First Class Warehouse Research Report: Jupiter, the aggregator on Solana

Investment Summary

Jupiter is a transaction aggregator built on the Solana network, with a user interface similar to 1inch. The protocol provides transaction aggregation, limit orders, and fixed investment functions. Jupiter aggregates more than half of Solana’s transaction volume, leaving little room for further development in transaction aggregation. The horizontal expansion of the protocol launches Jupiter Start and Jupiter Labs, which are similar to launch platforms. As of January 15, 2024, the agreement has not released financing information.

Jupiter’s transaction aggregation function is close to its peak, and there is less room to increase the proportion of aggregated transaction volume on the Solana network.Jupiter has been the only competitive transaction aggregator on the Solana network. With a good trading experience and user interface, the protocol has developed so far. Its 24-hour transaction volume is approximately US$460 million. It is conservatively estimated that its aggregate transaction volume has exceeded 50% of the overall Solana network transaction volume, and there is little room for further improvement.

As a project promotion plan launched by Jupiter, Jupiter Start has great potential with the support of resources and user base.Jupiter has launched Jupiter Start, which is similar to a launch platform. At present, the key functions Launchpad and Atlas functions have not been launched yet. However, Jupiter has a huge user base of the Solana network, plus its own Jupiter Labs project resources and cooperation projects. The quality of the Jupiter Start project is guaranteed to a certain extent. , this feature deserves attention.

The Jupiter Labs project is a Fork version of other chain star products and has great potential under the promotion of Jupiter.The two projects temporarily launched by Jupiter Labs are derivatives and LSD stablecoins, which are very similar in form to GMX V1 and Lybra. The derivatives project is currently in the use stage, with an average daily trading volume of nearly 90 million US dollars (limited by TVL). It can be seen that, driven by Jupiter, Jupiter Labs’ products have attracted market attention and attracted more users and funds. The subsequent LSD stablecoin protocol made minor innovations in the lending rate and redemption mechanism, filling the gaps in Solana-related fields.

Overall, Jupiter has no competitors in Solana’s transaction aggregation section and aggregates more than half of the transaction volume, making DEX the underlying liquidity protocol on Solana. With the support of a huge user base and project resources, its horizontal expansion of Jupiter Start and Jupiter Labs also have strong market potential, and Jupiter Start and Jupiter Labs may have a linkage effect. Based on the above conditions, we choose to focus on Jupiter.

Note: The final assessment of [Follow]/[Not Follow] for the first-class warehouse is the result of a comprehensive analysis of the current fundamentals of the project in accordance with the first-class warehouse project evaluation framework, rather than a prediction of the future price rise or fall of the project token. There are many factors that affect the price of tokens, and project fundamentals are not the only factor. Therefore, just because the research report is judged as [not paying attention], it does not mean that the project price will definitely fall. In addition, the development of blockchain projects is dynamic. If a project judged by us to be “not concerned” undergoes significant positive changes in its fundamentals, we may adjust it to “concerned”. Likewise, if a project judged by us to be “not concerned” If a project that is [Follow] undergoes major malignant changes, we will warn all members and may adjust it to [Not Follow].

1.Basic overview

1.1 Project Introduction

Jupiter is a transaction aggregator built on the Solana network. Jupiter aggregates more than 50% of the transaction volume on the Solana network and is the first choice for users to trade. The development of its aggregation function has approached the ceiling, and the protocol is undergoing horizontal expansion to further develop. Jupiter has launched two major functions, the launch platform Jupiter Start and the incubator Jupiter Labs, to increase its influence.

1.2Basic information

2. Detailed explanation of the project

2.1Team

The main members of the team are Meow and Ben Chow, who founded Jupiter in May 2021. At the same time, they are also members of Meteora, the liquidity platform on Solana.

Co-founder—Meow:Co-founder of Jupiter, builder of DEXMeteora on Solana.

Co-founder-Ben Chow：With many years of interaction design and product experience,One of the founding team members of social gaming company Hive7 and co-founder of several companies. In May 2021, Ben and Meow established Jupiter Aggregator.

2.2 Funds

Jupiter has not announced any financing.

2.3 Code

Jupiter is audited by OtterSec, which has audited well-known projects such as Solana, Aptos, Sui, and Wormhole (mostly well-known Solana projects and US projects). Have relatively rich audit experience and a certain reputation in the industry.

2.3 Products

As a trading aggregator built on the Solana network, Jupiter is one of the primary choices for Solana trading users. It currently mainly provides four major functions: transaction aggregation, limit orders, DCA/fixed investment, and Jupiter Start. At the same time, Jupiter Labs unites the community and users to launch independent projects, currently including perpetual contract products and LSD stable coins.

