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Jito - Reshaping the Staking Market Landscape of Solana.

MT Capital

23-12-07 14:23

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Original Title: "MT Capital Insights: Jito - Reshaping the Staking Landscape of Solana"

Original Source: Severin & Ian, MT Capital

"Jito has performed exceptionally well in the current wave of Solana's recovery. As the first LSD protocol on Solana to combine MEV revenue and staking revenue, Jito has the potential to reshape the competitive landscape of the LSD market on Solana."

TL;DR

·Jito is the first liquidity staking protocol on Solana that combines MEV revenue and staking revenue. In the past 30 days, its TVL has increased by nearly 70%, and it is expected to reshape the staking market landscape on Solana.

·Jito is about to launch governance token JTO. There are few JTOs circulating in the early market, and the main selling pressure comes from airdrop users. The usage scenario of JTO is relatively limited, and its value capture ability is poor. Jito needs new incentives and ecological expansion to stimulate the continuous growth of Jito TVL, thereby alleviating the selling pressure of airdrop users and maintaining the stability of JTO value.

· Backed by the influx of new assets and users from Solana, as well as the increase in trading volume, and Solana's extremely low liquidity staking ratio, the LSD protocol represented by Jito is expected to capture a higher staking TVL. Solana's potential for huge MEV value gives Jito greater room for imagination.

·Compared with Marinade, Jito's gap in ecological composition, decentralization, and single staking mode will continue to narrow as Jito develops. Jito's core competitive advantage in capturing and distributing MEV value will continue to expand with the prosperity of the Solana network. Therefore, we have a very optimistic future expectation for Jito. Jito is expected to replace Maridane as the largest LSD protocol in the Solana ecosystem.

·Jito's solid fundamentals will also drive up the price of JTO's secondary token. Referring to the trend of the LSD protocol token price over the past month, we believe that JTO will also have a stronger performance in the secondary market.

Jito: The First Liquidity Staking Protocol on Solana with MEV Rewards

Deeply Cultivating the Solana MEV Field: Jito Labs

Jito Network was launched by the Jito Labs team. The Jito Labs team previously worked in the infrastructure field of Solana MEV. In July 2022, Jito Labs launched the Solana MEV Dashboard, which classified and analyzed over 36 billion transactions on Solana since January 2022. Subsequently, in August 2022, Jito Labs announced the completion of a $10 million Series A funding round led by Multicoin Capital and Framework Ventures. The raised funds will continue to be used to build and optimize MEV infrastructure.

Following that, Jito Labs has successively launched Jito-Solana validator client and Jito Block Engine, which optimize MEV extraction and distribution, becoming another important infrastructure service provider in the Solana MEV field. Jito Block Engine links relayers, searchers, and validators in the network through off-chain auctions to solve the MEV problem.

·Firstly, the Jito Block Engine will receive transaction orders from the relay and forward them to the searcher.

· Afterwards, the searcher will submit a transaction bundle containing bids.

·Finally, the Jito Block Engine will simulate each transaction combination and find the best transaction combination bundle to forward to validators for processing.

source：https://www.jito.wtf/blog/jito-block-engine-expands-access-to-all-solana-mev-traders/

According to the Validator Health Report: October 2023 released by the Solana Foundation, approximately 31.45% of Solana validator nodes currently choose to use the Jito-Solana validator client developed by Jito Labs. This also indirectly demonstrates Jito Labs' technical capabilities in the MEV field.

source：https://solana.com/news/validator-health-report-october-2023

With the continuous adoption of Jito-Solana validator clients, more and more MEV rewards captured based on Jito-Solana have laid a solid foundation for Jito to launch the LSD module with MEV rewards.

source：https://dune.com/ilemi/jitosol

First Solana LSD with MEV revenue

生不逢时导致 JitoSOL 长期难有起色: In November 2022, on the eve of FTX's collapse, Jito Labs officially announced the launch of Jito staking service, while watching the development of the popular LSD protocol. Similar to other LSD protocols, users can delegate SOL to validation nodes and receive JitoSOL as liquidity certificates. The price of JitoSOL will continue to rise to reflect the rewards obtained from node validation. Thanks to Jito Labs' early layout in the Solana MEV field, Jito can also distribute MEV revenue to stakers, further increasing their staking rewards. Unfortunately, just as Jito announced the launch of LSD staking service, FTX collapsed due to misappropriation of customer funds. Solana, which has a close relationship with FTX, also suffered from massive liquidity loss. Therefore, after Jito launched its staking module, due to the lack of sufficient market confidence and liquidity demand, Jito's TVL has been tepid.

