It's pretty much consensus that Jito ignited the airdrop meta on Solana with its JTO token generation event in 2023.
However, JTO has not been the only success story so far. That’s because Jito’s other token—JitoSOL—now also trades at a significant premium to the price of SOL, highlighting the demand for the liquid staking token (LST).
But what is JitoSOL, and how can you use it in Solana DeFi?
In this guide, we'll explore just that—let's dive right in!
What is JitoSOL?
JitoSOL is a liquid staking token (LST) on the Solana blockchain, operated by the Jito Network.
When participating in liquid staking, holders stake their SOL to a smart contract or staking pool—instead of directly to a validator. In return for staking their tokens, participants receive a different type of token that represents their staked SOL. This new token—referred to as a Liquid Staking Token (LST)—can be traded, used in DeFi applications, or transferred while still earning staking rewards.
Due to this, liquid staking with JitoSOL has become increasingly more popular compared to native staking. As a result, JitoSOL has been instrumental in driving the growth of Solana’s TVL, which has seen a healthy recovery since the start of 2024.
Now, let’s explore all the different ways you can get involved and leverage JitoSOL in Solana DeFi!
What can you do with JitoSOL?
Lending
Lending protocols allow you to deposit tokens and borrow other assets against them. Deposited tokens normally benefit from supply APYs, while borrowed tokens are usually taxed with interest. Apart from that, lending protocols also enable you to employ more sophisticated strategies, such as hedging and looping.
As of June 2024, Solana's TVL stands at $9.66 billion, with the lending market making up $1.75 billion of that value. JitoSOL plays a major role in lending markets on Solana, as it's more often than not one of the most supplied and borrowed tokens.
- Kamino: Initially, Kamino started out as a platform exclusively for structured products. Now, the protocol offers multiple liquidity options—from borrowing and lending to vaults—and currently holds over $1.05 billion in deposits. At the moment, the supply cap on Kamino is 2 million JitoSOL and the borrow cap is 250,000 JitoSOL; while the loan-to-value (LTV) ratio for JitoSOL is 45%, meaning that you can borrow assets worth up to 45% of your JitoSOL deposit. Also, Kamino is incentivizing deposits through its ongoing points program, distributing its KMNO token to users, including borrowers and lenders. For more details, make sure to check out our Kamino airdrop guide.
- marginfi: This is one of the longest-standing lending protocols on Solana. As of May 2024, marginfi’s deposit base is growing and currently stands at ~$405 million. Apart from minting yield-accruing tokens such as LST and YBX, you can also deposit JitoSOL into the platform and borrow other assets against your tokens—all while earning marginfi points. At the moment, the supply cap on Kamino is $2 million in JitoSOL and the borrow cap is $500,000 in JitoSOL; while the loan-to-value (LTV) ratio for JitoSOL stands at 77%. For more details, make sure to check out our marginfi airdrop guide.
- Solend: Similarly to both Kamino and marginfi, you can also deposit your JitoSOL into Solend—to earn supply APR—and borrow other assets against your tokens.
Liquidity
In crypto, the term "liquidity" refers to how easily an asset can be bought or sold. Consequently, liquidity in crypto is generally dependent on liquidity providers who deposit tokens into decentralized exchanges (DEXs), allowing other DeFi users the possibility to swap and trade tokens on demand. In turn, the liquidity providers are able to collect fees and rewards.
As mentioned above, the total liquidity in Solana DeFi currently stands at $9.66 billion—which is a fraction of the $116.3 billion in liquidity on Ethereum.
In this context, JitoSOL plays a significant role, as it helps grow the overall DeFi market on Solana by making liquidity incentives more attractive.
- Kamino Vaults: Through Kamino liquidity vaults you can earn fees and rewards by deploying liquidity into concentrated liquidity market maker (CLMM) platforms such as Orca, Meteora, and Raydium. As you may know, you can also deposit your tokens into Orca, Meteora, and Raydium without the help of Kamino. So how do Kamino liquidity vaults differ and stand out from manual liquidity deposits? Mainly, Kamino's liquidity vaults remove the complexity of maintaining a CLMM position, as the entire process is automated—from the moment of deposit, through to reward compounding, and position rebalancing. As such, this enables you to passively earn the highest possible yield on your liquidity. With a TVL of $34.92 million, the JitoSOL-SOL pair has the largest liquidity vault on Kamino, and currently comes with additional incentives—allowing you to earn an APY >10%. But that's not all! Kamino liquidity vaults also issue kTokens to depositors, which are yield-bearing LP tokens that are accepted as collateral in K-Lend.
