Jito will airdrop 10% of the total supply of JTO tokens on January 1 next year, and the snapshot was completed three days ago.
Written by Karen, Foresight News
Liquidity Staking Derivatives (LSD) plays an important role in the decentralization of the network. LSD embedded with MEV (Maximum Extractable Value) rewards has also attracted much attention because it can fairly distribute MEV rewards to token holders.
Today, Foresight News will introduce Jito, a liquidity staking product that can capture MEV returns in the Solana network. Jito also announced today that it will soon launch a governance token and will use 10% of the token supply for airdrops.
It is worth mentioning that in mid-October 2023, Lido announced that it would no longer support SOL staking. In fact, the Lido team P2P on Solana began to seek a $1.5 million grant from Lido DAO in September, but the relevant proposal was not voted through. Therefore, Lido will no longer support SOL staking.
In the more than one month since then, Jito has benefited from the situation, with the locked amount surging from $57 million in mid-October to the current $360 million, a 5.4-fold increase, while the price of SOL has increased by 1.5 times during the same period. At the beginning of this year, Jito's locked amount was less than $5 million, and it has now become the second largest protocol in the Solana ecosystem, second only to the liquidity pledge protocol Marinade Finance.
What is Jito?
In August 2022, Jito Labs announced the completion of a US$10 million Series A financing round, led by Multicoin Capital and Framework Ventures. Together with the previous US$2.1 million seed round of financing, Jito Labs' total financing amount is US$12.1 million.
Investors in the Series A round also include Solana Ventures, Delphi Digital, MGNR, Robot Ventures and 18decimal. In addition, Solana Labs co-founder Anatoly Yakovenko, Coral founder and former Alameda Research engineer Armani Ferrante, and Solana Foundation communications director Austin Federa also invested.
At that time, the Solana ecosystem and FTX were still in a prosperous state. On November 1, the day before CoinDesk disclosed the Alameda Research financial report that opened the Pandora’s box of the FTX and Solana ecosystems, Jito launched the MEV-driven staking derivative JitoSOL, which aims to complement the Jito-Solana validator client and help improve Solana’s performance, allowing staking and MEV rewards to be earned while maintaining SOL’s liquidity and DeFi opportunities.
After that, Jito was tepid and experienced a relatively stable period. It was not until the second half of this year that a turnaround came, that is, Lido no longer supports SOL staking and the Solana ecosystem bloomed again. In terms of the number of locked positions, the current SOL locked position on JitoSOL is about 6.8 million, and the Jito MEV validator network running the Jito-Solana client operates 41% of the network staking weight.
How does the Jito-Solana validator client work? Where do MEV rewards come from?
In simple terms, the Jito-Solana validator client implements an auction mechanism where traders can bid on the opportunities brought by these MEVs. The winning bidders will be assigned to the validators and then to the stakers.
Maximum Extractable Value (MEV) is the value that validators and network participants can extract on the blockchain by reordering, inserting, or censoring transactions.
The Jito-Solana validator client has been open sourced by the Jito Foundation and is designed to earn MEV revenue and optimize its distribution to network validators and stakers. From an architectural point of view, the Jito Labs block engine is responsible for obtaining transactions from the relayer and forwarding this data to the searcher, then obtaining bundles (a list of transactions executed in order) from the searcher, and performing bundle simulations, as well as selecting the most profitable transactions for the network, and finally forwarding the best transactions and bundles to the validator for processing. The Jito Labs block engine charges a 5% fee on all MEV rewards.
Jito-Solana Architecture
That is to say, users deposit SOL and obtain JitoSOL. Jito Stake Pool entrusts the SOL deposited by users to validators that support MEV. These validators then auction block space and obtain MEV rewards. MEV rewards will be redistributed to the Stake Pool as additional APY. In other words, users can obtain dual rewards of staking and MEV at the same time.
So how does JitoSOL make money? JitoSOL charges an annual management fee of 4% of the total rewards (staking and MEV rewards, minus validator commissions). Jito says this fee is equivalent to 0.3% of the value of SOL deposited each year. The fee is applied to MEV revenue after staking rewards and validator commissions, minus validator commissions. Users who withdraw directly through its website will also have to pay an additional 0.1% fee.
What is the utility of the governance token JTO? How are the tokens distributed?
In terms of token economics, the total supply of JTO is 1 billion, of which 10% will be used for airdrops, 24.3% will be directly controlled by token holders through DAO governance on Realms, 25% will be used for ecosystem development, 16.2% will be allocated to investors (fully locked in 1 year and fully unlocked within 3 years), and 24.5% will be allocated to core contributors, i.e., Jito’s founders and employees who were early contributors to the ecosystem (fully locked in 1 year and fully unlocked within 3 years).
In terms of airdrops, the eligibility and quantity of JTO token airdrops depend on users' contributions to the development and growth of the Jito Network over time, including long-term JitoSOL holders, users using JitoSOL on various DeFi protocols, Solana validators running the Jito-Solana MEV client, and searchers who actively use Jito Network's MEV products.
The following chart shows the changes in the circulating supply of JTO tokens:
According to the circulating supply curve, Jito will launch tokens and airdrops on January 1, 2024, and the snapshot was completed three days ago. In addition, Jito said that JTO token holders can use it to make decisions, such as the fee setting of the JitoSOL staking pool, updating the delegation strategy by controlling the parameters of the StakeNet program, managing the JTO token library held by the DAO and the fees generated by JitoSOL, etc.
JitoSOL Future: Transition to Self-Developed StakeNet Protocol
Given that the equity pool relies on centralized key pairs and servers for management and operation, it has failed to achieve true decentralization. A month ago, Jito outlined Jito StakeNet, a self-developed protocol for Smart Solana LST.
Jito StakeNet will be designed as a self-developed, transparent and decentralized protocol for operating smart staking pools, with a network of keepers and on-chain programs at its core.
The validator history program stores three years of history for each validator on the network, allowing users and on-chain programs to make informed decisions about the validator’s behavior.
The Steward Program runs as a smart state machine designed to reward well-performing validators and punish poorly performing validators. Using the on-chain validator history, the Steward calculates the score and stake delegation amount for each validator. A group of Guardians coordinates running the state machine to ensure that the stake is delegated to the best performing validators.
Jito said that with StakeNet, the protocol can use on-chain governance to transparently modify parameters and state machine behavior instead of relying on centralized operators for management, thereby driving a more transparent, secure and decentralized network.
