A proposal to improve the JTO tokenomics to increase revenue for the protocol and reward users is being discussed in the Jito community.
The Jito community proposes new tokenomics for JTO with many improvements
The core contributor of the Jito Foundation, Andrew Thurman, has proposed new tokenomics for JTO, including the idea of token buybacks.
New Jito DAO community discussion is LIVE 🚨
— Jito (@jito_sol) March 6, 2025
A Jito community member posted their research on tokenomics with a call to action for the Jito DAO to start to discuss whether, and how, the DAO should utilize its fees.
🧵👇 pic.twitter.com/3h7nptGeuF
Thurman's 12-page proposal has sparked much discussion related to expanding the utility of the Jito Governance Token, leaving open many possibilities for adjusting the token economy to better fit the new market context.
However, this is not an official governance proposal, and it does not represent the views of the Jito Foundation, JitoDAO, or other stakeholders.
Jito is a liquid staking protocol that allows users to Stake SOL and receive the liquid staking token JITOSOL for various use cases to maximize their returns. Notably, Jito integrates additional rewards from MEV to support users in achieving higher returns compared to traditional solutions.
According to Thurman, with Solana's current growth trajectory, the Jito protocol and DAO will increasingly generate significant fee revenue. This revenue is currently only being deposited into the treasury, but there are many other ways to generate profits.
big numbers pic.twitter.com/2HokJggyJI
— Andrew T (@Blockanalia) March 5, 2025
With many other protocols, transaction fee revenue is reinvested into the ecosystem - what Thurman calls "recycling" - or distributed as rewards to users. Therefore, he proposes that Jito could develop a strategy that includes both "recycling and rewards".
"Jito is in a dominant position. There are not many examples of DeFi ecosystems creating value as quickly as the Jito Network, and most of them are contemporary Solana projects, with achievements that cannot be compared to Jito."
Thurman states:
"At the application/infrastructure layer, both 'recycling' (or reinvesting in ecosystem development) and 'rewards' (redistributing or rewarding ecosystem participants) are relatively new token utilities, and we are still uncertain which one is the best or most suitable for the project."
When it comes to "recycling" value, there are essentially two options: "buybacks" or "fee switching", both of which aim to return value to users in a relatively direct way.
2/4 The community discussion explores two paths:
— Jito (@jito_sol) March 6, 2025
• Value rewards (fee switch mechanisms, buybacks)
• Ecosystem recycling (protocol-owned liquidity, reward subsidies, grants)
Fee switching is a simple mechanism to reward token holders with value. A project trying to go this route is Uniswap, which announced a proposal to share fees with users in February 2024, causing the UNI price to surge by nearly 80%.
However, the proposal has remained on the drawing board as they have to weigh many pros and cons, such as the high likelihood of being classified as a securities company for paying "dividends" to shareholders.
Nevertheless, following Uniswap, many other DeFi projects are also considering redistributing transaction fee revenue to users, such as Frax Finance. Thurman also cites a few other examples like GMX and Synthetix, but argues that:
"Currently, there are few successful projects that have managed to redistribute value through a model of sharing fees with users."
On the other hand, the "buyback" model has more successful examples, such as MakerDAO, Raydium, Jupiter, and Hyperliquid.
"Token buybacks have become a common method to reward ecosystem participants, similar to the success of stock buyback mechanisms in the traditional financial market."
The "buyback" option seems more feasible, but Thurman notes that there is still no tokenomics design that has been truly successful without risks. Therefore, he proposes two newer approaches: "buyback and swap" and "real yield".
Under the buyback and swap model, the Jito DAO would use a certain percentage of the fee revenue earned to "cross-swap" or buy tokens of promising projects at reasonable prices.
However, the downside is that there will be counterparty risk, meaning the risk of the project Jito invests in falling into crisis, being hacked, going bankrupt, or even experiencing a rug pull, leading to a deep token dump.
Meanwhile, the idea of "real yield" is borrowed from Curve, a long-standing DeFi project on Ethereum. Curve locks the governance token CRV in a staking contract, then deploys it across multiple liquidity pools to generate additional profits.
In Thurman's model, users will Stake into the JitoSOL pool or a pool with the JTO pair and vote on where the DAO will invest the profits.
"Jito Network's pursuit of profits from liquidity pools will not lead the project to be mired in DEX business operations. Instead, it will create a new utility for the JTO token, providing incentives for the JTO and JitoSOL pools. Many protocols have gone in this direction, but only a few have actually generated real profits."
Additionally, the proposal suggests increasing the restaking JTO yield rate:
"Many community members have voiced on various forums that the current JTO restaking rewards are too low. Increasing the JTO restaking yield rate from 0.15% to 0.2% or 0.25% or any other number is something the DAO should consider."
Meanwhile, the JTO price has not fluctuated much in the last 24 hours, only oscillating around $2.6. Compared to the ATH of $6 set in late 2023, JTO has now decreased in value by 56%.
JTO price fluctuation in the 7-day frame, screenshot from CoinGecko at 10:35 AM on 07/03/2025
Compiled by Coin68