2.3.1transaction aggregation

Like most trading aggregators, users can select trading pairs and enter the transaction amount in Jupiter, and Jupiter will automatically find the optimal exchange path in supported decentralized exchanges. For tokens that only have liquidity on individual DEXs, trade aggregation can directly find liquidity. For tokens with larger transaction volumes, transaction aggregation may provide better transaction prices/slippage through multiple paths. Before trading, users can choose to modify parameters such as transaction fees, slippage size, and whether to use a direct path.

Jupiter’s trading interface is relatively neat (similar to 1inch) and the trading experience is better. In the settings, you can adjust the language, block browser and RPC nodes to adapt to different needs and avoid single points of failure. Jupiter currently supports 29 applications that include trading functions. DEX must meet certain conditions to be integrated by Jupiter, which mainly include liquidity and security audits. DEX requires at least $500,000 in liquidity to ensure certain trading volume requirements, and secondly, the code needs to be audited to ensure security.

Jupiter aggregates the majority of transaction volume on Solana, partly due to user interface issues. The most liquid DEX on Solana is Orca, which accounts for $190 million in liquidity. Next is Raydium. Except for Raydium’s own protocol token RAY, Orca has more liquidity than Raydium in other mainstream tokens. However, Orca’s own trading volume is often lower than that of Raydium (Orca’s trading volume mostly comes from Jupiter aggregation). Orca’s trading interface is not a conventional Uniswap-like operation interface. Instead, you can choose buy/sell and then enter the quantity, which is not in line with users’ operating habits. Secondly, WIF has not joined Orca’s whitelist (you need to enter the contract address to search) . Although Orca can meet users’ small-amount transaction needs, the trading experience is far inferior to Jupiter.

Figure 2-1 Orca trading interface[1]

Secondly, the overall liquidity of the tokens on Solana is not strong. Using an aggregator for large transactions can reduce certain slippage losses. Taking SILLY as an example, the slippage loss of using one million USDC to exchange SOL is close to 1.22%. Using Jupiter slippage loss is close to 0.4%, which means the aggregator can reduce slippage loss/price impact by 0.8%.

Figure 2-2 Orca SOL/USDC large transaction display

Overall, the main reasons for Jupiter’s large-scale application are user interface, liquidity and airdrops. And after getting used to using aggregators, users will first use aggregators instead of DEX for transactions, which has a certain degree of user stickiness.

2.3.2limit order

Jupiter also provides a limit order function, which avoids cost increases and slippage problems caused by price effects during transactions (there is no MEV problem). Limit orders can be partially filled and receive a portion of the trading tokens without being fully filled. When trading, users can choose the order validity period, exchange price and exchange quantity. The protocol cooperates with Birdeye and TradingView. Birdeye provides on-chain price data of tokens, and Jupiter uses TradingView’s technology to display chart data. The overall trading experience is very similar to that of a centralized exchange.

Figure 2-3 Jupiter limit order function display

2.3.3DCA/fixed investment

DCA (Dollar Cost Averaging) is called dollar cost averaging, also called fixed investment. Amortize the cost of purchase by making multiple investments over a certain period of time. Jupiter provides fixed betting with a minimum frequency of minutes and a maximum frequency of months. Users can choose the frequency of fixed investment, the total time period and the price range of fixed investment.

Figure 2-4 Jupiter fixed investment interface display

When fixed investment begins, the tokens will be transferred to the relevant account of the fixed investment token, and trading operations will be performed at regular intervals (transactions may vary for 2-30 seconds to prevent MEV). After the transaction is completed, the fixed investment account will be closed automatically and all tokens will be transferred to the wallet. The agreement charges a one-thousandth fee for fixed investment. Fixed investment is suitable for accumulating tokens in bear markets and gradually selling less liquid tokens, but the overall demand is less.

2.3.4Jupiter Start

Jupiter will establish its own project promotion platform, Jupiter Start, dedicated to promoting the development of new projects while protecting the interests of investors. The process of Jupiter Start is divided into five parts: social introduction, education, pre-launch, Launchpad and Atlas. The community introduction will last for a week, mainly introducing the project’s concept, economic model, etc. and conducting community discussions. Education will place individual projects as part of the website, with partially qualified users earning tokens through reading materials and on-chain operations. Pre-listing allows users to place limit orders and DCA operations before liquidity is added.

At present, the community introduction, education and pre-launch functions have been launched, and the ones worth looking forward to are the Launchpad and Atlas (not yet explained) functions. Since Jupiter Labs’ projects will issue their own protocol tokens, its Launchpad project may be a derivatives project.

2.3.5Jupiter Labs

Jupiter Labs is independent of Jupiter. Jupiter Labs projects will eventually operate independently, and Jupiter users and the community will receive certain priority rights and token incentives. The projects currently launched by Jupiter Labs are perpetual contracts and LSD stablecoins.

