Category:
Treasury
Abstract:
This proposal outlines a 2025 incentive or liquidity mining budget of 14m JTO. Additionally, this proposal provides a retroactive analysis of the 2024 budget performance and forward-looking discussion of hypothetical liquidity mining strategy in 2025.
Motivation
In 2024 the Jito Foundation worked with Gauntlet to establish a comprehensive framework for evaluating the efficacy of a JitoSOL liquidity mining strategy, particularly focused on incentivizing decentralized exchange pools. The result of this study was published in May in JIP-2: Incentive Budget and Framework for Strategic Growth, which ultimately recommended that the DAO allocate 7.5m JTO tokens to the Foundation for the purpose of pursuing liquidity mining strategies.
In a November update to the DAO on the program’s efficiency, the Foundation noted that analysis shows many of the incentivized strategies have been successful, and that overall incentive spend has been modest.
Going into 2025, there are a number of new initiatives and developments that could benefit from strategic incentive spend. This includes Jito (Re)staking and the growth of associated restaked assets, the isolation of JitoSOL liquidity from other LSTs following the deployment of Interceptor, and potentially pursuing similar integrations to the Phantom quest campaign.
While the 14m JTO request is slightly higher than a full-year prorated 2024 budget request, the sum is intended to allow the Foundation to maintain flexibility if opportunities arise and should not be thought of as a target spending goal.
Note: All figures provided in the following retrospective analysis are as of 12/15/2024. On or about Dec 31st, the Jito Foundation will make a final JTO transfer to cover ongoing LM campaigns for the month of January 2025 as this proposal works through governance. On or about January 1st, 2025, the Jito Foundation will return unused liquidity mining funds to the DAO treasury, per the terms of JIP-2. Full accounting of these transfers will be provided in an edit to this proposal posted prior to JIP-13 moving to Realms vote.
2024 performance:
In JIP-2, the Jito Foundation requested 7.5m JTO for the purpose of liquidity mining (LM) after working with research firm Gauntlet to develop an evaluation framework for the success of LM campaigns.
Since the passing of JIP-2, the Foundation has directed 1,428,409 JTO to various incentive programs. These programs can roughly be categorized in three verticals: Kamino vaults, Non-LP DeFi Incentives, and Kamino Looping.
On or about January 1st, the Jito Foundation will return roughly 6.3m JTO to the Jito DAO. This sum includes both the unspent 6,071,591 JTO from the JIP-2 proposal, as well as 513,475 JTO remaining from an initial grant to the Foundation for liquidity mining at TGE, minus a final distribution for ongoing incentive spend to cover the month of January.
An analysis of each of the three verticals is provided below:
Kamino Vaults
As of December 15th, 2024, the Jito Foundation has spent a total of 1,662,000 JTO on 19 Kamino vault campaigns, or traditional liquidity mining (spending incentives to attract liquidity to DEX pools). This includes programs undertaken prior to the passing of JIP-2. Six of these were adjustments to the Orca JTO-JitoSOL vault, and four were adjustments to the Orca JitoSOL-SOL vault:
The Jito Foundation applied the liquidity mining analysis provided in Gauntlet’s May 2024 report, and found that the outcomes of these vaults skewed positively relative to expected outcomes – meaning there were more positive outcomes rather than negative:
The vaults have been essential in maintaining JitoSOL’s status as the most liquid LST in Solana DeFi. Additionally, the Foundation focused on incentivizing new Solana DeFi token launches, peaking at eight concurrent vault strategies in mid-May. The following graphs show total daily emissions (left Y axis, blue line) and the number of Kamino vault campaigns being run (right Y axis, red bars), as well as the same chart with USD value of JTO:
A number of these strategies proved to be successful in attracting sustained TVL on a medium-term time horizon, even after incentives ended, which points to a strategy of expanding vault spend to focus on successful Solana ecosystem tokens.
The JUP-JitoSOL vault is one such example, which maintained over $10m in liquidity after incentives ended, and maintains $2M in liquidity today:
Additionally, internal survival analysis shows that users who deposit into Kamino vault are significantly more likely to be long-term holders, with a survival rate of 60-70% longer than non-depositors.
Kamino Looping
The incentivized Kamino Looping campaign refers to incentives paid to SOL liquidity providers on the dedicated Kamino lending market for JitoSOL and SOL. This market allows for highly capital efficient looping strategies via the cheapest SOL borrows in DeFi.
