# JTO Utility And Tokenomics **URL:** \ **Category:** JIP - Ideas\ **Created:** [March 6, 2025, 4:25pm UTC](https://forum.jito.network/t/jto-utility-and-tokenomics/646 "2025-03-06T16:25:42Z")\ **Posts on this page:** 1\ **Showing post:** 15
**Author:** ![joebuild](https://avatars.discourse-cdn.com/v4/letter/j/9dc877/32.png) [@joebuild](https://forum.jito.network/u/joebuild)\ **Post date:** [March 28, 2025, 3:03pm UTC](https://forum.jito.network/t/jto-utility-and-tokenomics/646/15 "2025-03-28T15:03:27Z")
It’s great to see so much high-quality discussion. Thanks @andrewt for kicking things off with the detailed framework. Othman from @Chainflow and I were at The Port this week in Miami, and had a great time collaborating on this post: # Jito Tokenomics ![](https://us1.discourse-cdn.com/jito/original/1X/00b7dc8f534d6df00f879b0493dba7a6ce7d347b.png) Revenue Allocation Summary (very approximate, pending feedback) - 3% Buyback - 1-3% POL (direct costs are unclear) - 40-60% JitoSOL Subsidy - 1-3% Treasury Diversification - 3% Buyback and Barter (highly project/protocol dependent) - 10-20% Real Yield Gauge (JTO Rewards, only JitoSOL-paired pools) The primary objective of the Jito foundation is to facilitate the growth of the Jito network. We should be building for the long term health and sustainability of the network. When considering the allocation of network revenue, we should be heavily favoring ‘recycle’ vs. ‘rewards’. The Jito network is a large protocol within a complex ecosystem, and putting resources towards strategic growth will pay dividends in the future. That being said, it is important to maintain trust amongst holders and investors. Some community members have advocated for a reasonable 3% of tiprouter revenue being put towards buybacks. This 3% (or any low single digit percent) seems reasonable, with the understanding that this metric will not be revisited in the very near future. For rewards options: buybacks vs. buyback and burn vs. fee-switch, buybacks seem the most sustainable, and give the foundation the most optionality in the future. When considering how to allocate revenue in the ‘recycle’ category, we first have to decide which objectives we are trying to optimize. There are several possibilities: - JitoSol, liquid staking token TVL - treasury growth - transaction landing and tip revenue - validator client market share JitoSol - LST TVL JitoSol is the largest LST, currently at around [4% of the network, or 40%](https://tokenterminal.com/explorer/studio/dashboards/a75fc47f-89ae-4cec-abff-af3b8657d66c) of LST market share. There is ample room for growth here, and impact per dollar may be one of the best uses of network revenue. Control over directed stake has many benefits: choice of validator client, optimized REV by choosing highly performant validators, and Solana governance vote weight. JitoSol subsidy and Real Yield Gauge could both help to boost LST market share. Treasury Growth The JitoDAO treasury sits at an impressive ~$550m, 97% of which is JTO. Active management for a treasury this large is a necessity. The foundation should pursue tactical incentives, and treasury diversification. Transaction landing & Tip Revenue There are many factors that contribute to the ability of the protocol to quickly land transactions, and generate tip revenue. Many of these factors are technical and product improvements, but some of these could be influenced by foundation support. Specifically, buyback and barter could benefit the protocol in certain instances, for example: using the DoubleZero optimized network connections could help reduce validator\<-\>block-engine\<-\>block-engine latencies. This may or may not be feasible, depending on their product offerings, but is directionally the type of collaboration that could be beneficial. Validator Client Market Share The Jito client is currently used by ~90% of validators. This is an impressive amount of saturation, and improvements in market share from this point are likely marginal. It’s worth keeping an eye on new market entrants, and ensuring that Firedancer is fully Jito-enabled. Resources allocated to this category would be defensive in nature. ## Potential Benefits: ### 1. Protocol-Owned Liquidity (POL) + incentive approach - Revenue Generation: POL could provide ongoing stable revenue, reducing reliance on external liquidity providers. - Crisis Resilience: The DAO itself becomes a liquidity provider of last resort, ensuring market stability during volatile conditions. - Long-term Alignment: Using treasury funds to maintain liquidity aligns incentives between protocol governance and market stability. - Incentives: Jito