth $1m, the borrower will have to lock up $82,500 worth of JPEG for 1 year. [$1m (collateral value) *33% (max loan amount) * 25% = $82,500.

16/ $JPEG Token

The JPEG token is the protocols governance token. However, as you can see from the above example, the token will accrue fundamental value due to borrower lock-ups. Reducing circulating supply, and scaling it’s value with the Cryptopunk market.

17/ Insurance

This is a really exciting addition to the protocol IMO. Markets are unpredictable and some NFT holders really value their assets. Providing insurance gives holders/borrowers the confidence that they can still retain their asset, assuming unfortunate liquidation

18/ Users can elect to purchase insurance for a non-refundable 1% fee on the loan they draw. If they are liquidated they can repurchase their punk back from the DAO after repaying debt, accrued interest, and a 25% liquidation penalty. Sucks - but its better than being punkless...

19/ Bullish Protocol Components:

- $PUSd - The JPEG'd native stable coin
- $JPEG - Governance & Lock-ups
- Custom decentralized Chainlink oracle
- Innovative liquidation process
- Insurance mechanism (Cool AF)
- Huge partnerships
- Team and investors
- Solid tokenomics

20/ Investors & Advisors:

If you are well integrated within the DeFi space - These guys need no introduction. Some of the most of influential and successful people in DeFi.

CHAD list below:

21/ @Tetranode
@dopex_io
@TheLAOOfficial
DC Investor
Carson Cook (TokeMak)
Andy Chorlian (Fractional)
@santiagoroel
@jamis (PleasrDAO)
@dcfgod
Mariano Conti
Richard Ma (Quantstamp)
DeFi God
and others

22/ Tokenomics

Total supply: 69,420,000,000

Allocation:

- DAO 35%
- Team 30% (2 years vested, 6 month cliff)
- Donation event 30% (unlocked)
- Advisors 5% (2 years vested, 6 month cliff)

23/ With the team and advisor tokens being vested for 2 years linearly with a 6 month cliff, we can see that the tokenomics for JPEG'd are favourable.... Safu from dumpoors

For the Degens - Il be doing a whole thread soon on how you can better analyse protocol tokenomics 🔥

24/ Partners & Infrastructure

JPEGd are already aligning with some of the most reputable protocols in DeFi to maintain the efficiency of the project. Very Bullish!

So far, they have mentioned the following:

25/ _ @OlympusDAO $OHM

Launching Olympus Pro bonds as one of the first NFT-focused protocols to utilize bonds for liquidity. Olympus DAO will help oversee JPEG launch a bond program for it’s ETH/JPEG liquidity pool

26/ _ @TokenReactor $TOKE

JPEG’d intends to pursue various strategies utilizing Tokemak, beginning with launching a “Token Reactor” to deepen JPEG’s liquidity at the token’s launch. Less LP incentive costs means less sell pressure on the JPEG token 🚀

27/ _ @MIM_Spell $MIM

JPEG’d will be seeding a liquidity pool incorporating MIM, the stablecoin of the Abracadbra protocol. Users can mint PUSd — JPEG’s native stablecoin — to obtain a line of credit using their NFTs as collateral.

28/ _ @dopex_io $DPX

JPEG'd is planning to launch a SSOV for the JPEG token on Dopex. Users will be able to purchase call options on JPEG using the liquidity pools and options management suite provided by Dopex.

29/ Market

An observation I had was, whilst the market is not looking great right now, I do believe this project is actually launching at a great time and whilst this isn't great for buying pressure, it should mean that the protocol gets utilized immediately...

30/ ... for example if market dips heavily, punk holder might be keen to unlock liquidity from illiquid assets to buy the bloood 🩸

31/ Overall, I am super excited to see how this project delivers and if it proves to be successful, this could unlock so many avenues across DeFI and NFT composability.