JIP-16: TipRouter and StakeNet Adjustments for Priority Fees

JIP - Official
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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 Solana’s fee-sharing mechanisms as well as JitoSOL yield.

Finally, this proposal will require 10,000 SOL from the DAO treasury to cover the rent costs associated with the TipRouter upgrade.

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 network’s fee economy fairly.

Additionally, StakeNet’s 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.

Additionally, this proposal will lead to the transfer of 10,000 SOL from the DAO to cover the additional rent costs associated with the TipRouter upgrade. These funds can be reclaimed by the DAO at a later date.

TipRouter Upgrade

  1. 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.
  1. Modify TipRouter Distribution Logic:
  • Extend TipRouter’s capabilities to handle priority fee distribution.
  1. 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.
  1. Rent costs:
  • This upgrade will create a parallel set of accounts to track priority fee payments each epoch per each staker. Covering the rent costs for these accounts will require 10,000 SOL from the treasury.
  1. Fees
  • The Jito DAO will take a 1.5% fee on all priority fees distributed to users, rather than the 3% fee from the standard TipRouter. For example, if a validator is sharing 50% of priority fees with stakers, they will be paying a net .75% (1.5% of 50%).

StakeNet Parameter Adjustment

  1. Introduce Priority Fee Commission as a Delegation Factor:
  • Modify StakeNet to factor in a validator’s historical priority fee commission when determining delegation eligibility.
  1. 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:

  1. A fully upgraded TipRouter capable of distributing both MEV tips and priority fees.
  2. A modified StakeNet delegation model that prioritizes validators with fair priority fee distribution practices.
  3. A more transparent and efficient staking ecosystem for Solana.
  4. Greater reward accumulation for JitoSOL

8. Cost Summary

This proposal will lead to opportunity cost for the DAO in that 10,000 SOL from the treasury will be used for rent costs associated with the TipRouter upgrade, rather than earning yield as JitoSOL.

NOTE: This proposal was edited on 4/3/2025 to add information about new fee structure and rent costs

1 Like
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Given concrete plans to implement in-protocol mechanisms to do this, this seems like unnecessary complexity for the pool, the affected programs and the affected validators, is the reasoning in justification of this simply not wanting to await the implemention of the in-protocol solution?

Will this become obsolete, or be replaced/compatible with the in-protocol solution once this is implemented or will this force validators to use this mechanism and set a 100% commission on the in-protocol solution?

FWIW after activation of SIMD96 the block rewards are down significantly to validators. There have been significant changes in the macro markets so it is impossible to conclude that this is a result of median fee accommodating the reduced burn or just overall market changes, but it certainly should be considered that validators are not better of because of SIMD96, and I would argue that this proposal has merits independent of SIMD96 and it’s existence shouldn’t be motivation for this. Either stakers (jitoSOL) want a share of block rewards or they don’t, the fact some were burned and now aren’t shouldn’t really matter.

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Is there any good reason to treat priority fees differently than Jito tips, in terms of what is (and is not) routed through TipRouter? I don’t see any reason to maintain the distinction, and tend to agree there are benefits to unifying the treatment now versus waiting until changes are made in protocol (and then having to go through the process of making changes to Stakenet at that point to take those protocol changes into account - just seems like unnecessary delay and that timing is out of this community’s control).

Moreover, maintaining an arbitrary distinction seems like it may just invite unnatural behavior to “game” any difference in treatment of priority fees and Jito tips, even after the in protocol changes are made. Similar to the rationale for getting rid of the 50% burn of priority fees, which incentivized users to use out-of-protocol tips vs priority fees. Seems logical to go ahead and unify treatment of user fees, but open to hearing why there’s good reason for maintaining a distinction in terms of what is (and is not) routed through Tiprouter

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With this change and the upcoming SIMD-123 implementation there will be two more commission variables to be adjusted (currently we have validator commission and MEV commission). It is already very competitive and hard to get into the pool (since TVC implementation is insane), not to mention that if you don’t run your validator in Europe kind of sucks (when IVC?).

With this change race to 0% will start again and small-medium size validators will struggle even more. Jito stake pool is already offering very attractive APY, why change now?

