Jito’s MEV-boosted client adoption & impact on Solana validators performance

<p>On January 25th, 2023, P2P joined the Sui network testnet wave-2. We had also participated in the first wave of the testnet with the goal of understanding the node operation nuances of the Sui blockchain. The second testnet was a game played by validators and delegators to understand the network economics and staking specifics.</p><h3 id="high-level-overview-of-sui-economics-specifics">High-level overview of Sui economics specifics</h3><p>Sui is a layer one blockchain focused on scalability, user and developer experience, and utilizes its own variant of the Move programming language. It allows for consensus to be forgotten in simple use cases, and transaction processing is parallelized.</p><p><em>In this article, we will briefly cover two elements of the Sui economy:</em></p><ul><li>Storage Fund</li><li>Reference Gas Price Mechanism</li></ul><p>Let’s start with the <strong>storage fund</strong>. It plays the role of a compensation buffer to reward validators for on-chain data storage. It is evenly staked to validators and a portion of staking rewards get reinvested back into the fund. This parameter influences the overall reward calculation. It starts relatively low in the beginning but its share steadily increases slowly along with the storage growth.</p><p>Another element influencing the validator rewards is a <strong>Reference Gas Price [RGP]</strong>. It represents the minimum price at which validators are willing to process transactions. For users, it plays the role of a guide when propagating transactions ensuring that gas prices close to the reference price will be executed appropriately. Every epoch, validators submit their quotes for RGP and the protocol chooses the 2/3's percentile by stake as the epoch reference price.</p><p><strong>Staking rewards</strong> consist of stake subsidies and gas revenue. Subsidies are known for each epoch. For testnet-2 epoch, subsidies were equal to 0,01% * total stake (mainnet subsidies will differ from wave-2) making them relatively low compared to gas revenue. Validators could calculate expected gas revenue based on the selected RGP and on-chain activity. Each participant received random costs and had to select RGP to remain profitable but at a reasonable level to improve UX and maintain lower transaction costs for users.</p><h3 id="testnet-overview">Testnet overview</h3><p>The Sui team has prepared a dashboard to track the progress of the validators during the testnet If validators selected an RGP that was equal to or lower than the final epoch RGP, they received a bonus point. Points were also assigned for maintaining positive profitability during the epoch. The score rules were changed after the 6th epoch to switch the behavior of participants during the game, so some data will be split in two groups: The first group from epoch 2 to epoch 6, and the second group from epoch 7 to epoch 31. The first two epochs were experimental and were not counted and we excluded them from the analysis.</p><p>Validator shares and costs varied during the testnet, resulting in different capabilities to remain profitable and get into the ⅔ percentile in RGP voting leading to a semi-random points distribution. The analytics below can bring some clarity to the actual activity of participants during the testnet. <br><br><em>Important note, validators could have different goals and strategies for the game, and the data below should not be taken as a representation of participation quality. We set the following goals for the testnet:</em></p><ul><li>To align with Sui economics specifics</li><li>To understand the RGP selection process and build a reliable model to calculate it</li></ul><p>We decided to prioritize the calculation precision and set our RGP quotes for each epoch with a targeted profitability margin of 5-15%. Our goal was to strike a balance between maintaining profitability without overpricing the user experience. It’s important to note that the logic for the mainnet may differ from that of the testnet.</p><h3 id="wave-2-analytics">Wave-2 Analytics</h3><p>The economic conditions during the testnet changed every epoch, requiring validators to adjust their strategies in order to remain profitable. Out of the 41 validators, only 17 changed their RGP for 80% of the epochs during the testnet.