JIP-39: Maximising JitoSOL Performance - The next phase of JitoSOL economics

[drnick]

JIP-39: Maximising JitoSOL Performance - The next phase of JitoSOL economics

Category: Protocol Development

Proposal Type: Standard (includes a Programme Modification of JIP-31)

Status: OFFICIAL

Abstract

This JIP will make JitoSOL the highest-yielding major LST on Solana and sets the BAM Early Adopter Subsidy Programme on a path to graceful wind down. The proposal outlines the creation of a “reference validator,” which will be a Jito-operated validator that gains sufficient stake from the stake pool to set the network standard and ensures that JitoSOL yield is maximally competitive.

Mechanically, this JIP directs the Steward to move 25% of JitoSOL delegation, pro-rata across all validators, to a Jito-operated validator running 0/0 commissions and passing all block rewards to holders. This not only creates an ideal reference node for pushing the frontier of BAM, it lifts JitoSOL yield ~15bp to ~5.28%, breaking through the material performance ceiling for major decentralised LSTs on the Solana network.

In parallel, it re-tiers the JIP-31 subsidy curve to concentrate support on the small and mid-sized validators most affected by the delegation move, extending the programme at the full rate through Q4 2026, and then winding it down on a fixed exponential schedule that reaches 0% by the end of Q2 2027. This final extension covers the delegation change period and then winds down gracefully over the following quarter.

Motivation

JitoSOL is the most decentralised LST on the Solana network and consequently has higher overheads than other operators, which often use single digit validator set ups. At 350+ validators in the Jito Stake Pool, JitoSOL provides over half the validators on the Solana network with additional stake.

JitoSOL sits at roughly 7bps from top market performance amongst major LSTs, yielding ~5.13% APY. LST competitors that zero out their commissions, the “0/0 ceiling” will converge on ~5.2% APY. The steward already ranks validators on their economic metrics and puts a selective pressure on low commissions. The only lever remaining are block rewards (priority and signature fees), which as it stands accrue 100% to validators. This proposal specifies a JitoSOL delegation change that will shift 25% of the stake pool delegation to a Jito-operated validator that will pass through 100% of block rewards to JitoSOL holders, breaking the yield ceiling and cementing JitoSOL as the market leading decentralised LST.

Table 1: The percentage delegation change and its impact on JitoSOL yield. Every 1% of the pool moved adds ~0.6bp of yield:

A more competitive JitoSOL means more TVL to distribute to validators. JitoSOL TVL is down 50% from all time highs. This reduction in TVL can be explained by market context and that some users prioritize yield over decentralization. The economic changes outlined in this proposal, although reducing immediate delegated stake to wider stake pool validators, should recover total JitoSOL TVL to the point where the validator earnings are recovered. A recovery of 33% of this TVL will comfortably offset the changes outlined in this JIP.

The subsidy has done its job and should end well. The BAM subsidy (~$338k/month at the current run-rate) was a growth lever, diverting JitoSOL revenue away from JTO value accrual economics. BAM is now mature, highly performant and operating at the frontier of Solana schedulers. Stake weight across the scheduler competitor set has stabilized for some months and the impact of the BAM Subsidy has reached its growth limit.

A graceful wind down of the programme. The BAM Subsidy Programme outlined in JIP-31 was set to terminate at the end of Q2 this year. JIP-37 recently extended this to the end of Q3. In this quarter the impact of the BAM Subsidy programme flatlined. Consequently, this proposal lays out a modification to the mechanism that will support the maximal number of validators to manage the economic transitions outlined in this JIP, including an additional flat rate quarterly extension and then a quarter long wind down of the programme, terminating in Q2 2027.

Key Terms

Jito Reference Validator — a validator, or validators, operated by Jito with 0% inflation commission, 0% MEV commission, and all block rewards (priority fees and signature fees) passed through to stakers. With the additional stake this Jito validator will provide the network stake weight it needs to become the benchmark for validator operations on the network.

0/0 Ceiling — the maximum yield (~5.2%) achievable by an LST whose validators charge zero commissions but retain block rewards.

Effective Stake — a mechanism-adjusted version of a validator’s raw delegated stake used to determine its share of the subsidy pool (per JIP-31).

Pool-Share Ceiling — a cap on the fraction of any epoch’s subsidy pool a single validator may receive, replacing the current 3M effective-stake cap.

Steward Cycle — one 20 day Steward rebalancing cycle (~3 weeks), during which at most 7.5% of the pool may be moved.

E₀ — the first epoch of Q1 2027, from which the subsidy decay schedule is computed

Epoch Extension — a mechanism which extends the number epochs in the BAM subsidy programme to anchor as close as possible to the end Q2 programme target. This mechanism is designed to compensate for shortening slot times on the Solana network, which is compressing epoch times. For example, claim windows will extend from 10 to 11 to compensate for the 350ms block times, 13 epochs at 300ms and 20 epochs at 200ms.

