30s Summary

Jito Labs has proposed a new setup to enhance the financial benefits of Solana protocol’s economic structure for investors in its JTO token. The potential changes would allow node operators and JTO stakeholders to access part of the $15 million rewards generated by Jito every few days. The proposal, known as JTO-10, also aims to test Jito’s restaking setup for Solana and introduce a slashing mechanism to maintain economic security. However, crucial aspects of the final design will not be ready at launch. Consequently, if this system is successfully implemented and network activity sustained, it could lead to $3.6 million annually in tip rewards.

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If you’re an investor in Jito’s JTO token, you might soon be able to make some extra cash on top of your holdings. This potential outcome is due to upcoming changes in Solana protocol’s economic structure.

Jito Labs has created a network that has effectively improved the efficiency of Solana cryptocurrency transactions, resulting in a massive flow of crypto value. As a result, bots have spent billions of SOL to reorder transactions for their financial benefit.

As of now, Jito Labs is in control of distributing these perks to validators using its software. However, a new setup known as the TipRouter is looking to spread this process across a network of node operators. This means they’ll have to reach a consensus on who will get a piece of the $15 million worth of rewards generated by Jito every few days.

For their work, these node operators will also benefit financially. The same benefits will also extend to JTO holders who vouch for them by staking their tokens with them, provided the new governance proposal JTO-10 is accepted.

The suggested system will capitalize on two recent Jito strategies. Firstly, its decision to establish a restaking network for Solana during the summer. Second, it is incorporating a new type of governance model known as futarchy that relies more on markets than on tokens and votes.

Jito’s governance token JTO currently operates like most DAO-related crypto assets. Holders can vote on proposals and their power within the DAO increases with the number of tokens they hold. However, there’s no direct economic gain involved with JTO. But this could change if proposal JTO-10 is accepted by Jito’s traditional DAO and then approved by the futarchy-based MetaDAO.

The proposed setup will also test Jito’s restaking setup for Solana. Brian Smith from the Jito Foundation mentioned that the project partially built a restaking setup to support the TipRouter’s decentralization.

There are still some crucial aspects of the final design that will not be ready at the launch of Jito restaking and TipRouter. For example, there won’t be an immediate slashing mechanism in place to punish node operators who may attempt to manipulate tip reward distribution. However, if it’s all executed properly and network activity sustains, it could mean $3.6 million in tip rewards annually for node operators and their JTO stakers. Slashing would be a costly reversal on a favorable setup and is seen as an important component of maintaining economic security in the restaking movement.

While the plan is to eventually introduce some form of slashing mechanism to the TipRouter, Smith acknowledged that there are a number of complex issues that need to be addressed first. But as he put it, “You can have a carrot and a stick. The carrot is big enough at the moment that we probably don’t need a stick”.