</p><figure class="kg-card kg-image-card"><img src="https://lh6.googleusercontent.com/Kz0Q0-DgbF35ujQVJbD2hJ083ZFVCJ6HzY7JjfBd5sOgr3J5roudMxqoFNfpFMZobviLue1kpd_mbU2G2ebHCyPrTMdO1PttWC8dPs5dOw9ZtxLYO6QDxizl4W-ryEAfUZtM5M8HH4pvN18x48Vw8tE" class="kg-image" alt loading="lazy" width="615" height="351"></figure><p>Profitability was an important part of the assessment, and the following breakdown shows the number of epochs in which each validator had positive profits. However, it is important to note that validators may have had different goals for the testnet. Nonetheless, over 50% of participants were able to make a profit in 80% of the epochs.</p><figure class="kg-card kg-image-card"><img src="https://lh6.googleusercontent.com/DBwnNdG7x-WMqH9NevDtILzT8muOnKQmAA1vi00V3Olo_x9nC713a98Au4BYljCHAqJ-Ey-QovfX9OhRbk3tAswqGlhvwPS-O3YXS6LhQ2nmAzoCGNEsoJ-5ToA1_AQduBzBEDNbhZ2AFFbPOuv6M7k" class="kg-image" alt loading="lazy" width="624" height="296"></figure><p>This chart shows the total margin of validators during the testnet. We can observe changes in behavior after the rule change that stopped punishing validators for not being in the ⅔ percentile with their RGP quotes.</p><figure class="kg-card kg-image-card kg-card-hascaption"><img src="https://lh4.googleusercontent.com/MNJK1YAe8-t2MqRNbiAK-PqKKofoEi02oNgVaCcVdIivrJN8m7fmeuy5rw3PKfFqZeavV5wibb-7ewuWHHxCO1KRh_hBlAzh4K2KRNvTGmaDqTJzSSIivrA4bP4HrmuHdAXxY59N1zKqbG2jvi93YOY" class="kg-image" alt loading="lazy" width="624" height="304"><figcaption>Epochs 2-6</figcaption></figure><p>Epoch 7-31 resulted in a more selective approach that takes profit into consideration.</p><figure class="kg-card kg-image-card kg-card-hascaption"><img src="https://lh3.googleusercontent.com/P1bFZ02CXinViO1MTRo4xpJFGiJbf6io0xZX2Uz26PPDUAbCx9BjTKDnmTvV3TkobVWkxKrs3yFfLKH3KDkB_wrUseLcaPqrOSxR4D9-OctEFIjTDVQr_oddggTDX4qTECOVJ7ZNKotFUdj-KZ76rh8" class="kg-image" alt loading="lazy" width="624" height="304"><figcaption>Epochs 7-31</figcaption></figure><p>In the following plots, we will display the standard deviation of each validator, which indicates how stable and precise their margin was. A lower standard deviation indicates more precise and consistent RGP quotes. For instance, if a validator quoted around 10% margin most of the time, their deviation would be low.</p><figure class="kg-card kg-image-card kg-card-hascaption"><img src="https://lh5.googleusercontent.com/wn2t8VuyRxjTSWm8oBEYyNClUV-2WRc2jWuPrjFr27lGjFs0zqJmctTxbk65mpOcC1Db6SWJMD772ok_U5ZTCMlFUgplSQg6ghdFGsWzDtXDHuNBxkxuuIJtTecFg86wE59lfDVg0I0symK6pJhwxVQ" class="kg-image" alt loading="lazy" width="624" height="315"><figcaption>Epochs 2-6</figcaption></figure><figure class="kg-card kg-image-card kg-card-hascaption"><img src="https://lh3.googleusercontent.com/sofwFnKTNhtRXpRCAKN2bdZBsJUsOOCpkZ_Rsql67YEMFuChDmYKIfOvPZ0o6iFYiPoRwkWq-OMOsznP5SUVOgvehZ68yboAda2HJXpoGDaVIClwEJfyuRAmlRoFWtOYwDFcyMizoslIhFd9_VCn3TU" class="kg-image" alt loading="lazy" width="624" height="272"><figcaption>Epochs 7-31</figcaption></figure><p>Another way to represent margin statistics is through the mean, total and median margin parameters, which also provide insights into validator behavior. This chart excludes extreme values that deviate from the average by more than 2.5 standard deviations. If all three parameters are similar, it indicates that a participant successfully targeted and maintained the margin. For instance, the mean, total and median parameters for P2P vary from 8 to 11 percent, falling within the selected 5-15 percent range that we aimed for internally beforehand.</p><figure class="kg-card kg-image-card"><img src="https://lh3.googleusercontent.com/zYeUw2njbpfDchttyajDZN5o_z0yS6SuhDXBHSdDCqhIQuhJb0RBZcNjzXf5ZoEFLlU-XNfNADzqUD4j5pk4q_WD9rieY2NG7Kc8WJ7yvf_BclWRA-O_FWYI99ZZdN1MvfQMuhAJ-zf918yo-3auryU" class="kg-image" alt loading="lazy" width="624" height="268"></figure><p><em>Feel free to explore the </em><a href="https://docs.google.com/spreadsheets/d/1XAe7rFMQ2I9BZHNiJHbcMZvgRXdu9KcGKXPfQo84Yus/edit?usp=sharing&ref=p2p.org"><em>spreadsheet with the data</em></a><em> and graphs provided in the article.