In the proposal says “Validators will be required to share 50% or more of their priority fees to be eligible for JitoSOL delegation upon implementation of this change.”. Once SIMD 123 gets implemented will you also factor in the score the block rewards sharing?

I see very dark times ahead for small validators and we are not yet in a bear market…

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I agree with the spirit of this proposal, but I think this is the right idea implemented incorrectly.

Reasons I am for something like this

  • While I am sure that this proposal will be controversial for many validators, this is the right idea. Stake pools are becoming more and more competitive while JitoSOL is falling further and further behind on APY. I don’t think Jito necessarily needs to have the highest APY as comparing a single validator LST vs Jito is an apples to oranges comparison. However, the delta is growing quite large, and if Jito becomes complacent, I do fear TVL is at risk.
  • While many validators will and have criticized this, while I can understand the criticism, I think it’s only fair. For example, many validators operate their own LSTs where they distribute block rewards. Why should stakers staking through one mechanism (ie their own LST) be treated than stakers who stake through JitoSOL? I’m open to my mind being changed, but without hearing an argument to defend that, it seems hypocritical.
  • It’s inevitable stakers are going to want this.

With that being said, I don’t think this is the right approach right now.

Reasons:

  • To receive JitoSOL delegation, it seems a bit unfair to force stakers to distribute block rewards to ALL their stakers vs just to the JitoSOL stake account delegating to their validator. I can’t see a good reason for that. In many cases, it helps competitors.
  • AFAIK, Jito Labs or Jito DAO (I forget which one) receives some percentage of the tips flowing through tip router. I think it seems a aggressive to force validators into using TipRouter allowing Jito <Labs|DAO> to make more, especially with SIMD-123 about to be voted on, which would be native and allow for validators to distribute at a much lower cost.

Open questions

  • To improve the APY of JitoSOL, will the 4% reward commission be revisited?
  • To improve the APY of JitoSOL, will the (I believe) 3% fee on TipRouter be revisited?

Overall, I think the spirit of this proposal is correct, however:

  1. I can’t see any rational reason why in order to improve JitoSOL, validators should be forced to distribute revenue to stakers outside of JitoSOL. In many cases, that will actually improve the APY of other stake pools, hurting the idea behind this proposal.
  2. 7% in total fees off of this seems objectively very high. Jito deserves a commission off what they built. I’m not arguing that. But that commission comes directly out of stakers pockets and can / will continue to hurt JitoSOL.
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Can’t agree more about this statement. The risk of adding a high and static entry fee by default due to the assumption of SIMD96 is a misconception of Solana macroeconomics and many of the current Validator set could not cover operations based on Q1 25 numbers. In my opinion and as counter proposal, in case of additional fees generated by block rewards, we need to make them flexible based on market volume.

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I appreciate all the thoughtful input on this proposal. I think there are some valid points which have been raised from various stakeholders - however, I would like to reframe the conversation, focusing on what is best for the DAO, and all its products including JitoSOL.

Jito itself should be thought of as an extension of Solana, with a business that is deeply intertwined to the core network itself, but optimized with the flexibility to capture value in a way the Solana network cannot mimic. The DAO should continue to focus on attracting validators that are optimally aligned with the protocol, as it has currently done with StakeNet.

Thus far, StakeNet has demonstrated that validators are relatively elastic in their fee structure, with the majority of validators currently showing that they are willing to take zero commission on native staking rewards. If this proposal is to pass, I am highly confident that this would serve as a forcing function to have validators meet the criteria via a max limit of 50% of priority fees being shared to the stake pool. These market dynamics will bring about the best results for JitoSOL stakers, bolstering the existing network effect of the asset throughout DeFi. More usage of JitoSOL throughout DeFi will have compounding effects, driving more revenue to the DAO treasury via stake management fees.

Additionally, having priority fees routed via TipRouter also stands to benefit Jito’s Restaking product. I believe that TipRouter processing both Tips and Priority fees provides beneficial strategic positioning if any changes were to impact user behavior to drive higher Tips vs Priority fees, or vice versa.

