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October 31, 2022 • 4 minute reading time

Introducing JitoSOL: Solana’s 1st MEV-Powered Liquid Staking Token

Jito Foundation
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Solana HFT

Jito Foundation is excited to launch JitoSOL, Solana’s first liquid staking token to include MEV rewards. JitoSOL holders benefit from staking rewards plus MEV revenue, while helping to secure the network.

The Basics

JitoSOL is a Solana liquid staking token. Users can exchange their SOL for JitoSOL. In return, holders maintain SOL’s liquidity and DeFi opportunities while earning yield from staking. JitoSOL uniquely provides its holders with additional rewards from transaction revenue associated with MEV extraction on Solana.

jito.network is now live so any SOL holders can instantly mint JitoSOL. Users will have the flexibility to trade JitoSOL for other tokens on decentralized exchanges such as Jupiter. Jito’s website also provides no-slippage withdrawals into SOL following a 2–3 day cool down period.

The token’s yield accrues in its price rather than an ongoing distribution. At launch, 1 JitoSOL = 1 SOL. As rewards are accrued, JitoSOL will appreciate vs. SOL (e.g. 1.05 SOL per JitoSOL). The price appreciation ensures all JitoSOL holders receive yield regardless of how the token is stored. In addition, the token accrues extra value from MEV rewards, explained in detail below.

MEV 101

Maximum extractable value (MEV) describes profit opportunities attributable to the specific order of transaction execution. For example, a large swap on Orca can lower the pool’s price below that of Raydium or Serum. Traders will race to profit from that price difference and this arbitrage is considered MEV.

Alternatively, a large account on Solend may be near liquidation. Bots will compete to liquidate the account as soon as possible. These liquidation profits are another form of MEV.

The Jito Foundation was created to minimize the negative impacts of MEV, equitably distribute the profits and increase transparency. Jito published an open source validator client designed to create a competitive market for MEV extraction. The client enables auctions within each block for the opportunity to capture that block’s MEV. Traders submit bids, and the highest bidders within each block can harvest available MEV.

This structure benefits the network twofold. First, validators receive the winning bid amounts and pass most of that reward to stakers like JitoSOL. This provides more incentive to stake and secure the Solana network. Second, the structured bidding process and guaranteed transaction ordering for winning bids reduces bot spam. As the Jito-Solana validator client gains share, we expect spam to be materially reduced while staking yields increase.

Anatoly Yakovenko, the CEO of Solana Labs, has applauded Jito’s mechanism. He remarked, “MEV is a rapidly growing business model for blockchains. Jito has a great approach to maximize the benefits of MEV to the network and minimize the negative externalities of MEV to the rest of the users and applications running on Solana.”

See a detailed Jito-Solana overview and the Jito Foundation’s MEV priorities.

JitoSOL Yield = Staking Rewards + MEV Rewards

Liquid staking tokens typically generate yield from staking rewards. The network issues new circulating SOL to validators for securing the network. JitoSOL’s structure uniquely provides extra yield from MEV transactions. With Jito’s validator client, traders participate in auctions for the opportunity to profit from MEV. The winning bids are distributed to validators and stakers in return for access to MEV transactions. MEV rewards will be modest at first but over time could become a significant source of additional yield.

The MEV rewards provide only upside. Because the rewards are based on guaranteed auction amounts, JitoSOL has no exposure to the risks around MEV trading. Staking rewards provide a base yield with MEV only increasing the returns.

Liquidity and DeFi Integrations

Liquid staking tokens derive utility from their DeFi composability. JitoSOL has several flagship partners at launch and expects to have a broad array of integrations within several months.

Initial applications include Orca whirlpools and a Solend lending pool. For trading, JitoSOL is accessible within Jupiter from day 1. Jupiter provides best available execution between JitoSOL and any common SPL token with no additional fees.

Jito Foundation is working to onboard additional DeFi partners. If any users have preferred integrations, please let us know in the Jito Discord so those can be prioritized.

Network Benefits

Jito Foundation’s stake delegation strategy will improve network performance while delivering best-in-class yield to holders. After an initial setup period, JitoSOL will exclusively delegate to validators using Jito’s client. Validators capturing MEV will attract more stake and therefore encourage more validators and searchers to adopt the Jito client. The end result is organized MEV extraction with profit redistribution to stakers.

Stakers should not have to compromise between high yields and supporting the network’s decentralization goals. JitoSOL achieves both these goals while supporting efficient MEV extraction. Nodes must meet performance and decentralization criteria in order to receive stake from JitoSOL. Reference this article for further information on delegation.

Security

JitoSOL is built on the stake pool program developed by Solana Labs. The program has been audited three times since the network launched (reports).

Get Started

  • Users can mint JitoSOL at our website in under 2 minutes (guide)
  • For details on how to swap for JitoSOL, see our documentation here
  • For any questions, checkout the resources below or ask in our Discord

Resources