</em></p><p>For a more detailed picture we have compiled a heatmap showing the deviation from each validator’s optimal RGP for each epoch. We assumed that the validator's optimal RGP is calculated based on a random margin value within the  5-15% interval. We can infer that In the second part of the game, validators moved towards profitability and calculated their RGP more precisely.</p><figure class="kg-card kg-image-card"><img src="https://lh4.googleusercontent.com/rmUHootLT_PQVFlI-hVLXMDAbtiYWtVGUIiMbvWZiNS1B1n6cn5vtI4Rr2wS3gx-d6MDlQlhV1oRv3inaytTRf_fHexlbeyskVzNPJKmv9QVeGUKKXTYRvPgbp1JqUqjGL6mka5tL_BW_4zYK2Kvj2c" class="kg-image" alt loading="lazy" width="624" height="573"></figure><h3 id="summary">Summary</h3><p>The Sui testnet-2 was an intriguing experiment that contributed to a better understanding of staking economics and network specifics.</p><ul><li>Validators were able to experiment with different calculations to develop their own strategies during the game</li><li>The main purpose of RGP is to maintain a balance between validator profitability and end-user experience</li><li>Using an optimal margin level for calculating RGP may be an effective way to achieve both goals</li><li>Calculating RGP involves multiple parameters that can fluctuate and may be difficult to predict in advance leaving room for modeling improvements over time</li><li>Participating in a testnet is an excellent opportunity to familiarise with network specifics and prepare for mainnet launch.</li></ul><p><em>If you’re interested in staking or in launching a white-label validator with us, feel free to express interest on p2p.org. We’ll keep you informed about key milestones and help you get onboarded to the mainnet from the very beginning.</em></p><hr><p><em>Special thanks to Alexey Toporov for aggregating the data and creating the charts for the article.</em></p><hr><h3 id="about-p2p-validator">About P2P Validator</h3><p><a href="https://p2p.org/?ref=p2p.org">P2P Validator</a> is a world-leading staking provider with the best industry security practices AAA SR-rating and proven expertise. We provide comprehensive due diligence on digital assets and offer only top-notch staking opportunities. At the time of the latest update, more than 1 billion USD value is staked with P2P Validator by over 40,000 delegators across 40+ networks. We have successfully participated in Sui testnet-1 &amp; testnet-2 to become the most comprehensive partner for staking and branded node maintenance.</p>

<p>We are pleased to announce that P2P has launched an MEV-enabled client on Solana validators which will allow P2P stakers to receive extra rewards from MEV starting today. <br></p><p>Maximum extractable value (MEV) is a growing capability in blockchain. It refers to the maximum profit a validator can make through its ability to include, exclude, or reorder transactions in the blocks it creates.  By running a MEV-enabled client on validators, P2Ps gain access to MEV Opportunities, which can increase staker APR while having a positive impact on the quality of the Solana network.</p><h3 id="mev-boosted-client-adoption">MEV-boosted client adoption</h3><p>To maximize MEV rewards for stakers, P2P will use the open-source Jito-Solana Client, which has been <a href="https://jito-foundation.gitbook.io/mev/audits/audits?ref=p2p.org">audited by Neodyme</a>, a leading security and blockchain auditing firm. Jito-Solana represents a meaningful improvement to Solana’s validator software. It was intentionally designed to maximize MEV rewards and optimize their distribution to network validators and stakers. In addition, Jito-Solana was designed to combat spam and improve network efficiency. One of the ways that Jito-Solana achieved this is through its optimization of transaction processing. Jito-Solana offers more efficient transaction processing by bundling transactions and optimizing transaction ordering, which reduces the number of duplicated and unnecessary transactions and enables faster processing times.