With regards to the concerns raised, I think they are valid, and thoughtful, but ultimately all of them seem to take a more personal, or general viewpoint than that of the DAO. Looking forward, the next wave of capital inflows for JitoSOL may very well be via staked SOL based Exchange Traded Products. This opens a new door of capital via investors who otherwise would likely find it difficult to receive Solana exposure, let alone Solana staking reward exposure, outside of relatively high-fee venues like centralized exchanges. Jito has both a comparative and competitive advantage versus centralized exchange venues for the highest staking yield with the lowest cost point for users, and the DAO should focus on continually attracting validators that are optimally aligned with the protocol, thus maximizing the opportunity for higher yields for JitoSOL stakers.

I plan to vote yes on this proposal, but look forward to continued dialogue around this topic.

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I would also like to emphasize that it’s crucial to assess how this proposal integrates with anticipated in-protocol mechanisms, such as SIMD-123, to avoid redundancy and ensure long-term compatibility. Additionally, there needs to be measures to prevent the marginalization of smaller validators to maintain network diversity. Given the current market conditions and SIMD-228 you can see a compounding effect on small validators and their operating expenses. The current voting status on SIMD-228 and assuming this proposal passes, a more moderate or staged implementation of these proposals can allow smaller validators time to adapt, reducing immediate centralization pressures. Smaller validators would simultaneously experience shrinking revenue from reduced token emissions and intensified competition from fee-sharing demands. The fee sharing floor of 50% can also be adjusted quarterly as a workaround.

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Reframing the conversation towards the DAO, I am very worried about this one.

While the additional revenue for the DAO might seem nice in the short term, this is a CEX-level extraction type play. Jito is viewed as a great ecosystem infrastructure player on Solana right now. With this change, I really think the entire narrative around Jito will change.

Opinions aside, much of the narrative around SIMD-228 was around CEX’s and greedy middlemen. Cutting inflation hurts revenue of these types of players. While Jito is not viewed as a greedy middle man now, I strongly think it will be if this proposal passes. This will welcome encourage others to compete and encourage validators to work with other competitors.

While this proposal might seem great in the short term for the DAO, I encourage others to look at long term effects of this. 7% in fees is outrageous for an ecosystem team and will make Jito really the highest extracting team on Solana that I am aware of.

Even putting the narrative of Jito aside, the 7% yield comes directly out of customer’s pockets, and I am skeptical Jito will be able to keep it’s lead on TVL if this passes.

There’s a time to be extractive, but this is not the time. At this phase in Solana’s growth, it makes much more sense to grow the pie.

I encourage long term thinkers to think long and hard about this one and vote no.

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Hey Max, thanks for sharing your thoughts. Respectfully, I disagree with your views and have shared my reasoning below.

No, this doesn’t mimic CEX style “extraction” at all. This is an opt-in service for validators to compete amongst each other to deliver the highest yield to JitoSOL stakers in the most decentralized, autonomous, fashion possible.

Validators working with competitors is fine, they are welcome to do so currently. Their cooperation is not what brings TVL to Jito.

Again, your use of the term “extraction” lacks substance. Jito has provided the infra to be able to distribute over $1bn+ in tips across the entire Solana ecosystem between stakers and validators over the last year alone. In my opinion, “extracting” is taking more than you give back, and that’s not the case here.

This seems to take the view that the validators themselves are the ones bringing the TVL, which is not the case. This proposal will lead to more adoption of JitoSOL via boosted APY through priority fee sharing, bolstering its existing network effects.

Again - this is not extractive. This is an opt-in service from validators. The economics of StakeNet will continue to attract the best possible infra providers who are willing to compete amongst each other in order to meet the criteria to receive stake delegation from the Jito stake pool. There is simply nothing “extractive” about this process.

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Thanks for the reply! Respectfully, I disagree with you, but I appreciate the dialogue.

No, this doesn’t mimic CEX style “extraction” at all.

I’m not sure personally how you can take the position that this is non-extractive. SIMD-123, which is currently being voted on, will allow validators to distribute block rewards for no additional fee. Jito’s tip router charges 3%. I’m not sure how it can be argued that forcing validators to use a service that charges a fee vs something natively built into the protocol that charges 0% is non-extractive.

This is an opt-in service for validators to compete amongst each other to deliver the highest yield to JitoSOL stakers in the most decentralized, autonomous, fashion possible.

