Jito DAO Proposes New Structure for Collecting MEV Tips
Solana is undergoing a significant shift in the distribution of benefits from its blockchain, primarily driven by a proposal from Jito’s DAO. This proposal suggests allocating 3% of all maximal extractible value (MEV) tips to the DAO treasury and TipRouter, a program for Jito's upcoming restaking platform.
Jito Labs plans to reduce its share of MEV tips from 5% to 3%, resulting in a total of 6% of all Jito MEV tips being redirected under the new structure, increasing from 5%. The anticipated fee switch could yield approximately $22.8 million annually for the newly established Jito DAO.
MEV involves profits derived from reordering transactions within blockchain blocks. Jito has developed a validator client that allows “MEV searchers” to bid for transaction processing priority. Tips can enhance these bids, generating substantial revenue for validators, especially during periods of increased trading activity on Solana.
Between March and September, Jito MEV tips generated around $232 million in economic value, according to Blockworks Research. In one week, Solana processed $20 million in Jito tips, which constituted 54% of Solana’s real economic value (REV), a metric assessing blockchain income.
The proposed changes would alter revenue distribution among Solana stakeholders. Recent trends show a gradual increase in SOL stakers' income at the expense of validators and SOL burned to manage inflation.
Currently, Jito Labs earns about 2.5% of Solana’s REV from its 5% share of MEV tips. With the new proposal, less REV will go to Jito Labs while some will be allocated to the DAO. Discussions continue regarding whether stakers or validators should receive more REV and the appropriate share for Jito from Solana's economic activities.
Additionally, a recent adjustment from the Solana Improvement Document (SIMD)-0096 aims to direct all priority fees to validators instead of burning half.
The majority of the new tip structure will benefit Jito’s DAO, with 0.15% going to TipRouter, which will facilitate programmatic distribution of MEV tips as part of a node consensus network (NCN) on Jito Restaking. TipRouter resembles EigenDA on EigenLayer, serving as an early restaking service for the platform.
This proposal awaits a vote from Jito governance; however, given its potential annual revenue generation of $22.8 million for the DAO, it is likely to pass.