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Hello readers,
We recently covered ETH vs SOL from the perspective of “Real Yields” paid to tokenholders. The takeaway? Solana is currently doing a better job of 1) selling its product to users, 2) returning value from user activity to SOL holders.
With that said, 100% of this value is derived from MEV today.
Which begs the question: how durable is Solana’s MEV infrastructure?
And what does that mean for you, the SOL holder?
We’re going DEEP on Solana MEV this week.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.
Let’s go.
From the tokenholder perspective, 100% of the MEV paid to you is coming from Jito via “tips.”
How it works:
Traders (and bots) submit transaction bundles to the Jito block building engine. Most of this user activity occurs on Jupiter, Raydium, Orca, etc (which “integrate” with Jito). A bundle can contain multiple atomic transactions meant to execute together — often representing arbitrage, sandwich, liquidation, or multi-hop swaps (across DEXs).
The Jito block engine simulates and evaluates bundles to determine profitability, correctness, and inclusion priority. It then holds an MEV auction, where searchers compete by attaching tips to their bundles.
Winning bundles are sent to validators running Jito to include in blocks. Note that Solana validators are selected on a “stake-weighted” basis, which means the more stake you have, the higher the chance you will be chosen to validate the block (similar to BTC miners, where the more energy power you have, the better your chance of mining a block).
Validators execute bundles atomically (all transactions in the bundle succeed or none do).
MEV rewards (tips) from bundles + 50% of base (the other half is burned) and vote fees (which may be eliminated) are then distributed to validators. Validators share the MEV rewards with stakers. Note that base fees represent just 1.3% of total REV on Solana over the last 6 months.
All of this happens in roughly 200 - 700 milliseconds (.2 to .7 seconds).
Please note that Solana protocols have to integrate Jito if they want their user transactions to land during high congestion + avoid being front-run or sandwiched.
This makes Jito the most important protocol on Solana.
With that said, during periods of lower congestion on the network (when the risk of transaction failure is lower), validators can work directly with searchers (bots) to capture MEV in the form of priority fees.
A searcher (bot) identifies an opportunity — such as a pricing mismatch between DEXs — and submits a transaction via a public RPC or private relayer to capture the value. A priority fee tip is included to incentivize faster block inclusion.
The transaction goes to the slot leaders’ validator transaction queue. Note that Solana doesn’t have a mempool like Ethereum, but there is still a queue before inclusion.
Validators prioritize transactions based on priority fees.
Please note that when a transaction is submitted outside of the Jito block engine, there is no guarantee that it will succeed. Furthermore, the transaction can be front-run or sandwiched by other users.
If the slot leader (validator) selects the transaction, it is included in the block and executed. The priority fee is paid directly to the validator (not shared with stakers, although that may change soon).
Jito’s Block Engine is the execution layer of Solana. We want to be very clear about this, as well as its importance.
Jito guarantees that transactions land and are not front-run/sandwiched (MEV protection).
Without Jito, you cannot atomically group multiple dependent transactions across multiple hops (DEXs). There is no simulation, no auction, higher failure risk, and no MEV rewards shared with stakers.
When you see “priority fees" on a REV chart, these are the tips that searchers pay for MEV transactions that do not run through Jito (and are not shared with SOL holders).
I’ll say it again. Jito is the most important protocol on Solana.
Now. Let’s take a look at some Jito stats…
Data: The DeFi Report, Dune
Over the last 6 months, 56% of Solana’s MEV has been generated via Jito tips (paid to tokenholders).
Data: The DeFi Report, Dune
Tip Events = Solana transactions utilizing the Jito block engine.
Tippers = Number of unique tip addresses.
Over the last 90 days, Jito averages 15.8 million tip events per day. Over the last week, the number has jumped to 20.8 million tip events per day — highlighting Jito’s importance as onchain activity increases.
Jito averages roughly 852k unique tippers/day. Over the last week, that number has jumped to 2.3 million/day.
The vast majority of tip events are coming from average Solana users (tiny tips for transaction inclusion). However, searchers (a much smaller subset) drive the vast majority of tips.