TipRouter itself is fine. No disagreements there. But this proposal is trying to force validators to use TipRouter if they want to qualify for Jito’s stake pool, making it mandatory. So by definition, this is no longer “opt-in” for validators who want to participate in Jito’s stake pool. Additionally, putting that point aside, what is the point of trying to compete with a native mechanism built into the protocol, especially if you are taking the position that this is non-extractive.

Again, your use of the term “extraction” lacks substance. Jito has provided the infra to be able to distribute over $1bn+ in tips across the entire Solana ecosystem between stakers and validators over the last year alone. In my opinion, “extracting” is taking more than you give back, and that’s not the case here.

Covered the extraction point above with substance. I have no issue with Jito taking commission. But 4% as the reward fee plus 3% on block rewards represents 7% in commissions charged by Jito. This is just shy of Coinbase’s 8%, which is why I used the term “CEX-level extraction.”

I am using the term “7% in commissions” because this does not represent the total fee charged by Jito in this proposal. The actual fee could very well be even higher than Coinbase.

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Sorry I forgot to reply to this one.

My point is not that validators bring the TVL there. That is certainly not the case.

Instead, my position is that Jito fees will be so high that it will be much harder for Jito to compete because the fees come directly out of the APY for JitoSOL holders.

It will be extremely difficult for JitoSOL to compete on APY with these additional fees, especially in a post SIMD-123 world where a stake pool will certainly lean on this to save on costs.

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If we want to have a real discussion about who’s getting what percent of the value being generated in the system, that’s fine, but it’s kind of unfair to only focus on the fees Jito is charging and try to claim “that’s too much” without looking at the value flowing to all other participants in the system and comparing their relative contributions to generating that value. I personally think that in such an analysis, Jito’s fees will clearly be very light relative to their contribution in generating value. If you want proof, just look at what happens when Jito goes down for a few hours.

Nonetheless, even when you only focus on the 3% fee that would be charged by TipRouter on priority fees if this JIP were implemented, the impact is miniscule.

Current staking yields are around 9%, and currently priority fees represent around 2% of that. So applying a 3% TipRouter fee on priority fees would mean the DAO would get roughly 0.06% of the 9% staking yield as a result of this JIP. IMO that 0.06% is not going to be the reason anyone stops running the Jito-Solana client, but if it is, then that’s great because someone else must be providing even more value than Jito, and they deserve that additional business.

With SIMD-228 about to get shot down (and emissions remaining several percent points higher as a result), this JIP’s 0.06% impact is not material.

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Thank you for the response. While I could comment on it, I’d like to bring this conversation back to the DAO instead of justifying the amount.

Current staking yields are around 9%, and currently priority fees represent around 2% of that. So applying a 3% TipRouter fee on priority fees would mean the DAO would get roughly 0.06% of the 9% staking yield as a result of this JIP.

This is not the right lens to look at this proposal in IMO. Another way to frame this question is, “Why should JitoSOL holders get 3% less in block rewards than other stake pools?”

You mentioned SIMD-228 here, but you did not mention SIMD-123, which will do the same thing as TipRouter, but for 0%.

Stakers are more important than validators in a stake pool. That’s the objective truth.

Why do JitoSOL holders deserve less in block rewards?

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Thanks to all of the contributors here @laine @cryptopeterb @maxkaplan @OscarGF @Ian @ValidBlocks. We really appreciate this critical debate, as it ensures robust governance and clarity around our decisions.

Summarising clearly, we believe the key themes emerging from these discussions are:

  • Obsolescence: Concerns that the proposal’s impacts will become obsolete following future protocol-level implementations (SIMD-0123).
  • The Mechanism Choice: The decision to use the 50/50 fee split versus more nuanced, algorithmic or market-based approaches.
  • Validator Competition and Economic Pressures: Concerns around how additional fee sharing could exacerbate existing pressures on validators.
  • Jito’s Fee Structure and Extraction Narrative: Questions regarding whether the Jito network’s fees represent excessive extraction or reasonable funding of ecosystem development.

We will address each of these issues in this post and discuss a little more clearly about Jito DAOs position both in the governance of the protocol and its economic structure.

Jito Governance’s Role in Balancing Economic Interests

Firstly, it’s worth clearly positioning the role of Jito DAO in the protocol, since there is some confusion regarding its precise governance role and purpose within the wider protocol structure.