积分激励计划助推 Jito 复苏: With the recovery of the Solana ecosystem in the second half of this year, Jito's TVL has gradually increased. At the same time, in August of this year, Jito also launched its own points incentive program to promote the large-scale adoption of JitoSOL. Users can earn points by participating in Jito staking, holding JitoSOL, participating in DeFi activities with JitoSOL, and inviting friends. Points represent users' contributions to the Jito community and are also considered an important criterion for future airdrops. The launch of the points incentive program has made the growth curve of Jito TVL significantly steeper.

source：https://www.jito.network/stats/

Lido exits, Jito takes over Lido Solana's market share: At the same time, in October of this year, Lido DAO decided to no longer support new SOL staking after a community vote, and node operators will also gradually withdraw from the SOL staking market starting in November. Lido's exit means that stSOL, which is worth nearly 6 million, needs to find a new staking place. Jito, which combines staking and MEV rewards with incentive points, has taken over a large amount of stSOL, causing Jito's TVL to soar further and become the second-largest LSD protocol on Solana.

source：https://lookerstudio.google.com/u/0/reporting/b41835bc-fafb-46c8-9ade-b012f28a41b2/page/p_7dnjjzu6uc

More Decentralized Jito - StarkNet

In order to make the underlying verification node pool and the process of managing changes in the staking pool more decentralized, Jito has proposed a future development plan for Jito StarkNet. Jito StarkNet is a self-sustaining, transparent, and decentralized intelligent management protocol for the verification node pool. Jito StarkNet is mainly composed of three modules: Keepers, Validator History Program, and Steward Program.

·Validator History Program will store historical data records of each validation node for nearly 3 years, including participation and correctness data of validation nodes in the consensus process, commission collection ratio, MEV extraction value, total staking value, and staking ranking data.

·The Steward Program will calculate the score and appropriate staking amount for each validation node based on their on-chain historical data records.

·Keepers Network will allocate the staked delegation amount based on the calculation results of the Steward Program.

In the Jito StarkNet network, the historical behavior of verification nodes will serve as the sole reference standard for allocating staking delegation amounts, thereby encouraging benign competition among underlying verification nodes to provide users with a better staking experience. At the same time, the management of staking delegation funds no longer relies on centralized protocol management, but is automatically executed by the Steward Program and Keepers Network to change the delegation amount, making the operation process more decentralized.

source：https://www.jito.network/blog/a-deep-dive-into-stakenet/

source：https://www.jito.network/blog/jto-airdrop-eligibility-and-allocation-specifications/

source：https://defillama.com/chain/Solana

source：https://pro.nansen.ai/multichain/solana

source：https://dune.com/ilemi/solana-lsts

Due to Jito distributing MEV rewards to JitoSOL holders, the higher the MEV value in Solana, the more JitoSOL staking rewards will be allocated. The increase in APR will further enhance the attractiveness of JitoSOL to users. In the past year, Solana MEV Profit has reached as high as 14M, with a huge potential for optimizing MEV value space.

source：https://explorer.jito.wtf/

With the prosperity of the Solana network, the accumulated MEV value captured by Jito is also constantly increasing. We expect this trend to continue, and Jito will accumulate more MEV value in the surging network activity of Solana and distribute it to JitoSOL holders.

source：https://dune.com/ilemi/jitosol

Compared to Marinade, Jito has unique competitive advantages

Marinade is the earliest LSD protocol in the Solana ecosystem, which once disrupted TVL reaching 1.7B and is also one of the biggest competitors of Jito. Compared with Marinade, the main competitive disadvantages of Jito are as follows:

1. The ecological network of Marinade LST will be richer than that of Jito LST.

2. Marinade has more validation nodes and better decentralization than Jito;

3.Marinade can provide other collateral options besides LSD;

For competitive disadvantage 1, as shown in the figure below, JitoSOL is constantly expanding its ecological use cases and has been integrated into 10+ mainstream DeFi protocols. Additionally, Jito has the support of Multicoin, which has deep roots in the Solana ecosystem, making it easier to expand to more ecological partners in the future.

source：https://dune.com/ilemi/jitosol

Regarding competitive disadvantage 2, Marinade currently has about twice the number of nodes as Jito, and its decentralization is significantly better than Jito, which Jito is unlikely to surpass in the short term. However, Jito itself is also transitioning towards Jito-StarkNet, and the decentralization of the protocol is expected to further improve in the future.

除了竞争劣势外，对比Marinade，Jito还存在着竞争优势如下：

Translation:

In addition to competitive disadvantages, compared to Marinade, Jito also has the following competitive advantages:

1. JitoSOL is able to capture additional MEV rewards, with staking rewards slightly higher than Marinade;

2. In the same incentivized program, Jito is able to capture more active users in the current wave of Solana's recovery.

source：https://dune.com/dirt_diggler/the-great-solana-dashboard

Jito's capture and distribution of MEV value is Jito's core competitive advantage in long-term competition. The more active the Solana network is, the greater the value of MEV, and Jito's competitive advantage will become more apparent. Jito's ability to capture more active users also indicates that Marinade has not yet formed a monopoly on the LSD market, and similar LSD protocols such as Jito still have significant room for development.

In summary, compared to Marinade, Jito's gap in ecological composition and decentralization will continue to narrow as Jito develops. Jito's core competitive advantage in capturing and distributing MEV value will continue to expand with the prosperity of the Solana network. Therefore, we have a very optimistic future expectation for Jito. Jito is expected to replace Maridane as the largest LSD protocol in the Solana ecosystem.

Jito's stable fundamentals will also drive the price of JTO's secondary token higher. Referring to the trend of the LSD protocol token price over the past month, we believe that JTO will also have a stronger performance in the secondary market.