Data: The DeFi Report, Dune
Over 96% of the SOL staked on Solana is currently with validators running the Jito block engine (!)
Solana currently has 1,301 active validators. 1,057 are running the Jito block engine (81%).
The DeFi Report, Dune
The vast majority of Jito tip events are for very small amounts. In fact, 99.5% of tip events are under .02 SOL (less than $4). However, these tip events only make up 57% of the total tips over the last 90 days.
Meanwhile, just .002% of tip events are greater than 1 SOL. These tip events drove 9.4% of all tips over the last 90 days.
This tells us that a small subset of searchers are driving a disproportionate amount of the MEV paid to tokenholders today. In fact, just .49% of Solana addresses (149k) are currently driving 95% of the gas fees and Jito tips on the network. For reference, Ethereum has 465k wallets driving 95% of its gas fees.
We estimate that roughly 10% of Jito tips come from Telegram bots, and less than 1% come from perp DEXs. The vast majority comes from professional searchers on Solana DEXs.
As the execution layer of the Solana network, Jito:
Guarantees transaction inclusion (key for users and also protocols serving users).
Protects transactions from being front-run by others.
Creates a marketplace for priority transactions.
Shares the vast majority of the value from those priority transactions with SOL holders (stakers).
Jito is creating positive-sum outcomes by sharing the immense value it creates with all participants on the network (users + SOL holders).
This begs the question:
Does Jito have a “moat” as the most important protocol on the Solana network?
We ask the question because we couldn’t help but wonder about the following:
“If the Solana protocols (such as Jupiter) control the user experience (where MEV originates), could they integrate their own block-building engines (and move MEV away from Jito)?”
Technically? Yes.
Practically? Maybe not.
Why?
Over the last few years, Jito has built tremendous network effects across:
Validators. 96% of SOL staked on the network is within Jito validators. As such, many of the largest stake pools and major infrastructure providers have already baked Jito into their recommended software stack. The more validators that run Jito, the more attractive it is for searchers, which in turn makes it more valuable for validators — a classic two-sided network effect.
Searcher liquidity. Jito aggregates most of the MEV searcher activity on Solana today. This means that searchers have already integrated Jito’s auction rules, bidding APIs, RPC endpoints, taxonomies of profitable bundles, etc. The inertia here would create a feedback loop that would be difficult for a competitor to replicate.
Ecosystem Partnerships. Major DeFi protocols (Jupiter, Raydium, Orca) have integrated Jito and recommend that users route through Jito-powered RPC endpoints to minimize failed transactions and improve UX. This implicit endorsement reinforces Jito’s dominance.
Technical Complexity. Jito’s block engine isn’t just a standalone program — it hooks into validators’ propagation and scheduling logic to 1) simulate bundles at nanosecond granularity, 2) reorder transactions atomically. This tight integration required non-trivial changes for validators and extensive in-production testing.
In short, yes. We think Jito has a path toward establishing a “MEV moat” within Solana. With that said, Solana is still a baby. And Jito launched roughly 2.5 years ago. This will most certainly be a marathon, not a sprint.
As a final note: Jito is sharing the vast majority of the value it creates (along with network users & searchers) with validators and SOL holders. If they were to increase their take rates, this would likely invite competition (which ultimately benefits SOL holders).
But there’s more to the story…
Data: The DeFi Report, Dune
A new trend is emerging within Solana: Private DEXs.
What’s a “Private DEX?”
It’s a liquidity pool funded privately, rather than publicly in open pools such as traditional crypto DEXs (such as Uniswap, Raydium, Orca, etc).
Execution and settlement are still onchain. The user experience happens on Jupiter (DEX aggregator), where private DEXs such as SolFi, ZeroFi, and Obric have integrated. Therefore, MEV protection for these private DEXs comes from Jito.
[Note that Solana’s private DEXs currently do not support memecoin trading.]
Private DEXs offer:
Reduced slippage.
Private order matching (no front-running).
Offchain price discovery (users get fill prices closer to mid-market rather than suffering public pool price impact).
Privacy (order size and direction aren’t leaked on public pools).