Jupiter Perpetual

Jupiter Perpetual is a derivative protocol similar to GMX V1 launched by Jupiter Labs and is currently in the use stage. Protocol users are mainly divided into liquidity providers and traders. The liquidity provided by the liquidity provider is converted into a basket of tokens (currently including BTC, ETH, SOL, USDC, and USDT). The tokens in the pool with higher weights are mainly SOL and USDC, that is, the main trading target is SOL. .

When a trading user performs a leveraged trade, the trader borrows tokens from the pool to establish a leveraged position. Users of this derivatives trade do not need to bear transaction slippage, but only pay transaction fees and borrowing fees, which depend on the utilization of the token. Liquidity providers receive 70% of transaction fees and all borrowing fees. Correspondingly, liquidity providers also bear the risk of losses caused by traders’ profits and token depreciation. From the end of 2023 to now, the price of JLP has been fluctuating around $1.8.

Figure 2-5 JLP data[2]

LST stablecoin

Jupiter Labs’ LST stablecoin protocol XYZ has not yet been launched. According to its documentation, the protocol is similar to Lybra V1. Users can mint the interest-bearing stablecoin SUSD (without borrowing interest) by staking SOL. The protocol obtains staking income through the pledged LST, and the income will be distributed to SUSD holders and the governance token of the agreement. The main feature of the agreement is that when the LST yield is higher than the SOL borrowing rate, SOL LST will be mortgaged in the lending agreement and used to lend SOL and replace it with LST, using leverage arbitrage to maximize returns. Secondly, among possible additional mechanisms, the protocol adopts a redemption mechanism to ensure the stability of SUSD prices. Frequent redemptions may affect the borrower’s position, especially when market fluctuations oracles are delayed (SUSD holders exchange SUSD for borrowers’ LST). The protocol does this by introducing small price range governance token redemptions. Reduce the impact on borrowers. When the price of SUSD is between $0.95 and $1, the protocol may use SUSD to redeem governance tokens to reduce the frequency of borrower redemptions.

While using leverage arbitrage to increase returns, it also brings additional protocol and oracle quotation risks to borrowers and SUSD holders. Borrowers need higher governance token incentives to maintain a certain amount of SUSD minting. Redemption of governance tokens in small price ranges can significantly alleviate the impact of redemption on borrowers’ positions, but it also brings new problems. Small-amount range governance token redemptions will result in the vast majority of redemptions being governance token redemptions. If the price continues to be below 1 US dollar, it will cause a more serious token issuance.

Figure 2-6 XYZ operation logic[3]

Summary: Jupiter provides transaction aggregation, limit orders and fixed investment functions. The overall trading method is very similar to 1inch. The fixed investment function can set the price range, time and frequency, which is an additional function. Jupiter Start’s Launchpad function and Atlas function have not been launched yet and may be the focus of subsequent development. Jupiter Labs, launched by the protocol, is incubating two new protocols, namely derivatives and LSD stablecoin. The new protocols will operate independently in the future and give Jupiter users and the community certain priority rights and incentives.

3.Development

3.1 History

Table 3-1 Prisma Finance major events

3.2 Current situation

3.2.1business data

Jupiter is the only competitive transaction aggregator on Solana, and a large portion of the transaction volume on the Solana network passes through Jupiter. Looking at the transaction volume in November and December, the total transaction volume of DEX on the Solana network was 8 billion and 28 billion US dollars respectively, while Jupiter’s aggregate transaction volume in these two months was 3.9 billion US dollars and 17 billion US dollars respectively. From the perspective of transaction volume, Jupiter leads more than half of the DEX transaction volume on Solana, that is, users use Jupiter more for transactions rather than the front end of DEX, truly realizing the existence of DEX as the underlying protocol for liquidity.

Figure 3-1 Jupiter monthly transaction data[4]

Jupiter currently aggregates the liquidity of 29 protocols, among which the top five protocols in terms of transaction volume generated through transaction aggregation are Orca, Raydium, Phoenix, Lifinity and Meteora. The top five protocols account for nearly 90% of Jupiter’s transaction volume. One worth mentioning is Meteora. Meteora’s team members also include Meow and Ben Chow. The predecessor of the protocol is the decentralized exchange Mercurial Finance. After the FTX thunderstorm, Mercurial Finance announced a shutdown and snapshot token holders will receive 20% of Meteora tokens, and Jupiter will launch tokens/add liquidity on Meteora. Currently, Meteora has started to provide liquidity. Incentive plan for investors (10% of tokens allocated to LPs before adding liquidity).

Figure 3-2 Jupiter DEX trading volume data

3.2.2social media scale

As of January 15, 2024, Jupiter has a large community size and Discord is highly active, mainly discussing issues related to JUP airdrops and Meteora liquidity.