The market was launched on 11/4/24 with 8,000 in weekly JTO incentives, which was raised to 12,000 per week on 11/6/24, and was raised to 18,000 per week on 11/18/24. Daily expenditures at these rates can be seen below:
This market has been highly successful in attracting TVL, with 520,000 units of JitoSOL worth an aggregate $213m currently deposited.
Non-LP DeFi Incentives
Non-LP DeFi Incentives are incentive campaigns undertaken to encourage JitoSOL deposits into DeFi protocols other than decentralized exchange liquidity products.
As of December 15th, the Jito Foundation has spent 103k JTO on campaigns with lossless lottery protocol Zelo (8k), DeFi interface layer Infinex (20k), derivatives exchange Adrena (25k), and a forthcoming campaign from Phantom (50k).
To date, all of the campaigns have been successful in attracting significant deposits.
2025 Strategy:
Without firm commitments in any direction, the Jito Foundation would aim to continue pursuing strategies that were proven to be successful in 2024 while also targeting new, high-growth verticals.
Currently, JitoSOL has been successful in growing TVL in total terms, but is beginning to cede overall marketshare as competitors – particularly from centralized exchange LSTs – begin to emerge:
Additionally, JitoSOL locked in DeFi protocols (which, per the survivor analysis provided above, tends to represent a longer-term and thus higher value user) has remained largely stagnant in percentage terms throughout 2024, even as the allocation of deposits to various protocols has shifted significantly:
Given these market dynamics, the Jito Foundation sees growth opportunities in two areas in particular: attracting new JitoSOL mints, and attracting more JitoSOL to DeFi protocols.
Specifically, if JIP-13 passes, continuing to incentivize JitoSOL liquidity via Kamino vaults will likely be a key cog of the 2025 strategy. With the deployment of Interceptor following the passing of JIP-9, the Jito Foundation will be watching closely to see how mitigating toxic flow impacts participation in the vaults, and the wider JitoSOL liquidity profile.
Additionally, restaking presents a major opportunity for both new JitoSOL mints and deposits of JitoSOL into DeFi protocols. As Jito (Re)staking’s caps were raised in 2024, the Foundation saw a strong correlation to net new mints, and new DeFi protocols such as rate trading and restaking yield looping will push new JitoSOL mints into DeFi.
Ultimately the Jito Foundation believes it was highly successful in driving JitoSOL adoption throughout 2024 in spite of a relatively modest incentive spend, and would bring similar sensibility to 2025 if JIP-13 is approved.
Key Terms:
Liquidity Mining (LM):
An incentive scheme where tokens are distributed to users to provide liquidity in decentralized finance (DeFi) pools, such as Kamino vaults or other JitoSOL-supported initiatives.
JTO:
The native governance token of the Jito Network ecosystem.
Kamino Vaults:
Automated liquidity management vaults on Solana-based decentralized exchanges (DEXs).
Interceptor:
An open-source program designed to help SPL Stake Pool LSTs avoid the impacts of toxic decentralized exchange flow resulting from socialized liquidity.
TVL (Total Value Locked):
The total value of assets staked or locked in a protocol, commonly measured in SOL or USD.
Restaking:
A yield-enhancing strategy where staked JitoSOL is further utilized as a source of economic security in secondary DeFi or other applications.
Specification:
If passed, JIP-13 will lead to the Jito DAO allocating 14m JTO tokens to a Foundation multisig (address: 8sjM83a4u2M8YZYshLGKzYxh1VHFfbgtaytwaoEg4bUJ) to spend on a discretionary basis in order to pursue a variety of liquidity mining and incentive strategies.
The Foundation will have a mandate to pursue pools and strategies, such as the previous Kamino programs, that maximize new JitoSOL mints and JitoSOL DeFi deposits, and will return any unspent JTO at the end of the calendar year. The funds will be managed by a 4/5 multisig of four Foundation members and one Labs member.
Benefits/Risks:
Benefits:
- JitoSOL TVL growth
- JitoSOL deposits in DeFi growth
Risks:
- Overspending on inefficient LM programs
Outcomes:
The desired outcomes include:
- Sustainable, accelerated growth in TVL
- Clear tracking of the success or failure of specific programs
- Growing JitoSOL dominance measured as a percentage of total Solana LST TVL
Cost Summary
This proposal would cost the DAO 14m JTO tokens. The Foundation will return any unspent tokens at the end of the year, and if the program is overall deemed to be successful, the Foundation will likely initiate DAO proceedings for a 2026 liquidity mining budget.
Performance Milestones
- Minimum two public review posts on incentive program effectiveness.
- Adjustments based on empirical data and community feedback.