Category:
Protocol Development
Abstract:
This Jito Improvement Proposal (JIP) will authorize the Jito DAO’s adoption of the Jito (Re)staking protocol. The adoption process will place Jito (Re)staking under the control of Jito DAO governance, including routing native protocol fees to the Jito DAO treasury, and will take place roughly over the course of two-to-three months depending on development and auditing timelines.
If approved, the Jito Foundation will transfer a deployed instance of the protocol to the Jito DAO in three phases: a Migration phase, which allows for users to migrate assets into Vault Restaking Token (VRT) vaults; a Staking phase, which enables Node Consensus Networks (NCNs) to launch with the majority of the protocol’s core functionalities; and a Slashing phase, which enables NCNs to activate slashing.
Governance permissions will allow the DAO to collect, control, and modify the protocol fees associated with withdrawals as well as rewards. The initial protocol fee for withdrawals from vaults will be set at 10bps and will go live concurrently with the Deposits phase. The initial protocol fee for rewards paid out by NCNs will be 4%, and will go live during the Staking phase.
Motivation:
The forthcoming Jito (Re)staking module has the potential to become a core part of the Jito Network’s functionality, enabling thousands of previously impossible use cases to propagate.
The proposed codebase for Jito (Re)staking has recently been made public and is currently being audited by 2 firms (Certora + Ottersec). Details regarding proposed Jito (Re)staking’s functionality can be found here.
The adoption of Jito (Re)staking through DAO governance, and its ongoing maintenance by the same, represents a critical step towards decentralization of the Jito ecosystem. Additionally, restaking creates a new avenue of utility for JitoSOL.
Ultimately, this proposal would transform the Jito DAO from being primarily focused on LST governance to instead being focused on the broader Jito Network – a collection of synergistic and interconnected protocols providing key Solana infrastructure and enabling the development of countless consumer- and enterprise-level tools and applications.
Key Terms:
- Jito (Re)staking: A hybrid staking and restaking platform that allows networks to quickly establish economic security parameters for achieving consensus.
- Node Consensus Network (NCN): A decentralized system of validators who provide consensus for on- or off-chain programs.
- Protocol Fee: This proposal references two types of protocol fees: a percentage of the fees generated by the NCN that is directed to the DAO treasury, as well as a fee on vault withdrawals. Initially set at 10bps for vault withdrawals and 4% for NCN rewards.
- Vault Receipt Token (VRT): A Vault Receipt Token is a token that represents a user’s migration into a staking or restaking vault, allowing for enhanced liquidity and composability of staked assets.
- Node Operator: An infrastructure provider responsible for managing and operating nodes within a NCN, performing consensus operations.
- Jito DAO: The decentralized autonomous organization governing smart contracts in the Jito ecosystem, including the restaking protocol.
- Vault Program: One of the three programs that constitute Jito (Re)staking’s functionality. Manages the creation and operation of vault receipt tokens; handles minting, burning, and delegation of VRTs; and allows for customizable delegation strategies across multiple operators and NCNs.
- Restaking Program: One of the three programs that constitute Jito (Re)staking’s functionality.
- Slashing: Allows NCN developers to tailor the conditions under which economic security would be “slashed” from the node operators of their networks and determines where slashed assets are routed.
Specification:
This proposal authorizes the Jito DAO’s adoption of a deployed instance of the Jito (Re)staking Protocol live on Solana mainnet and places the protocol’s governance under the control of the Jito DAO.
The launch of Jito (Re)staking will take place over the course of three phases, ideally over the course of a month depending on development and auditing timelines.
1. Deposits phase
The Deposits phase represents the launch of the Vault Program on Solana mainnet. The Vault Program oversees multiple functionalities in Jito (Re)staking, including: Manages the creation and operation of vault receipt tokens; handles minting, burning, and delegation of VRTs; and allows for customizable delegation strategies across multiple operators and NCNs.
From a practical perspective, many of these functionalities will be inoperable in the absence of the Restaking Program, which will go live in phase 2. However, users will be able to migrate assets to blockchain-based accounts at Vault Operators in order to build a base of security in preparation for Jito (Re)staking’s full launch.
Additionally, this phase would represent a new source of protocol-driven fees for the Jito DAO in the form of a 10bps withdrawal fee on assets users withdraw from vaults. This fee is identical to the JitoSOL unwrapping fee, and has not proven to be a barrier to the growth of the protocol in the case of JitoSOL.
The Vault Program is expected to be transferred to the Jito DAO after the passing of this proposal, subject to audit and other technical preconditions.
Phase 2: Staking Phase
The Staking phase represents Jito DAO’s adoption of the Restaking Program on Solana. The Restaking Program oversees multiple functionalities, including: the creation and management of NCNs and operators; coordinates the relationships between NCNs, operators, and vaults; implements flexible opt-in/opt-out mechanisms for NCNs, operators, and vaults; slashing; and governs the distribution of rewards.
With the Vault Program going live prior to the Restaking Program (assuming an approving Jito DAO vote), this launch would enable third-party NCNs to go-live with full Jito (Re)staking functionality, aside from slashing. Additionally, this phase would roughly coincide with the launch of the Jito Rewards NCN, which will be responsible for calculating and distributing rewards for NCNs that opt into its parameters. Upon launch, the Jito DAO will be able to modify fee parameters.
The Jito Rewards NCN will function by: taking a snapshot of a third-party’s NCN activity, determining a Merkle root for the rewards, coming to a consensus regarding the Merkle root, and distributing rewards to all component parties.
The Jito Rewards NCN will also route a portion of rewards to the Jito DAO treasury in the form of a 4% fee. Jito DAO will decide a portion of that fee to be directed to NCN participants with the balance allocated to the Jito DAO treasury.
The Staking phase is expected to launch a number of weeks following the Deposits phase, depending on development and audit timelines. The Jito Rewards NCN code will be made public prior to a DAO vote on launch.
Phase 3: Slashing Phase
The Slashing Phase represents the launch—and the Jito DAO’s adoption—of slashing functionality of the Restaking Program, assuming a favorable Jito DAO vote. The slashing functionality of the Restaking Program oversees slashing for NCNs, allowing NCNs to tailor the slashing specifications, amounts, and destination for slashed assets. Note: slashing on any NCN is always subject to approval by NOs and VRTs prior to any activation.
The launch of this phase, roughly estimated to be a matter of weeks to months after the launch of the Staking Phase, will mean that Jito (Re)staking has completed full and successful deployment.
Benefits/Risks:
Benefits:
- Increased decentralization by placing control of a Jito ecosystem product under the Jito DAO.
- Sustainable funding for the Jito DAO treasury via protocol fees.
- Flexibility to adjust fees based on the needs of the community.
Risks:
- Smart contract and brand risk associated with a potential exploit.
- Mismanagement of fees could impact Jito (Re)staking product adoption.
- Lack of DAO activity/coordination could result in stale features, including fees.
Outcomes:
The successful deployment of this JIP will result in the Jito DAO’s adoption of the to-be-launched Jito (Re)staking protocol over the course of three phases, ultimately placing governance of the protocol under the control of the DAO and providing two new forms of fees for the treasury in the form of a withdrawal fee and a rewards fee.
Cost Summary:
There are no direct costs to the DAO associated with this proposal.