Can Jito help Solana TVL continue to grow?

This article comes from: Forbes

Original author: Victoria Chynoweth

Solana’s network-wide Total Value Locked (TVL) has experienced crazy growth recently. DeFillama data shows that Solanas TVL has nearly doubled since the first week of December 2023, from $671 million to $1.21 billion.

Solana suddenly regained the markets attention, and Jitos recent airdrop can be said to be indispensable. On December 8, Jito officially launched the airdrop of its governance token JTO. The generous scale of the airdrop made it a hot topic in the entire Solana community.

Next, lets take a look at what Jito is and explore the future of Solana.

What is Jito?

Although Solana has been widely praised for its performance, cost, etc., it has also suffered from many security issues in its history.

Jito CEO Lucas Bruder once said on the Bankless podcast:"There are many spam transactions on the Solana network, and arbitrage transactions always fail.

Because Lucas anticipated this happening early on, Jito Labs has been working on a solution since 2021.

Jito Labs began developing a new infrastructure to efficiently extract Maximum Extractable Value (MEV) on the Solana blockchain. Thus, the Jito Solana client was born, and Jito Labs also created a Jito blockchain engine, which Lucas described as a block builder.

Lucas explained: “This can be compared to beaverbuild on Ethereum.”

However, Jito’s goal is not just to extract MEV, but also to efficiently distribute value to stakers.

Jito allows network validators to decide how much value to allocate to stakers and thereby become contributors to the Jito Network. Jito Network is a new liquidity staking protocol that issues SOLs liquidity staking derivative token JITOSOL.

Different from earlier liquidity staking protocols, Jito Network is built on the client (similar to Prism and Nimbus on Ethereum). Jito itself is a client of the Solana blockchain and may play a crucial role in Solanas future.

Is SOLs rise sustainable?

Jito’s airdrop has boosted Solana’s recent excellent performance in the secondary market. In addition to the significant increase in TVL, SOL has also soared by more than 800% in 2023. This increase is far ahead of similar Layer 1 competitors.

Compared with Ethereum (ETH), which has the highest TVL, the price growth of SOL is more obvious. Although ETH also maintained its upward trend, it only rose 94% throughout the year.

However, focusing solely on TVL is not always a good idea.

TVL gives you a false sense of precision about a metric that can be easily manipulated, Tushar Jain, partner at Multicoin Capital, said on the Lightspeed podcast with Blockworks.

Helius CEO Mert agreed with Jain: I think TVL is a flawed metric... but as more people switch to Solana, TVL will naturally increase.

However, some professionals have a more positive view of the proliferation of TVL. When asked whether Solana’s recent surge in TVL is a temporary phenomenon or the beginning of long-term growth, Altcoin Daily co-founder Austin Arnold responded: “In terms of the development of decentralized applications (DApps), Solana has the crypto One of the most active ecosystems in the field. People see it as a faster or cheaper version of Ethereum, and Solana also provides a better user experience. The more actual Dapp development activity on the blockchain, the TVL will The bigger it gets, the bigger the Solana ecosystem will become.”

Some signs that can be seen currently are that while Solana TVL is growing, meme coins built on Solana have also attracted more attention, and the number of project parties conducting airdrops on Solana has also increased.

Is the arrival of airdrop hunters good for Solana?

While we can be optimistic about Solana’s growth, we shouldn’t ignore that cryptocurrency is a market rife with airdrop hunters. As Solana develops, more and more airdrop hunters are attracted. Is this really good for Solana? According to Mert, this also seems possible.

While its not perfect, ultimately some of these users will choose to stay, and they can help Solana attract more users...In addition, it will also help with network stress testing, Mert said.

No one can deny Solana’s recent growth, and as this trend continues, more and more people are beginning to consider a question – will it surpass Ethereum?

Can Solana surpass Ethereum?

Solana is faster and cheaper than Ethereum, so as Solana gains momentum, its natural for some to start thinking about the chances of Solana surpassing Ethereum.

While there are many very optimistic assumptions in the market, the experts we invited have a more realistic view in this regard.

Considering Solana’s advantages such as low latency and low fees, Mert pointed out: “I think Solana can replace Ethereum in some use cases of smart contracts, especially those that require low latency, low fees, etc., but I think both will continue to exist.”

Altcoin Daily’s Austin Arnold took a similar view but provided a more comprehensive analysis.

“I believe we are now in the first phase of cryptocurrency adoption and the real winners are yet to emerge. Ethereum is in the lead now because it has better network effects, is more decentralized, and has stronger Censorship resistance. However, Solana is faster, cheaper, and has a better user experience. The market will make its choice based on its competition, and it will be about which blockchain improves its flaws faster.

What’s the future for Solana?

Jito’s airdrop has clearly had a positive impact on Solana’s ecosystem, and Solana’s rapid rise in TVL is also worthy of praise. However, it is still important to note that there is still a lot of uncertainty in the cryptocurrency market.

In addition, we have yet to further observe the long-term positive impact that JITOSOL can bring to the Solana ecosystem. In other words, we cannot ignore the improvement in Solanas ecological fundamentals due to the arrival of Jito.

Mert believes that over the next five years, Solana can drive advances in decentralized computing and become the blockchain of choice for developers building applications.

Austin Arnold added: I think Solana will still be a top five DApp ecosystem in the next five years. Development will continue to improve and users on the network will continue to grow. As cryptocurrencies become more mainstream, the overall network The effect will be greater.

Solanas rise in 2023 may be attributed to the arrival of Jito and the improvement of the encryption market environment. However, when the markets attention once again focuses on Solana, how will it develop in the future? Will Jito help Solana catch up with Ethereum? The answers to these questions will be revealed as Solana develops in 2024.