Design Overview

How does it work?

Jungle Finance is a Defi primitive protocol built on the Solana blockchain, allowing users to create, buy, sell and redeem their staking or farm rewards instantaneously. SPL Tokens are deposited into Jungle auto-compounding vaults in exchange for two separate tokens; one which represents ownership of the staking or farm rewards generated over a set period of time and the other representing ownership of the base asset without the rewards.

Income Tokens

The Income Tokens (I-TOKENS) may be bought or sold up front, allowing for speculation on future value. These tokens are essentially yield futures on supported assets, offering farmers greater flexibility on their capital. They may be minted or redeemed at any time in combination with an equal number of J-TOKENs so long as the corresponding vault is active, or they may be redeemed individually once their vault has expired.

Since each I-TOKEN represents a claim to redeem tokens at a specific date in the future but in an unknown quantity and an unknown future price, we expect this to be a volatile market. I-TOKENs will likely be priced by the market on a discounted cash-flow (DCF) model basis, adjusted for the market's expectation of future token price in combination with any additional rewards offered through Jungle farming programs. Any natural market premium over the current redemption value of I-TOKENs are also expected to reflect in a corresponding discount on J-TOKEN pricing.

Some users may choose to purchase I-TOKENs as a method of obtaining greater capital efficiency over yield farming directly. While this approach may prove attractive to users who wish to increase their notional holdings in the underlying token, we expect the I-TOKEN market to be less liquid than that of the underlying token. As the I-TOKEN total market value is functionally smaller than the corresponding J-TOKEN market, capital constraints may naturally discourage larger entities from directional positioning in the I-TOKEN markets. This may result in an opportunity advantage for users operating with less capital.

Jungle supports USDC markets for each I-TOKEN, facilitated by Raydium's Automated Market Maker (AMM) platform. Raydium provides a constant-function swap pool with a portion of deposited funds and places the remainder in orders on the Serum orderbook, ensuring multiple forms of liquidity.

Market functionality for I-TOKENs is maintained by incentivizing Raydium LPs with JFI emissions and by accumulating protocol-owned liquidity (POL) through bonding programs for each I-TOKEN market. This ensures product reliability and a minimal degree of sustained market efficiency. Jungle does not redeem the I-TOKENs held as part of the POL for their yield.

This results in excess yield becoming available for redemption post-expiry and creates a chance for arbitrage. Upon the vault re-opening for its next cycle, fresh I-TOKENs created by deposits may redeem for the previous cycle's remaining rewards at a rate proportional to the outstanding I-TOKEN supply.

This dynamic provides a minimal degree of economic influx for each I-TOKEN cycle restart and helps maintain a consistent level of market functionality across all open I-TOKEN durations.

Jungle Tokens

Our Jungle Tokens (J-TOKENS) represent deposited capital and may be used to speculate on asset price, as collateral for loans and for any other purpose within the Solana ecosystem. Unlike I-TOKENs, J-TOKENs have no expiry date and are fungible with other J-TOKENs for the same underlying asset. They may be minted or redeemed at any time in combination with an equal number of I-TOKENs from that I-TOKEN's active vault. They may also be redeemed individually from the program-wide redemption pool funded by vaults as they expire.

Natural market dynamics are expected to result in J-TOKENs trading at a discount to their underlying in proportion to any market premium placed on I-TOKENs. I-TOKENs may trade with varying premiums between expiries however, potentially resulting in arbitrage opportunities through minting and redemption across expiries.

Since J-TOKENs represent a 1:1 notional claim to the underlying token, they are not expected to be volatile in relation to their underlying token. We expect these tokens to be priced at a discount to their redemption value according to any market premium assigned to their corresponding I-TOKEN. This is a byproduct of the arbitrage opportunity created any time the I-TOKEN and J-TOKEN pair is trading above its combined mint/redemption value.

This natural discount to redeemable value may prove attractive to users desiring speculative exposure on the underlying asset, with the added bonus of additional yield or farming rewards offered on J-TOKEN markets by Jungle. These rewards cannot easily reflect in J-TOKEN pricing due to the natural market effects of arbitrage and may prove attractive to entities who are unable to participate in the smaller I-TOKEN markets due to capital constraints.

Jungle supports market pairs of J-TOKENs against their underlying token, facilitated by Saber's AMM program. Saber provides constant-function AMM trading pools using the StableSwap pricing model. This ensures maximal, concentrated liquidity while still accommodating for fluctuations in price.

Market functionality for J-TOKENs is maintained by incentivizing Saber LPs with JFI emissions and by accumulating protocol-owned liquidity (POL) through bonding programs for each J-TOKEN market. In the same manner as the I-TOKENs, Jungle does not redeem J-TOKENs held in POL.

Unredeemed J-TOKENs create a different form of arbitrage opportunity due to their redemption pool being common across vaults of the same underlying. Any market discount between J-TOKENs and their underlying may be immediately realized as profit so long as the redemption pool holds a balance. Any reduction in the discount may result in new premiums to be arbitraged on active vaults.

If priced at a discount by the market, they may provide cheaper cost-basis exposure to the underlying asset for entities of all sizes.