Jito DAO actively coordinates and aligns incentives across validators, stakers, the Solana and Jito Network protocols themselves, and indirectly benefits users, searchers, and integrated apps, thereby amplifying Solana’s overall economic flywheel.

Since the launch of JTO, the protocol has moved to a foundation + DAO structure, which means that token holders have serious meaningful control of the Jito Network. The treasury collects all the fees generated by the protocol and Jito Labs has made continual efforts to continue this decentralisation trajectory by decentralizing TipRouter through the creation of the NCN.

Its role is an important one, it must holistically balance the interests of all of the critical stakeholders in the network, which broadly can be thought of as a trade off between, the protocol (both Jito and Solana), the stakers, and validators.

Jito DAO Governance
Jito DAO Governance1358×1024 74.5 KB

It is perfectly understandable that validators will take the view of their own economic positions, but it is important that the DAO holds the long-term interests of all 3 facets of this governance dynamic in mind when it comes to its decisions.

The Implementation of JIP-16

JIP-16 essentially integrates the SIMD-0096 protocol level change into the Jito protocol. You can think of it as an explicit agreement of fee sharing between the validators and stakers, creating a 50/50 split of priority fees.

Currently, stakers do not benefit at all from the SIMD-0096 implementation and JIP-16 transparently splits this new economic bandwidth between stakeholders, ensuring validators and stakers fairly benefit from this protocol-level upgrade. The passing of JIP-16 effectively completes the integration of SIMD-0096 into the Jito protocol and brings both the protocol and the stakers into the economic equation.

This proposal will benefit the Jito Network and JitoSOL by immediately increasing staking yield, by making JitoSOL more competitive with single-validator LSTs, which will ultimately drive more delegations to validators.

Complexity, Obsolescence and the 50% fee split

We explicitly recognise the possibility that the 50% fee split proposed in JIP-16 may not represent the final economic optimum for all stakeholders. However, we have no confirmed timeline for the implementation of SIMD-0123, and it is imperative during this period that JitoSOL remains competitive in the liquid staking token market.

So, while acknowledging a fixed 50% split may not ultimately be optimal, it serves as a pragmatic, minimally complex initial coordinating position, ensuring immediate benefit for stakers. A fixed split was selected precisely because of its simplicity and ease of coordination, serving as an ideal Schelling point.

This also provides a floor on expected reward sharing for JitoSOL in the near-term. Some constituents expressed concerns about a full market-based mechanism since they suspected it would catalyze a race-to-the-bottom in block reward commissions. The commission cap was intended as a compromise to avoid drastic changes for validator economics in a short time period.

Once implemented, this simpler mechanism allows us to gather valuable empirical data, enabling us to iteratively move towards a more nuanced, dynamic, market-based structure if desired. Governance will thus be informed by actual market outcomes rather than speculative design, reducing uncertainty and maximising long-term value.

Additionally, when considering the engineering time and effort from the development entities contributing to the Jito Network, there have rarely been better examples of provably high-value initiatives to pursue in terms of the direct revenue to the DAO.

More generally, given the extremely high stakes, existential nature of Solana protocol level upgrades, it will always be the case that Jito can make moves on its protocol architecture quicker than network level upgrades. Jito DAO has the position as a governing entity to steer and shape its economic dynamic in a more agile way than can possibly occur at the network level. In fact, it is an ideal scenario for both the Jito and Solana protocols that it does so.

This proposal has the potential to showcase the governance agility that Jito DAO has, making protocol moves that maximise value for stakers as quickly as possible. This is a crucial value add for confidence in JitoSOL and will be necessary for maintaining JitoSOL’s position as the leading LST in the Solana ecosystem. As @Ian mentions in his post, it is vital we stay at the leading edge of this action due the extremely high value upside potential of inclusion in future institutional products.

By operating in advance of protocol upgrades where appropriate, it means that holding JitoSOL is always the best possible option for maximising returns while holding the base asset on Solana. Currently, stakers are losing out on value and we think minimising that scenario as much as possible should be a prime driver of our decision making.

As this mechanism beds into the market, we can then open up the conversation about more advanced and nuanced economic mechanisms, including moving towards a more market based fee structure. It is far better to make these decisions on empirical data rather than speculative decisions about how a mechanism may or may not play out in the market.

