Collateral Onboarding Domain Evaluation Criteria (CODEC)

The CODEC defines Jet Protocol's domain criteria when evaluating assets for onboarding. The CODEC evaluates an asset and its project against detailed data points across all protocol-impacting domains.

Overview of Protocol & Metrics

Protocol Summary

The Protocol Summary provides a brief introduction to the underlying protocol of the asset and its token mechanics. This section establishes context for further evaluation, giving insight into project team and high-level history of the project and the token. Data gathered in this section include:

• Native ecosystem & Protocol Type (Peer-to-peer, Peer-to-Liquidity, etc.)

• Asset Type (Native or Wrapped)

• Asset (Token) Use

• Asset Summary Description

• Project's Founding Members

• Legal structure of the protocol (LLC, Association, Foundation, DAO)

And, if applicable:

• ICO Date

• Initial Price & Valuation

• Capital Raised

• Proportion of ICO raised converted into fiat

• Details and amounts of any fees generated by the protocol

Tokenomics

This section helps the evaluators to establish an understanding of the circulating supply of the token, how centralized is its control, as well as how token's mechanics might impact the supply in the future. Details under assessment include (where applicable):

• Way of issuing & distributing the tokens

• Current token distribution

• Active Addresses or Users holding the asset

• Investor Concentration

• Whale Presence

• Pre-ICO investors

• Token distribution between project team vs. investors vs. public

• Token distribution changes over time

• Future issuance mechanisms

• Burn mechanism (deflationary)

• Decreases or increases in token supply over time

• Possibility to mint new tokens by the project

• Staking mechanism

• Slashing mechanism

• Vesting schedule (if any) & vesture limitations

• Special purpose of the token or issuance schedules (e.g. liquidity mining)

Audits

The Governance Committee will evaluate if the protocol, project and the asset have been audited by recognized auditors. If available, audits will be reviewed and their results will be incorporated into overall assessment of the asset.

DEX Volumes & Liquidity

Trading volumes and available liquidity are important when estimating the speed and difficulty of recycling the asset in case it needs to be liquidated. Currently, Jet liquidates asset positions on Orca and Saber only and therefore the evaluation focuses on liquidity available on those venues. To assess liquidation risk, the Governance Committee will look at:

• Asset's supply on decentralized exchanges over time

• Liquidity amounts on Solana and on Orca and Saber

• Daily aggregated trading volume in USD

• Liquidity depth (amount of liquidity in the pools)

• Price volatility

If asset is used outside of its protocol:

• Protocols where asset is integrated

• Amount of asset liquidity existing in those protocols

Oracles

The number of oracles monitoring the asset and number of price feeds available are needed to assess the accuracy of asset's pricing information. Jet uses Pyth network to source data for its onboarded assets, so it's beneficial if the asset is monitored by Pyth with more than 5 feeds available.

Bridges

In addition, for wrapped assets, the security and stability of bridges used needs to be assessed. For non-custodial bridges, audits should have been performed and audit reports will be evaluated as part of asset's risk assessment.

Legal Specifications

To complete the assessment of the asset, Jet Governance Committee will evaluate legal profile of the project and the token to determine if there are any regulatory-related risks or limitations which need to be considered. Legal profile will be determined with following information:

• Token issuer (if any)

• Regulatory Status of the token (based on legal opinions, prospectuses, public disclosures, filing documents, etc.)

• Jurisdiction(s) in which the token was issued

• Token issuance as part of a regulatory process (e.g., securities offering) or funding process

Other considerations

Governance Committee will also consider other qualitative aspects of the project and token, which may influence the assessment. Those will be defined on a case-by-case basis and may include criteria such as asset's general integration into DeFi protocols, project's complexity, value proposition of the protocol, counterparty risk, etc.

Future Criteria

The CODEC are a living organism intended to be improved and tailored to the preferences of Jet community. At the same time, the assessment criteria directly reflect the characteristics of Jet product and capabilities of Jet protocol. For this reason, Jet community should steer the v2 of CODEC and indicate where Jet should open up more, where it should be more conservative and where it should develop mechanisms to improve the protocol itself. Some of our ideas are:

• Introducing caps to open the possibility for young assets to apply

• Opening up the possibility to liquidate directly to AMMs

• Include liquidation against other currency pairs (e.g. SOL)