Guaranteed fills.
Negotiated terms (between takers & LPs).
Reduced gas fees (by aggregating multiple user orders into a single onchain transaction).
Consistent outcomes (via deterministic quotation and slippage guarantees).
Now. If you’re like us, you might be asking yourself: if TradFi adopts these private DEX solutions, how might that impact MEV (and value accrual to SOL holders)?
If more volume migrates into private DEX batch auctions, the classic onchain sandwich and arbitrage opportunities could shrink. This would result in less “low-hanging fruit” MEV compared to what we see today.
Private DEXs could carve out their own mini-auctions, capturing slippage and reordering profits internally. Unless they still route through Jito, the MEV never lands in Jito’s tip auctions (or in SOL holder wallets).
With that said, the private DEXs today are not running their own block-building engines. Instead, they simply package their batched execution as Jito-tipped bundles. In this model, the MEV (public or private) still flows through Jito’s block engine (and to SOL holders).
Furthermore, it’s our understanding that validators have little incentive to run multiple block builder engines. Why? Each builder they integrate with is a fork of the validator itself. That means they have to track, test, and upgrade every new block builder engine separately whenever there is a new update to the Solana network.
In many ways, integrating new block-building engines for validators seems akin to an app having to integrate on multiple L2s within the Ethereum network. Its a pain in the ass operationally, and most of the activity tends to happen on one key chain. If you’re a validator, and 90% of your MEV comes from Jito, the incentives to put up with the headaches from integrating new block-building engines may not be there.
The growth of private DEXs has us thinking: what could the tech stack look like if someone like BlackRock or Fidelity wanted to tokenize their AUM and enable onchain trading via private DEXs?
If you squint a little, you can see the potential for something like this:
Tokenize the assets & manage LP positions/fund admin via a partner like Securitize (Blackrock is an investor).
Creates private DEXs for liquidity pools, which they manage.
White-label Jupiter for the trading user experience (w/KYC).
Leverage Jito (integrated with Jupiter) for execution and MEV protection.
Use Pyth for pricing oracles.
White label Phantom Wallet (or integrate with someone like Fireblocks) for custody.
Settle to Solana.
Hmm.
This is interesting because it’s easy to assume that TradFi players would choose an Ethereum L2 — where they control more of the tech stack.
But this might be more “plug & play,” where the existing infrastructure could be white-labeled, while still allowing a firm like BlackRock to monetize each layer of the stack (without running their own chain).
We’re obviously speculating here. But it seems these are some of the trade-offs firms looking to onboard public chains will be making. From another angle, one might view launching an Ethereum L2 and then plugging into Uniswap hooks as more seamless.
Data: The DeFi Report, Dune
As we can see, base fees represent just 1.3% of total Real Economic Value on Solana today. Therefore, if you’re a SOL holder, all you care about is Jito Tips (MEV).
That’s why it's critical to understand how the infrastructure works.
To answer the question: How durable is Solana’s MEV infrastructure?
We think it’s quite durable. If you’re a SOL holder, you should expect to see the “low hanging fruit” related to malicious MEV dissipate as protections are put in place and private DEXs grow in size and volume.
But MEV (payments for priority access) is most certainly not going anywhere.
In fact, the mechanics of MEV are all around us.
Google search. TSA pre-check. Uber surge pricing. Expedited shipping. Express toll lanes.
These are all forms of MEV in the real world.
As for the REV/L1 valuation debate (for those on crypto Twitter)?
We think the market will ultimately converge on three key components to L1 valuation (proof of stake chains):
Capital Asset Value (from fees & MEV paid to tokenholders). SOL leads here.
Commodity Asset Value (supply/demand of the native token used for gas). ETH leads here.
Store of Value (tokeneconomics as in issuance vs burn). ETH leads here.
There could also be an “assets secured” or “GDP” value component, in which the “fair market value” might collapse to one of these KPIs during bear markets (similar to how BTC tends to drop to its production cost).
Finally, we think brand/community/cultiness will drive monetary premiums.
Take a Report.
And Stay Curious.
Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.