1. Title and Category
Title: TipRouter and StakeNet Adjustments for Priority Fees
Category: Protocol Development
2. Abstract
This proposal seeks to upgrade the Jito TipRouter protocol in order to support the distribution of Solana Priority Fees in addition to Jito Tips, enabling validators to earn and distribute priority fees with their stakes.
Concurrently, this JIP proposes an adjustment to StakeNet, introducing a new parameter that includes or excludes validators from the Jito Stake Pool based on their priority fee commission percentage. These updates will improve the transparency of Solanaâs fee-sharing mechanisms as well as JitoSOL yield.
3. Motivation
The recent activation of SIMD-0096 has significantly changed the revenue structure for Solana validators by allowing them to retain 100% of priority fees. However, the lack of a standardized mechanism for distributing these fees has led to opacity in rewards for stakers, as well as an overall reduction in staker earnings relative to validator earnings as measured by a percentage of total block rewards.
Currently, individual validators are addressing this issue through their own Liquid Staking Tokens (LSTs), creating fragmentation and inefficiencies. Upgrading TipRouter provides a standardized, transparent, and equitable solution that enables all validators and stakers to participate in the networkâs fee economy fairly.
Additionally, StakeNetâs current delegation model does not account for validator behavior concerning priority fees. By integrating priority fee commission as a StakeNet parameter, JitoSOL can better align stake allocation with validator practices that benefit the broader Solana ecosystem, and help uplift JitoSOL yield.
4. Key Terms
- TipRouter: A distribution (Re)staking protocol for Jito tips on Solana.
- Priority Fees: Fees paid by users to have their transactions processed faster during network congestion.
- StakeNet: A decentralized delegation protocol used to manage validator selection in the Jito Stake Pool.
- Tip Distribution Account (TDA): An account that aggregates MEV tips and priority fees for redistribution.
- Merkle Root Distribution: A cryptographic method for verifying the distribution of rewards.
- Priority Fee Commission: The percentage of priority fees retained by a validator rather than distributed to stakers.
5. Specification
The passage of this proposal will serve as a sentiment check and approval for the Jito DAO Security Council and the Jito Labs Developer Council to execute upgrades related to priority fees for both the TipRouter and the StakeNet protocols.
Per JIP-2 and JIP-6, both StakeNet and TipRouter upgrade permissions are in the hands of the Security and Developer councils, respectively, during a handoff period to the DAO.
TipRouter Upgrade
- Adopt Tip Distribution Account v2 (TDA v2):
- Introduce a new version of TDA specifically for priority fees. This is a slightly modified version of the existing Tip Distribution Program to be owned by the DAO.
- Ensure the new TDA can integrate with TipRouter while maintaining a clean separation between MEV tips and priority fees.
- Modify TipRouter Distribution Logic:
- Extend TipRouterâs capabilities to handle priority fee distribution.
- Automated Fee Transfers to Collection Account:
- Enable validators to automate transfers of priority fees from their identity account to the TDA v2.
- Implement this as an integrated feature in Jito-Solana, with an option for standalone binary execution for validators not using Jito-Solana.
StakeNet Parameter Adjustment
- Introduce Priority Fee Commission as a Delegation Factor:
- Modify StakeNet to factor in a validatorâs historical priority fee commission when determining delegation eligibility.
- Update StakeNet Inclusion Criteria:
- Introduce a new binary stake pool inclusion criteria based on validator commission for priority fees. Validators will be required to share 50% or more of their priority fees to be eligible for JitoSOL delegation upon implementation of this change.
- Assuming validators share at least 50% of priority fees and the existing criteria, they will be ranked by the highest post-commission voting rate, aligning with current StakeNet strategy.
6. Benefits/Risks
Benefits:
- Standardization: A unified system replaces fragmented, validator-specific LST solutions.
- Incentive Alignment: Encourages validators to distribute priority fees fairly to all stakers based on market rates.
- Optimized Stake Delegation: StakeNet can better allocate SOL to validators who return the highest net rewards to delegators, increasing JitoSOL yield.
Risks:
- Implementation Complexity: Requires modifications to multiple systems (TipRouter, StakeNet, TDA v2).
7. Outcomes
The successful execution of this proposal will result in:
- A fully upgraded TipRouter capable of distributing both MEV tips and priority fees.
- A modified StakeNet delegation model that prioritizes validators with fair priority fee distribution practices.
- A more transparent and efficient staking ecosystem for Solana.
- Greater reward accumulation for JitoSOL
8. Cost Summary
This proposal incurs no direct cost to the DAO.