3.3 The future

Jupiter currently does not have a clear roadmap. Considering that the protocol is about to issue tokens, further action should be to establish a DAO for protocol governance. Jupiter Start’s Launchpad and Atlas functions will be launched in the future. As a star project on Solana, Jupiter has a large user base, and Jupiter Start can also gain certain resource advantages.

Summary: Since Jupiter went online in October 2021, Jupiter has received a large amount of transaction volume. With the FTX storm, the DEX with the highest TVL became Orca (the trading experience given by the user interface is slightly insufficient). Raydium has a higher TVL and the liquidity of some Tugo tokens. Jupiter has won the favor of more users with its ease of use and comfortable user interface. As of January 15, 2024, more than 50% of transaction volume occurs on Jupiter. The subsequent Launchpad function is worth looking forward to.

4. Economic model

4.1 Token distribution

Jupiter’s token is JUP, with a total supply of 10 billion. 40% of the tokens (10% in the first round, 4 rounds in total) will be used for airdrops, 20% will be used for liquidity and community incentives, and 40% will be used as team and strategic reserves. The protocol promises to allocate 50% of the tokens to the community and allocates a cold wallet to the team and the community. The initial circulating tokens are expected to be 5% for adding liquidity and 10% of the airdrop tokens (there may be additional About 2% of the tokens are unlocked)

4.2 Token utility

Jupiter has not yet announced the specific functions of the token JUP. The author believes that in the short term, JUP will mainly be used for community governance. Subsequent new projects from Jupiter Labs may airdrop and give priority testing rights to JUP holders. At the same time, Jupiter may follow the example of 1inch and provide positive slippage income to stakers.

5. Follow-up questions

Jupiter has already aggregated 50% of the transaction volume on Solana, and the main subsequent development lies in the protocol’s Jupiter Start function and Jupiter Labs.

5.1 Solana DEX Industry Overview

Jupiter has always been the only competitive transaction aggregator on the Solana network. Because of its smooth user experience and relatively comfortable user interface, Jupiter has attracted more and more users. Jupiter aggregates more than 50% of the trading volume on Solana, making DEX a true underlying liquidity protocol on the Solana network. With the further development of the protocol and subsequent airdrop plans, the proportion of transaction volume aggregated by Jupiter is expected to further increase.Jupiter has occupied almost all of Solana’s aggregator market, and further development lies in the further optimization of Solana itself rather than its own.

5.2 Jupiter Start

With limited further growth in transaction aggregation, Jupiter Start may be another direction for Jupiter to expand its territory. At present, Jupiter Start only has introduction, education and pre-launch functions. Jupiter Start’s core function Launchpad has not been launched yet. Jupiter has a huge user group and has a strong traffic effect. Considering its own resource advantages, projects launched on it are likely to be of higher quality.

5.3 Jupiter Labs

Jupiter Labs collaborates with JUP DAO, Solana community, and Jupiter users to launch a new DeFi protocol. Projects in Jupiter Labs will eventually operate independently, but Jupiter users, communities and token holders will have early priority rights and token rewards, and Jupiter Labs projects may also be launched on Jupiter Start.

The products currently launched by Jupiter Labs are derivatives protocols and LSD stablecoins. The derivatives protocol is already in the early stage of use, with liquidity (JLP) limited to $50 million. The overall protocol is very similar to GMX V1. Another protocol is the LSD stablecoin protocol XYZ, which is similar to Lybra V1 as a whole, but based on Lybra, it uses interest rate arbitrage (mortgaging LSD to lend SOL and replace it with LSD) to increase the stability of stablecoin holders and protocol token holders. income. At the same time, on the basis that other stablecoin protocols directly redeem collateral to maintain prices, XYZ uses governance tokens to redeem the borrower’s position when a small amount is unanchored (5%), and protects the borrower. while increasing the dilution risk of governance tokens.

Summary: Jupiter’s own transaction aggregation business has almost reached its ceiling. It has adopted a strategy of horizontal expansion into the DeFi sector and launched the Launchpad platform Jupiter Start and the incubation platform Jupiter Labs. Jupiter has a strong resource advantage (its own huge user base and Jupiter Labs project), and the Launchpad project deserves attention. Although its Jupiter Labs has less innovation, it has filled the gaps in related projects on Solana. With the support of Jupiter, it still has more Great potential.

6.Risk

1) Code risk:Jupiter is audited by OtterSec, but there are still code risks.

2) Derivatives project risks:Derivatives projects are still in the Beta stage, and there may be risks such as oracle attacks that drain the liquidity of the protocol.[5]。

Disclaimer：

1. This article is reprinted from [头等仓区块链研究院]. All copyrights belong to the original author . If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.