can become less reliant on incentives as they can be inconsistent depending on the market and expensive over longer periods. - Expert Risk Management: Using [Gauntlet](https://www.gauntlet.xyz/resources/protocol-owned-liquidity-pol-liquidity-mining-2-0) or similar products could optimize liquidity management and risk. ### 2. Real Yield Gauge - Community-Driven Rewards: Allows decentralized voting on incentive allocation, enhancing community engagement and decentralization. - Market-Based Efficiency: Could efficiently allocate DAO resources by directing incentives towards the highest-value projects and partnerships. ### 3. Treasury Diversification (USDC) - Risk Mitigation: Holding stables diversifies risk away from volatility, providing operational runway and reducing exposure to market downturns. - Liquidity Assurance: Easily accessible funds for quick deployment or emergency situations. ### 5. Buyback and Barter Strategy - Strategic Partnerships: Enables long-term collaboration with strategically aligned protocols, potentially multiplying network effects. Priority access to newer technology (Ex: DoubleZero) - Supply Control: Removes JTO from public markets temporarily, potentially enhancing scarcity and token value. - Perks: Potentially better economic terms (like discounted fees, special integrations, or improved staking rewards). ### 6. Subsidizing JitoSOL Yield - Competitiveness: Keeps JitoSOL attractive against competing liquid staking tokens. - Growth and Adoption: Direct incentives could accelerate adoption, especially valuable in short-to-medium-term hypergrowth phases. * * * ## Potential Risks: ### 1. Protocol-Owned Liquidity (POL) + incentive approach - Capital Efficiency: Risks inefficient capital allocation if not properly managed. - Market Risk: Exposure to impermanent loss or adverse market conditions, affecting treasury stability. - Incentive implementation: Too many incentives could be a net negative for the protocol in the long run. Time period is an important constraint to have alignment on for liquidity pool incentive programs. ### 2. Real Yield Gauge - Misaligned Incentives: Voting might be dominated by large holders or special interest groups, potentially leading to misallocation. - Operational Complexity: Management of gauges and yield allocations could become complex and resource-intensive. For example, to combat misaligned incentives the holders with less JTO could get larger boosts when they lock their tokens compared to delegates that have many governance tokens already - Demographics: It is unclear who, in addition to delegates, whales, and the Jito team, would be motivated to lock up their tokens for more voting power. ### 3. Treasury Diversification - Opportunity Cost: Holding stablecoins may mean losing out on potential upside from market appreciation. - Counterparty Risk: Dependence on centralized stablecoins (Ex: USDC) introduces risks related to issuer solvency or regulatory challenges. ### 4. Buyback and Barter - Counterparty Risk: Potential misalignment if the partner protocol underperforms or deviates from expected outcomes. - Liquidity Lock-up: Funds become less liquid, which could become problematic during unforeseen liquidity needs. ### 5. Subsidizing JitoSOL Yield - Unsustainable Incentives: Temporary subsidies might artificially inflate growth metrics, potentially causing sharp declines once incentives end. - Treasury Drain: Continuous subsidies may significantly draw from treasury reserves, limiting funds available for other strategic initiatives. ### 6. Communication with Double Zero via Hyper Optimized Networks - Technical Risk: Integration complexities could arise from adopting new, potentially unproven communication technologies. - Dependency: Risk of dependency on external technological solutions that might not be robust or fully developed. ## Open questions: - Will there be an SLA behind the buyback and barter between projects? - What percentage of the JitoDAO treasury should be diversified into stablecoins (USDC) for optimal risk mitigation? Is the 1-3% impactful because you could consider stablecoin allocation as selling. - What are the specific direct costs associated with the Protocol-Owned Liquidity (POL) allocation? Payment towards Gauntlet or if we automate any treasury management? - We believe that that requires a lot of trust and we are better off managing POL directly as DAO. - Which incentives would we contribute to for real yield gauge? - How should time constraints be structured for POL incentive programs to avoid long-term reliance? --- _[View the full topic](https://forum.jito.network/t/jto-utility-and-tokenomics/646)._