Jito Labs: if Lido and Flashbots had a baby
Jito Labs: if Lido and Flashbots had a baby
.. on Solana
Original tweet thread (posted Aug 7 ‘23)
Imagine if Lido and Flashbots had a baby.. on Solana. The baby would be named Jito labs.
Jito provides the highest staking yield while improving Solana decentralization and network health.
A good portion of Solana haters would shift their view if they understood the innovation Jito is bringing to Solana.
In this article, I’ll cover:
Jito's MEV enable Solana Client
Jito's Solana stake pool
Jito's results so far
MEV enabled Solana Client
What is a Solana client?
A Solana client describes the code required to “validate” the network – this is what is used to process transactions and finalize
What is MEV? I thought MEV was only an issue on Ethereum
ELI5: MEV is a term to describe the arbitrage opportunities that exist within ordering transactions a certain way
Solana has experienced periods of network congestion due to traders spamming the network during periods of volatility, token drops, etc
The spam is made worse by the fact that Solana transactions are so cheap
What’s so special about Jito’s Solana Client?
Jito’s client incorporates an “auction” into it – they’ve created a simplified version of a mempool within Solana
So how does this work?
The Jito client validator is selected as leader for the upcoming block
Groups of txns are bundled together in the most profitable sequence (bundle)
This is done by the “searchers”
This results in a set of bundles, each with an associated “tip” added to it
The “tip” acts as a bid during an auction process and the Jito client validator submits the “winning” bundle and proposes it
The auction itself is conducted by the “block engine”
How does this mitigate spam and network congestion?
Prior to this, traders or those focused on MEV would compete in a latency based, first-come-first-serve race to get their transactions in
This “mem-pool” solution via Jito labs enables an auction mechanism which allows you to “pay” to get your bundle finalized (as opposed to spamming the network)
Custom staking pool facilitating jitoSOL (LST)
What is a stakepool?
A stakepool is a smart contract that allows delegators (anyone that wants to stake SOL but doesn’t want to set up hardware to run a validator) to put up their Solana tokens to be staked by worth validators
This smart contract uses cryptography to securely custody your Solana – the depositor’s signature is required to enable “root” access
What is special about the Jito stake pool?
The Jito stake pool was built off of the one that Solana Labs uses
It mints jitoSOL (LST) when you deposit SOL and burns jitoSOL when you withdraw your SOL
It also distributes delegations in a way that maximizes the decentralization
How does Jito’s distribution logic maximize decentralization of the network?
Jito does not delegate Solana to the “superminority” validators
What is the superminority?
It is the smallest set of validators that control 33% of the total stake
If all of these validators go down, the solana network goes down
Currently that number is “33”
By staking with Jito, your SOL is distributed to validators outside of the “superminority” – this cuts into the % stake the superminority holds, increasing the number of validators required to take the network down
Other things to note
Jito chooses validators with minimal commission (maximizing yield for delegators)
Validators must run a MEV-enabled (contains auction-like mechanism) client
Results
The charts speak for themselves
Disclaimer: I have the majority of my Solana staked via Jito. If you’d like to stake through them, here is my referral link. You (and I) will get Jito points for staking through them which may convert to an airdrop sometime down the road