</p><p>For implementation, we conducted an in-depth analysis of the impact of the Jito MEV client on Solana’s network performance and adoption among Solana validators. You can find the full report <a href="https://p2p.org/economy/jitos-mev-boosted-client-adoption-impact-on-solana-validators-performance/">here</a>. </p><p>The key takeaways are:</p><ul><li>The Jito client has been gaining traction among Solana validator operators, as reflected by the growing number of validators running the client (currently 80), their total active stake (~55M SOL), and their market share (~15%).</li><li>We also observed a decrease in the average active stake per validator using the Jito client which indicates that more validators with smaller stakes are adopting the software. This trend is a positive sign as it shows that even smaller validators can successfully run the Jito client. The Jito client democratizes access to MEV with equal treatment for all validators. The growth in adoption by lower-stake validators demonstrates a strong interest in MEV opportunities from a community that was previously unable to access these benefits.</li><li>The total Jito-generated MEV rewards are currently relatively low due to limited adoption and lack of MEV searcher participation. This situation should improve with broader adoption of the client and as searchers become more accustomed to the new tools. We observed a significant increase in MEV rewards after January 2023 suggesting that a large DeFi participant started using Jito's MEV extraction tools and we believe that others will soon follow.</li><li>Jito-enabled validators have shown higher average uptime, a higher number of vote credits, and a significantly higher stake-weighted average block production rate.</li><li>Careful statistical analysis showed that block production rate for validators that switched to the Jito client has increased significantly. The increase is likely due to the more efficient transaction processing enabled by the Jito client's optimized block engine.</li></ul><figure class="kg-card kg-image-card"><img src="https://lh6.googleusercontent.com/YjlzfIMapEo0xV1CVCjMjZYeX1VMVKYrb-_mYKrB5D0_Ts3e6SqmHxcAnZOSO2fhMr1gA0lWNRPABEWSp62KhP5ZeU4P4AlhJgCPmj_ro9r-SV-hoEPLfV-tWq5oj-L-JpZ0aIhJU2h-0GSLwgDuUwI" class="kg-image" alt loading="lazy" width="624" height="361"></figure><p>Based on our research, we believe that the Jito client is a valuable addition to the Solana ecosystem, providing validators and their delegates with a new revenue stream from MEV capabilities while also improving the Solana network stability. Feel free to view the validator performance data, MEV validators rewards, MEV stakers rewards, and more using the public P2P Validator dashboard at: <a href="https://reports.p2p.org/superset/dashboard/jito_client_adoption/?ref=p2p.org">https://reports.p2p.org/superset/dashboard/jito_client_adoption/</a>.</p><h3 id="security-assurance">Security assurance</h3><p>To implement the MEV client on P2P nodes, automation was prepared and tested to seamlessly switch between Jito and the standard Solana client with 0-downtime in this case. Infrastructure security is the most important thing and we would like to add details about the possible security risks validators may face when switching to the Jito client.</p><p>Basically, Jito client is a set of patches applied to a standard Solana client, so theoretically it may have new vulnerabilities or performance degradations in some situations on current or future releases. We discussed these issues with Jito labs and found that 2 independent auditors checked Jito code base and checked the stability of the client on our testnet validator.</p><p>Although the probability of validator performance degradation caused by Jito client is not zero, we don’t think it is a big problem since we always monitor the performance of our validators against cluster average performance statistics (vote success rate, block skip rate) with automated alerting if performance issues are detected. Generally, our monitoring system will allow us to make quick decisions about falling back to a standard Solana client.</p><p>There are certain things that must be taken into account when switching to a standard Solana client:</p><ul><li>Solana Foundation releases a new client with a request to update immediately. Usually, it happens, when the Foundation wants to close a vulnerability or fix stability issues. Jito labs need days or weeks to release its patched version (since it requires a lot of testing) so in such cases, we will switch to the standard client and wait for the Jito client release.