What is Jito? Liquid Staking Protocol on Solana
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What is Jito? Liquid Staking Protocol on Solana

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Created 2mo ago, last updated 2mo ago

Liquid staking platform Jito kicked off airdrop farming season on Solana after it launched its governance token, JTO. But what exactly is Jito and how does it work? Read on to find out.

What is Jito? Liquid Staking Protocol on Solana

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On Dec. 7, 2023, eligible Solana users rejoiced as the ecosystem was blessed with one of most lucrative airdrops of the entire year. Liquid staking platform, Jito, had announced its upcoming airdrop the week prior, and finally released the JTO token airdrop for claiming.

Source: Jito Blog

Even on the lowest airdrop tier, users received 4,941 JTO tokens, which at the point of writing, is valued at over a whopping $14,500. Even before the airdrop, the Solana ecosystem has been heating up, and now airdrop farmers are swarming the chain to hunt for similar opportunities.

But first, what exactly is Jito?

What Is Jito?

Jito is a liquid staking protocol on Solana operating on a stake pool model. A stake pool is a collection of one or more validator nodes. When users deposit their SOL tokens with Jito, they are delegating their tokens to the stake pool. In return, they receive a liquid stake pool token, known as Jito Staked SOL (JitoSOL).
JitoSOL can be used freely in DeFi protocols for lending, liquidity provision and more, while rewards accrue directly to the token’s value. This is similar to how users on Ethereum are able to delegate ETH tokens to Lido Finance to receive stETH while rewards accrue to the stETH token value.

Currently, Jito’s stake pool comprises 163 validator nodes, with more than 6.3 million SOL tokens staked in the pool. Jito selects these validators on a set of criteria which requires the validator to:

  • Run a MEV-enabled client
  • Vote on >80% of all valid blocks during a sampling window
  • Retain a commission rate of <10%
  • MEV commissions are given equal weight to regular commissions
  • Retain a delinquency rate <10% over the course of the sampling window
  • Not belong to the validator superminority
  • Not run unsafe consensus modifications
  • Only stake to one validator operator at a time
These requirements ensure alignment with Jito’s goals, which are primarily to support high quality validators, improve decentralization in the Solana network.

Maxminal Extractable Value (MEV) as Yield

Aside from the yield on staking SOL tokens, Jito also brings an additional source of yield to stakers. This yield is derived from maximal extractable value (MEV) searchers and is accomplished with Jito’s three part product suite designed to enable greater revenue for validators while eliminating unproductive network spam arising from MEV searchers. These three components are:
  • Jito-Solana validator client
  • Jito Labs Block Engine
  • Jito Relayer

Source: Jito Blog

In this structure, Jito does an auction in every block, whereby MEV searchers submit bids for sequences of transactions that they deem profitable based on the block’s transactions. The Jito Labs Block Engine then runs a set of simulations to determine the ideal combination of transactions which yields the highest rewards. The final piece, the Jito Relayer, filters and verifies transactions on a separate server to reduce strain on validators. These transactions are submitted back to the Block Engine and the validator.

These submitted bids from MEV searchers form the rewards for the validators and stakers on the network. As such, Jito stakers, and hence JitoSOL holders, receive a portion of the proceeds from said MEV auctions, further increasing the staking yield on their SOL.

The JTO Airdrop

Jito announced plans for the launch of their governance token, JTO, at the end of November. Alongside this announcement were plans for an airdrop, which sought to distribute 10% of the total supply, or 100 million JTO tokens, to early adopters of the protocol, validators and MEV searchers via airdrop.

Source: Jito Blog

Of the 100 million tokens allocated to the airdrop, 90% were distributed immediately with the remaining 10% unlocked for community growth after token launch. 80% of the 90 million tokens were distributed to users, while validators received 15% and MEV searchers, the remaining 5%.

Source: Jito Blog

For JitoSOL holders, the airdrop tokens were to be distributed based on Jito’s point system. Although the point system was officially announced in September 2023, the points have been accumulating since the beginning of 2023, with each JitoSOL token earning the user 1 point per day. This meant that holding 100 JitoSOL over 100 days would net the user 10,000 points. Users were separated into 10 tiers, with the lowest tier receiving 4,941 JTO and the highest receiving 104,391 JTO.

Jito’s airdrop favored heavily to smaller wallets with whales seeing a much smaller than proportionate airdrop. On the whole, the move was praised by users, celebrating the larger distribution to smaller players in the DeFi space.

Source: Jito Blog

The claims are currently open on Jito’s website and will remain open for another 18 months until June 7, 2025. Users simply connect their wallets to the site to check their eligibility and claim their JTO tokens.

Source: Jito Claim Page

Conclusion

Jito launch was highly anticipated, and prices rallied to a fully diluted valuation (FDV) rivaling Ethereum’s top liquid staking protocol, Lido Finance. The huge valuation prompted a repricing of Solana’s ecosystem, most notably with fellow liquid staking protocols, Marinade and Blaze, seeing a 100% increase in price following the launch.
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As all eyes move to Solana as the new center of airdrop farming, activity is spiking on the chain again and speculators are expecting a DeFi summer-esque moment again for Solana, similar to how the huge DeFi airdrops kicked off 2020’s DeFi Summer for Ethereum.

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