As a seasoned analyst with years of experience in the cryptocurrency market, I must admit that the astronomical revenues generated by Solana’s staking pool Jito in recent months have caught my attention. With a background in finance and technology, it’s fascinating to witness the rapid growth of decentralized networks like Solana, especially when their validators are raking in millions from MEV practices.
In December and November alone, the Solana staking pool known as Jito reportedly generated over $100 million in monthly earnings from priority fees and tips, as stated in a December 26th report by Kairos Research, a firm specializing in crypto currency analysis.
2024 saw Jito’s validators consistently increasing their tip earnings on average by 32% every month, according to Kairos. The monthly revenue reached its highest point in November, amounting to roughly $210 million.
Jito’s increasing tip income indicates the increasing popularity of the Solana network. It also signals that validators are earning more due to selecting specific transactions ahead of others, a method called Maximum Extraction Value (MEV).
MEV bounty
In simpler terms, when users want their transactions processed quickly in a block, they can give rewards (tips) to the validators who are responsible for constructing these blocks. By doing so, their transactions get priority over others within the same block. However, this process also leads to higher overall transaction fees.
2024 marked the initial instance where validators on the Solana blockchain earned more MEV (Maximal Extractable Value) compared to Ethereum’s validators. This significant shift took place concurrently with transaction fees on the Solana network almost tripling. In January, these fees amounted to approximately 60,000 Solana (SOL) per day, whereas in October, they surpassed 150,000 SOL, as reported by Dune Analytics.
By December 26th, over 93% of Solana’s validators reportedly utilize Jito’s software for optimizing their income derived from block construction, as stated by the developers at Jito Labs themselves.
SOL restaking
It appears that the platform named Jito, known for generating the liquid re-staking token (LRT) JitoSOL, has become one of Solana’s most prominent decentralized finance (DeFi) projects. As reported by DefiLlama, the total value locked within it amounts to approximately $2.75 billion.
Restaking refers to the process of utilizing a token that has previously been pledged as security with a validator, earning rewards, and then employing this same token to support multiple protocols concurrently. LRTs symbolize a transferable ownership right over a pool of assets that have been restaked.
In October, holders of the Jito governance token, JTO, decided to share a portion of their tip earnings with JitoSOL stakers. As stated by Kairos, Jito is planning to direct 0.15% of their tip revenue towards JitoSOL stakers. The validators will still receive most of the income from tips.
By December 26th, the returns for JitoSOL restakers stand around 8.6%. Meanwhile, Ethereum remains the leader in staking and restaking Total Value Locked (TVL), with EigenLayer, the top restaking protocol, holding nearly $15 billion, as reported by DefiLlama.
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2024-12-27 01:19