Lightspeed Newsletter: Jito DAO’s $1.76B StakeNet question

30.05.2024

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Jito DAO’s $1.76B StakeNet question

Jito DAO is weighing whether to change delegation management of its $1.76 billion stake pool from Jito Labs to a new software named StakeNet.

If the new program is implemented and succeeds, the newly-formed DAO could be in for a hefty payday. The proposal is still in a discussion period.

When users of Solana’s delegated-proof-of-stake system delegate their SOL to Jito’s stake pool, they receive JitoSOL, a liquid staking token (LST) that can be used in things like DeFi.

Jito’s staking pool holds roughly 10.6 million staked solana, equivalent to around $1.76 billion at current prices. Yesterday’s governance proposal would shift the management of this stake pool to Jito Labs-developed StakeNet, which is a piece of software meant to automate JitoSOL delegation.

Jito Labs CEO Lucas Bruder wrote a lengthy blog post about StakeNet in January. One top-line takeaway is that Solana stake pools are currently centralized, requiring things like off-chain bots to decide where staked Solana should go, but StakeNet lets an on-chain program delegate staked SOL. More concisely: It boosts decentralization.

Jito has become a core piece in how Solana works. The rapid expansion of its JitoSOL product — particularly at the expense of the once-dominant mSOL issued by Marinade — is notable.

At around the time of FTX’s collapse in November 2022, JitoSOL held less than 5% of Solana’s LST market share, according to a Dune Analytics dashboard. Today, JitoSOL has by far the largest market share, hovering around 45% of the LSTs tracked on the dashboard.

JitoSOL may have further to grow. As Blockworks Research analyst Hayden Tsutsui pointed out, only roughly 6% of staked solana take the form of LSTs, whereas 38% of staked ETH corresponds to LSTs.

If JitoSOL remains the top dog in liquid staking (think Lido’s stETH, but for Solana), there could be a lot of deposits left to soak up.

JitoSOL became so popular partly by offering additional yield on top of Jito’s creation of maximal extractible value (MEV). Jito runs a fork of Solana Labs’ validator client that creates additional revenue through MEV. Jito Labs’ block engine charges a 5% fee on MEV tips, so the company makes more money the more its client gets used.

But the biggest winner of StakeNet taking off could be Jito’s DAO. JitoSOL charges an annual management fee equal to 4% of total rewards. This 4% goes to the DAO, a Jito Labs spokesperson told me.

If StakeNet is in fact a really good program, then JitoSOL could become more dominant than it already is. And a growing JitoSOL pie would make the DAO’s yearly slice that much bigger.

— Jack Kubinec

Zero In

20%

That’s the proportion of all staked SOL held by the network’s top-10 validators.

And who’s on that list? Well, the answer might not be so surprising.

Coinbase is the network’s top validator, holding some 3% of the total stake — about 11.18 million SOL, according to data provider Solana Compass.

Next is Galaxy with 9.8 million SOL, then Ledger by Figment (a collaborative initiative) and then Figment. The latter two hold 9.1 million SOL and 8.1 million SOL, respectively.

Binance ranks 7th in the top-10 list of validators, with 5.5 million SOL. Jito2 ranks 8th, with about 5.4 millon SOL, while Jito1 holds 4.6 million SOL.

As Solana Compass notes, the distribution of stake among validators is “still somewhat top heavy, with large validators run by centralized exchanges receiving an outsized share of stake.”

— Michael McSweeney

The Pulse

It seems that 2015 was the golden year for Solana’s current crop of memecoin celebrity-influencers.

Caitlyn Jenner, whose Pump dot Fun memecoin made waves over the long weekend, accepted the Arthur Ashe Courage Award at the ESPYS in 2015. Iggy Azalea, the next Solana influencer du jour, won top rap song at the 2015 Billboard Music Awards for her breakout hit “Fancy.”

Yesterday afternoon, former NBA player Paul Millsap wrote on X that he wants to get some of his “NBA boys” in on the memecoin-launching fun.

His best season? 2015-2016, when he was named to the all-star team and finished fifth in defensive player of the year voting.

These celebrities were all a lot closer to the A-list a decade ago than they are now, which is perhaps why they find themselves able to now add “memecoin dev” to their LinkedIn pages.

— Jack Kubinec