Solana was founded in 2017 to build a blockchain fast enough to power global financial markets. At the time, the best blockchains could process only tens of transactions per second. To even come close to that aspiration, Solana needed to scale blockchains by 1,000x. Today, after eight years, Solana is well on its way to deliver on that promise. It has become one of the dominant DeFi ecosystems in the space, and processes thousands of transactions per second, each one finalizing in less than a second and for a fraction of a penny in fees.
But scaling a blockchain is not the only hard problem that Solana has had to solve. As soon as there is meaningful financial activity running on any blockchain, another more subtle problem that has to do with incentives begins to emerge.
This is where Jito comes in.
Today we are announcing that a16z crypto is making an investment in Jito (JTO) tokens and partnering with Lucas, Zano, Brian, and team to help Solana become the dominant venue for Internet Capital Markets.
Imagine a busy stock exchange where thousands of orders arrive every second, and one person gets to decide the exact order in which they execute. That person has the power to place their own orders strategically in the queue: buying right before a large order pushes the price up, for example, or selling right before a large order pushes it down. On blockchains, that kind of value capture is called Maximal Extractable Value, or MEV. It’s the value that can be extracted by whomever gets to decide whether to include, exclude, or reorder transactions in a block.
Since 2021, when Jito entered the scene, their team has been hard at work building most of the infrastructure that packages and shuttles Solana transactions from users’ devices all the way to the validators that finalize them on the chain. Their goal with their latest innovation—called the Block Assembly Marketplace (BAM)—is to address some of the more insidious forms of MEV.
They do that through two core mechanisms. First, it leverages specialized hardware to keep transactions encrypted until the moment they execute. That precludes the visibility that otherwise enables validators to reorder transactions. The end result is better prices for users. Second, it introduces a plugin system that allows Solana applications to define their own transaction ordering rules. A decentralized exchange, for example, can opt to prioritize cancellations over new trades, protecting market makers from losing money on stale quotes. That empowers market makers to quote tighter spreads, which also leads to better prices for users.
The end result is that BAM is a network that extends Solana and unlocks onchain primitives—like central limit order books and dark pools—that have historically been impractical because of MEV.
Building a blockchain fast enough for the Internet’s Capital Markets was the first challenge Solana had to overcome. Building one where those markets can function fairly is now the second. Jito is at the forefront of that effort.
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