Specification

Part 1 — Delegation

1. Move 25% of JitoSOL delegation pro-rata to Jito-operated validator(s) (~2.3M SOL at current TVL).

2. Establish the Jito Reference Validator which will run 0% inflation commission, 0% MEV commission, and will pass all block rewards to stakers.

3. The delegation move is throttled by the existing directed staking algorithmic delegation cap of 12.5%-per-cycle. Assuming a full rate delegation change, the full move will be completed in mid-Q4.

4. BAM requirements: Eligible validators must run BAM for at least 6 full epochs of the last 10, and when not running BAM must be running an alternative Jito client e.g. FireBAM, jito-agave.

5. All other Steward parameters remain unchanged. No additional Steward engineering or mechanism redesign is required within the score of JitoSOL core protocol.

Part 2 — Subsidy Re-Tier (Programme Modification of JIP-31)

The points-based effective-stake formula is retained and re-tiered:

Table 2: Changes to the effective stake calculation for the BAM Subsidy Programme

Effect: the mechanism curve will change immediately on execution to the new parameters, incrementally shaping the subsidy curve to support the maximum number of validators.

Table 3: Projected changes in pool share at current snapshot. Note: exact share percentages will change based on pool composition and may vary.

All other JIP-31 parameters eligibility (50K SOL minimum, 3-epoch onboarding), unclaimed reward reflow, and programme modification authority remain unchanged. With the addition of an epoch extension mechanism that will ensure that the subsidy programme remains anchored to the planned length of times in the context of shortening slot times.

Part 3 — Final Extension and Wind-Down Schedule

Q4 2026 runs at the full rate (100% of protocol revenue). From the first epoch of Q1 2027, the subsidy decays epoch-by-epoch on a fixed exponential:

rate(e) = ½^((e − E₀) / 10)

where E₀ is the first epoch of Q1 2027 and e is the current epoch — the rate halves every 10 epochs (one Steward cycle, ~3 weeks, or equivalent based on current slot times). The programme ends at the last epoch of Q2 2027.

Plot and Table 4: A projected timeline of the BAM Subsidy Programme wind down. Timings are liable to change moderately and initiation will be dependent on vote finalisation and execution of changes.

Implementation Path

Contributor Execution:

1. Provision and operate the Jito Pass-Through Validator(s) (0/0 commissions, block-reward pass-through to stakers).

2. Configure the Steward directed allocation for the pro-rata 25% move within the existing 12.5%-per-cycle cap. No other Steward parameter changes, apart from minor BAM eligibility criteria.

3. Update the subsidy distribution mechanism with the re-tiered effective-stake bands, the 2% pool-share ceiling, and the exponential decay schedule from E₀.

Foundation Execution:

1. Provide necessary support and updates in the usual validator channels, and support community data provision.

Benefits, Risks & Risk Analysis

Benefits

• JitoSOL becomes the highest-yielding major LST (~5.28% at completion), clearing the 0/0 ceiling at cycle two and converting the DAO’s block reward yield lever into TVL growth that validators share in.

• Small validators are protected through the transition. The re-tiered subsidy raises median subsidy +50% (sub-100K) and +29% (100–250K) from cycle 1, before any delegation loss is material.

• A definitive end to the subsidy. A single published constant governs the wind-down; validators can plan it into their economics and the DAO can return to a value accrual regime.

• Limited mechanism-design complexity. The Steward is untouched beyond the directed stake delegation and the BAM subsidy changes sit within the existing effective stake paradigm, with slightly modified parameters for broader sharing of the pool subsidies.

Risks

• Subsidy dependence. The BAM subsidy has become an additional revenue stream for validators and a number may have become dependent on that revenue for operations. The extensive additional time and redistribution of resources to lower stake weights offsets immediate impact of the delegation changes to those where the marginal increase in revenue has the maximum impact on operation continuity.

• A large change in delegation economics - The movement of a large % of stake pool stake to the Jito reference validator, will have a material impact on pool revenues for validators. The BAM subsidy changes offset this loss of revenue until the Q2 wind down, providing an opportunity for TVL growth and macroeconomic changes to develop.

Outcomes

1. 25% of JitoSOL delegation moves pro-rata to the Jito Pass-Through Validator(s) over four Steward cycles, completing inside Q4 2026.

2. JitoSOL yield rises ~15bp to ~5.28%, clearing the 0/0 ceiling at ~15% moved (cycle two).

3. The subsidy curve is re-tiered from cycle 1, shifting ~9pp of the pool to the validators most affected by the move.

4. The BAM subsidy runs at the full rate through Q4 2026, then decays on a fixed exponential to ~0.3% by end of Q2 2027, at which point the programme ends.

5. 100% of protocol (non-JTX) revenues return to the DAO from Q3 2027.

Cost Summary & Funding Source

All subsidy figures float with protocol revenue; dollar values are estimates at the current run-rate. No incremental treasury draw is required.

Performance Milestones

• ~6-8 weeks: JitoSOL yield ≥ 5.22% (0/0 ceiling cleared).

• Mid-Q4: move complete; JitoSOL yield ≈ 5.28%

• BAM Subsidy completes its full wind down at the end of the programme in Q2 2027.