- Orca: At its core, Orca is an automated market maker (AMM) that makes it easy for you to buy and sell JitoSOL. Instead of trading directly with other people as with a traditional order book, you trade directly through the AMM.
- Raydium: Simply put, Raydium does exactly the same as Orca. So, what's different? Well, just some technical and architectural specifics, really.
- Meteora: This platform is being built by the same team that’s behind Jupiter. At its core, Meteora offers various pool-based trading strategies and options for your JitoSOL.
- Phoenix: The platform hasn't announced any token or rewards just yet, but if you’re an experienced trader looking to deploy sophisticated trading strategies and algorithms, Phoenix is a good venue to trade JitoSOL.
Collateral
In order to trade on perpetual futures DEXs, traders first need to deposit crypto such as stablecoins or SOL as collateral. Using this collateral, they can then long and short various crypto assets by taking out perpetual futures contracts.
- Drift: With a TVL of ~$358 million, Drift is the largest perpetual futures DEX on Solana. In this context, JitoSOL is Drift's largest collateral asset. Currently, the protocol holds ~$161 million in JitoSOL, which significantly outranks the collateral deposits of both USDC (~$77 million) and SOL (~$72 million). Apart from perpetual futures, Drift also offers a whole host of other options and strategies for your JitoSOL such as spot trading, swaps, lend/borrow, insurance fund staking, market making vaults, and super stake sol. For more details, make sure to check out our Drift airdrop guide.
- Zeta: Similar to Drift, you can also deposit JitoSOL on Zeta as collateral and trade perpetual futures. Currently, you can still earn points on the platform to increase your Z-Score. The more you trade, the higher your Z-Score. The higher your Z-Score, the larger your potential allocation if Zeta decides to airdrop a token. For more details, make sure to check out our Zeta airdrop guide.
DeFi risks
Please bear in mind that using DeFi protocols might expose you to risks and attack vectors:
- Smart contract risk refers to vulnerabilities and flaws in self-executing contracts deployed on blockchain networks—the basis of all DeFi protocols. These risks include security vulnerabilities, coding errors, and design flaws that may lead to exploitation, loss of funds, or other unintended consequences. Additionally, external factors such as network congestion or governance changes can impact smart contract functionality as well.
- Economic attacks, on the other hand, involve manipulating market conditions or protocol parameters to exploit protocols. These attacks can include front-running, where traders profit from executing transactions ahead of others, or arbitrage opportunities that exploit price discrepancies between different platforms. Additionally, attacks on DeFi protocols mostly involve market/price manipulations, allowing the perpetrator to drain the platform of its funds.
- When depositing tokens into DEXs such as Orca and Radium, make sure that you understand concentrated liquidity and the implications of impermanent loss first. Impermanent loss is when a token’s price change causes your share in a liquidity pool to be worth less than the present value of your deposit. It is considered impermanent because you can recover the loss if the token pair returns to the initial exchange rate.
- Lastly, make sure to read up on the depegging risks that come with LSTs. LSTs hold their peg through arbitrage mechanisms on DEXs. Although rare, if the LST liquidity on a DEX drops dramatically or runs dry, it could alter the arbitrage incentives and spiral into a situation where the LST doesn’t hold its peg.
How to liquid stake JitoSOL with Phantom?
We’ve partnered with Jito to make liquid staking easier than ever!
You can start liquid staking with Jito with a few clicks in Phantom.
You can also instantly convert your native staked SOL to JitoSOL within your wallet—no need to use additional platforms.
Here's how:
Step 1: Open Phantom and go to the account where you have SOL staked
Step 2: Select SOL
Step 3: Click the ‘Convert your stake to JitoSOL’ banner
Step 4: Select ‘Continue’
Step 5: Select the stake account you want to convert
Step 6: Select ‘Convert’
That’s it. You start accruing rewards just by holding JitoSOL in your wallet.
For more details, read our JitoSol announcement.