Consequently, we propose that this proposal passes and that we use empirical evidence it generates to move towards a more nuanced market driven mechanism in the future. In that time stakers enjoy the additional value on their staked assets, the DAO earns additional revenue, and we have a more complete understanding of how we can carefully craft the validator set to maximum protocol efficiency.

Validator Competition and Economic Pressures

We absolutely understand and recognise the high degrees of both competition and economic forces that validators are subjected to due to the challenging context of the cryptoeconomic conditions under which they operate, but also due to market macroeconomic conditions and also changes to protocol economics that are actively under deliberation as we speak.

These economic forces are central to the economics of Solana and it is worth noting that these forces will continue to become challenging and continue to become competitive as the more validators enter the system, but also as the Solana protocol drives towards IBRL. It will always be the context where competition is fierce and that validators will have to continually work towards advancing their infrastructure and compete in the market for stake.

This is absolutely central to Solana’s position in the market, reference say Ethereum, which takes a different technological stance towards network operations which aims for the broadest possible ‘inclusive’ validator set, but at the expensive trade off of latency and far slower technological advancement. The hard technological drive towards IBRL will put a continual pressure on validators to perform and StakeNet itself is an important part of that economic and technological dynamic.

Fee Concerns

After discussion with @maxkaplan, our understanding is some of his concerns were around the fees following SIMD-123 is implemented (subject to his correction). We agree that when SIMD-123 is implemented the utility of the JIP-16 TipRouter modification vs. in-protocol mechanisms may not be necessary. However, SIMD-123 will not be implemented for at least 6 months and likely closer to 12 months. We propose a DAO re-assessment of TipRouter’s role in priority fee sharing once SIMD-123 approaches mainnet launch. This should cover whether it remains justified and, if so, what is the fair rate of fees for TipRouter at that time.

TL;DR / In Summary:

  • Jito DAO explicitly balances validator, staker, and protocol interests, alongside users, searchers, and integrators, optimising the Solana ecosystem economic flywheel.
  • JIP-16 explicitly shares priority fees (currently not benefiting stakers at all), ensuring immediate uplift for JitoSOL yields and competitiveness.
  • The fixed 50% fee split provides a pragmatic, empirical starting point, enabling faster governance action than waiting indefinitely for network-level changes like SIMD-0123.
  • We fully acknowledge validator economic pressures and propose staged or iterative future adjustments to safeguard validator sustainability.
  • TipRouter’s usage for priority fee sharing and fees will be reassessed once SIMD-123 approaches mainnet adoption (likely 12 months away)

We thus strongly advocate passing JIP-16 now, while carefully iterating future improvements informed by actual market data.

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I am aligned with this proposal if it is re-evaluated after SIMD-123. My main worry is stakers making less than they have to make in a world post SIMD-123. If this is a short / medium term proposal, I am in favor of it.

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Thanks for the response @maxkaplan, that’s great to hear. Totally agree, we should minimise any time where the stakers are overpaying (even marginally) post SIMD-123.

We can absolutely re-evaluate after SIMD-123 and in advance of that if we like. I suggest we use this thread in an on-going fashion to monitor how the mechanism beds in and use the emerging data to propose more optimal solutions if any become obvious.

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Sorry, late to comment on this proposal.

I also feel like this feels a bit extractive (mainly due to the tip router fee when jito already takes from the tip portion) and it comes at a time when block rewards have been at a low (even with 100% priority fees now) so feels worse. Non-validators will probably not care but I’ve already seen in validator chats that validators are sour on this proposal (and Jito) mainly for this reason. Jito has had a pretty good rep among validators so there’s a risk here of losing support (whether that matters idk).

If the tip router has to charge for now due to logistical reasons then I think it would help perception-wise if the block reward tip router income were earmarked to fund things that would be viewed as beneficial for the broader ecosystem vs jito more specifically. Ideas here include: 1) funding for hackathons 2) funding for core engineering contributor(s)/efforts to make sure the chain is rock solid 3) funding for other forms of Solana R&D where Solana Foundation might not be putting as much money atm. Of those three my vote would be number 2 because we all know an outage would suck horribly for Solana and Jito, so the more people polishing Solana’s codebase/architecture the better imo. Branding wise it also bolsters Jito’s rep as a key Solana core contributor (which has mattered more for jito sol adoption than pure apy if I had to guess). Continued uptime will matter a lot more for Solana ETF interest/adoption than a few points more of apy as well.