</li><li>We detect abnormal behavior of a validator according to our monitoring metrics or detect significant performance degradation (for example vote success rate is lower than the cluster average).</li><li>We receive information from public or closed sources about a vulnerability revealed in the Jito client. In this case, all our validators immediately get moved to a standard client and we will get in touch with Jito labs to clarify the situation.</li></ul><p>If switching to a standard client happened and it has been going on for more than 2 weeks we will notify you about that on our <a href="https://twitter.com/P2Pvalidator?ref=p2p.org">Twitter</a>, so please subscribe to our Twitter to be up-to-date about our services</p><p>We believe that adopting the Jito client will drive MEV rewards. Performance should also improve even further as the client becomes more widely adopted and as searchers become accustomed to the new tools.</p><h3 id="sharing-mev-rewards-with-sol-stakers">Sharing MEV rewards with SOL stakers</h3><p>New and old P2P stakers alike have the opportunity to increase their revenue through extra MEV rewards. P2P will take an 8% commission from MEV rewards, distributing 92% of the rewards to stakers, according to their share.</p><p>The Jito Tip Distribution Program is the on-chain program that collects and distributes MEV rewards to eligible validators and stakers. At the end of an epoch, the MEV rewards earned by a validator are stored in a special account derived from the validator's vote account and the corresponding epoch.</p><p>Once the epoch is over, the validator generates a data structure containing the rewards claims for all validators and stake accounts and uploads it on-chain. Then validators and stakers receive the MEV rewards in the form of an automatic airdrop performed by Jito to the validators’ vote accounts and stakers stake accounts. The claim action is permissionless, meaning others could execute it if Jito failed to do so properly. Note that distributed rewards are not automatically staked (auto compounded) and the stake account owner is required to withdraw or stake the airdropped rewards.</p><p>Stakers and validators can check their rewards using the <a href="https://reports.p2p.org/superset/dashboard/jito_client_adoption/?ref=p2p.org">P2P Validator’s dashboard with Jito &amp; MEV </a>statistics or <a href="https://jito.retool.com/embedded/public/e9932354-a5bb-44ef-bce3-6fbb7b187a89?ref=p2p.org">Jito’s MEV rewards dashboard</a>. Anyone can check their rewards using public explorers, the details to do so are available in <a href="https://jito-foundation.gitbook.io/mev/mev-payment-and-distribution/faqs?ref=p2p.org">Jito’s documentation</a>.</p><h3 id="about-p2p">About P2P</h3><p>P2P Validator began in 2018 with a mission to positively influence the development of POS technologies. At the time of the latest update, more than 750 million USD value is staked with P2P Validator by over 35,000 delegators across 40+ networks. We work closely with each network we support to push the developments of each project to new limits. <br></p><p>Beginning as seed investors and validating from the genesis block, we have shown tremendous support to the Solana ecosystem since day one and are now trusted with over $120m under management. Our proficiency is shown not only by our excellent validating track record &amp; our published research papers written on network performance (<a href="https://www.stakingrewards.com/journal/solana-validators-performance-research-report-part-1-downtime-analysis/?ref=p2p.org">Downtime</a>, <a href="https://www.stakingrewards.com/journal/solana-validators-performance-research-report-part-2-skip-rate-analysis/?ref=p2p.org">Skip Rate</a>) to improve the network health and development, but also by our involvement across projects including <a href="https://portalbridge.com/?ref=p2p.org#/transfer">Wormhole Bridge</a>, <a href="https://pyth.network/?ref=p2p.org">Pyth</a>, and <a href="https://neon-labs.org/?ref=p2p.org">Neon EVM</a> to help build Solana’s network infrastructure.<br></p>