JIP-12: JTO Vault Parameters Proposal

JIP - Official
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JIP-12: JTO Vault Parameters Proposal

Category: Protocol Development

This proposal was written in coordination with the Jito Foundation.

Abstract

This proposal details potential parameters for TipRouter’s JTO staking vault management, as well as parameters for adding JTO VRTs to Jito DAO governance.

This proposal is contingent on the passing of JIP-10 and subsequent successful passing of the related futarchy market.

Motivation

JIP-10 proposed the creation of a futarchy market to determine whether the DAO should add JTO as a source of stakeable economic security to the TipRouter NCN, in addition to detailing rough parameters for the amount of programmatic fees routed to JTO-sourced security.

This proposal expands on the parameters laid out in JIP-10 and provides additional governance and integration frameworks for both vault managers and the resulting VRTs. The parameters in this proposal are designed to minimize governance overhead and allow market forces to dictate the amount of JTO VRTs in the market and the total amount of JTO deposits into the TipRouter NCN.

These changes introduce a more open and competitive environment for VRTs, including all JTO vault managers by default and imposing no cap on deposits into TipRouter NCN. Allowing for diversity in the JTO vault manager set allows Jito users access to more favorable staking solutions. These changes align with Jito’s recent decisions to minimize governance influence over market dynamics like VRT caps, VRT whitelisting, etc

Key Terms

  • Vault Manager: A development entity responsible for attracting and delegating stake to node operators within Node Consensus Networks.
  • VRT: A Vault Receipt Token, or a token issued by a vault manager representing a user’s stake within a vault.
  • Governance asset: A token that has voting power within the Jito Realms DAO and can be used for voting on proposals.
  • Deposit cap: A limit on deposits into an NCN imposed on vault managers.

Specification

TipRouter NCN Configuration

  • TipRouter NCN will accept all JTO vault managers by default.
  • No cap will be imposed on deposits into TipRouter NCN.

VRT Requirements

  • All JTO VRTs must include an auto-compounding feature, meaning that the vaults will programmatically sell JitoSOL fees to compound JTO. This means the JTO VRTs will continually appreciate in value relative to unstaked JTO, absent slashing events.
  • Any VRT failing to meet this requirement will be removed from the TipRouter NCN by the DAO or by the security council.

Governance Integration

  • JTO VRTs will be added as governance assets by the DAO or the security council once the market capitalization of the relevant VRT exceeds $5 million.
  • Governance weights for JTO VRTs will be:
    • Initially set at a 1:1 ratio for all relevant VRTs.
    • Updated every 6 months by the DAO or the security council based on rewards and slashing data.

Benefits and Risks

Benefits

  • Minimal governance overhead: By opting for an open model instead of whitelisting vault managers, Jito DAO reduces ongoing operations and does not have to pick winners.
  • Open and competitive environment: Enables diversity in the JTO vault manager set and allows Jito users access to more favorable staking solutions via open competition.

Risks

  • Fractured liquidity: Allowing anyone to create a JTO VRT may create a fractured liquidity landscape for staked JTO, which could make it more difficult for any one VRT to secure DeFi integrations.

Outcomes

  • Establishment of vault manager and vault cap parameters for JTO deposits
    • TipRouter NCN will accept all JTO vault managers by default.
    • No cap on TipRouter NCN deposits.
  • Establishment of governance parameters for JTO VRTs
    • All JTO VRTs must include an auto-compounding feature.
    • Initial Governance Weight: 1:1 ratio.

Cost Summary

This proposal does not incur direct costs but may require DAO and security council efforts for governance weight updates.

Note: Fragmetric is a client of Gauntlet, one of Jito (Re)staking’s founding VRTs.

4 Likes
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Kyros team would be interested to know why the number of $5M has been decided and what was the rationale behind the decision.

Other than that, Kyros supports the requirements stated by Gauntlet in this proposal and will be happy to follow them for our upcoming $kyJTO VRT.

1 Like
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Thanks, @kyros, for the question. The addition of the $5M market capitalization was included for the following reasons:

  • Integration Costs - some integration work is required to onboard a new asset as a voting asset. Adding long-tail LSTs will introduce a sizable burden without much upside to the DAO. For context, $5M of JTO represents ~0.12% of JTO’s voting power
  • Fragmentation Hurdle - fractured liquidity is the primary risk from this permissionless approach, and therefore, adding a TVL hurdle rate to realize the full benefits of holding the VRT should moderately influence users toward the largest VRTs, ultimately concentrating liquidity and protecting users from high execution costs.
  • Security - The $5M threshold also provides an additional security benefit against exotic attacks, where one might purposefully devalue an rJTO asset. The hardcode and value caps are designed to mitigate this risk as well.
2 Likes
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Without any deposit caps, is there a risk that a single vault manager could dominate the TipRouter NCN, leading to concentrated risk? If so, are there any mechanisms in place to mitigate this, or is such an outcome considered an acceptable, natural result of open competition?

Additionally, could this openness lead to the opposite problem—a VRT bloat situation—where liquidity becomes fragmented across too many VRTs? If so, how might this affect the overall usability and adoption of JTO VRTs, particularly in DeFi integrations? What is the DAO expected to do in this possible situation?

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Hey @BlockworksResearch, thanks for bringing this discussion to the forum. We recognize that this could be a risk, but find that the TipRouter blacklisting functionality included in JIP 8 should protect against an adversarial, concentrated VRT, assuming the DAO remains diligent.

When evaluating the tradeoffs, capping VRT allocations will essentially guarantee fragmented liquidity, reducing capital efficiency for all users and inhibiting each VRT team’s ability to set itself apart. Alternatively, going uncapped will let the market forces in the ecosystem be fully expressive and task the DAO with monitoring and ensuring the protocol is protected from the edge cases that the market may present.