We probably won’t utilize the Tip Router for now ourselves (at Overclock Validator) unless block rewards go up again. Our inflation and jito commissions are already at 0. It makes more financial sense for smaller validators to adopt the block rewards tip router though where jito stakepool stake is a larger portion of their total stake.

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Thanks for the feedback @7Layer very important that the commentary from the validator chats makes it to the forum and appreciate you stating your position so clearly. Interesting points regarding the funding suggestions, I those ideas dovetail significantly with the ongoing token economics conversation.

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Hey @Ian @laine @cryptopeterb @ValidBlocks @maxkaplan @OscarGF @Chainflow @7Layer. Thanks again for the really solid discussion on this proposal. I want to draw your attention to some important edits made to the proposal, which you can review in the original post on this thread. I’ll aim to summarise them here.

Following extensive feedback and discussion within the DAO forum and validator chats, JIP-16 has been updated to thoughtfully balance the interests of validators, stakers, and the overall protocol health. These refinements directly respond to community concerns, while maintaining our goal of enhancing transparency and improving yield for JitoSOL stakers.

Key Changes to JIP-16:

  1. Reduced TipRouter Fee Structure:
  • The concerns around the perceived extraction raised by validators have been recognised. To address this, the DAO’s fee on priority fees have been significantly reduced from the originally proposed 3% down to just 1.5%. This new fee structure ensures that validators sharing 50% of their priority fees with stakers will effectively pay only a net 0.75% to the DAO.
  1. Clarity on Rent Costs:
  • This proposal explicitly outlines the requirement of 10,000 SOL from the DAO treasury to cover the rent costs associated with the necessary TipRouter upgrades. Importantly, these funds represent a temporary opportunity cost for the DAO rather than a permanent expense, as the SOL will be reclaimable by the DAO in the future.
  1. Transparency and Economic Alignment:
  • The adjustments explicitly clarify the economic flow: validators maintain significant flexibility and a clear economic incentive, stakers gain substantial additional yield, and the DAO retains minimal revenue to sustainably support ecosystem growth. These refined parameters further align stakeholder incentives while reducing friction and addressing concerns around competitiveness and extraction.

Addressing Community Feedback Directly:

  • Validator Concerns on Competitiveness:

    • Fears of “race-to-zero” dynamics are a valid concern. The updated fee structure reduces the competitive pressure on validators, easing concerns of unsustainable fee compression. The commission cap rather than an auction should provide a floor on priority fees potential JitoSOL delegates can maintain.

  • Mandatory TipRouter Usage and Comparative Costs:

    • While JIP-16 does effectively require validators participating in StakeNet to utilize TipRouter, the significantly reduced fee (1.5%) aligns validators more significantly and allows them to operate using the high quality engineering and trusted integrated architecture of the Jito Network. Additionally, this solution provides transparency, standardization, and fairness, directly benefiting all ecosystem stakeholders and justifying this structured approach over unmanaged, fragmented solutions.

  • Protocol-Level Solutions vs. Jito Implementation:

    • The ongoing discussions regarding SIMD-0123 are obviously important and are highly related to nature of this proposal. However, given uncertainties surrounding its implementation timeline and economic details, proactively integrating priority fee distribution now ensures stakers immediately benefit, thereby enhancing JitoSOL’s competitive positioning and yield transparency. This move allows Jito DAO to operate in an agile manner and optimize the economic performance of JitoSOL in advance of protocol level changes.

These revisions represent a strong, balanced step forward. In its original state the proposal addressed the economic alignment between stakers and validators, and I think that this proposal edit now effectively affords an equivalent economic alignment between the protocol and the validators, with a 50% reduction in the initially stated fee structure. The refined fee structure minimizes economic pressures on validators, explicitly addresses concerns around extraction, and transparently benefits stakers with immediate yield improvements.

I encourage continued dialogue before this goes to vote early next week and seek your support in moving forward with this proposal, confident that these adjustments establish a clear foundation for a fairer and more sustainable economic ecosystem.

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