Brian Smith - Evolution of Staking on Solana - TOKEN2049 Dubai 2025

Thanks for being here. So I lead the GTO Foundation. For people that are less familiar with Salana, Jetto is really core infrastructure for all economic activity and that looks like a few different things. So the actual genesis of why Jetto was founded was MEV and you know founders foresaw that MEV on low fee low fee blockchains is actually very tricky to solve. there's a lot of spam and I mean you can see on Ethereum you know there's the dark force paper that was years and years ago and how hard of a problem that is to solve and so they set about to create a system that captures MV tries to minimize the negative externalities and redistribute all the profits for the good of the network and so the original system looked roughly like flashbots in kind of a Salana format it's evolved decently since then and will continue to deviate but that's really like the main piece.

And so today, JDO's MBV system has over 95% of the validators on Salana and it's distributed over 1 billion in JDO specific fees to validator stakers and um Salana stakers and validators. And so it's really like critical piece like if you're trying to land a trade quickly on Salana, you send a Geto tip. uh it probably embedded in your wallet or whatever front end you're using or whatever TGbot, but like it's processing the actual activity on Solano. The next product is Geto Soul. It's a liquid staking token.

Sure, you guys all know what liquid staking tokens are. It has like roughly 2 and a half billion in TVL. So, it's the largest liquid staking token on Salana by a significant margin and kind of a key tool for people that want to earn yield as well as have liquidity, DeFi utility, all of that. And then lastly is reststaking. It's, you know, kind of comparable to IGEN layer symbiotic on Salana.

It launched two months ago. The difference is like it's much more focused on enabling applications on the L1 as opposed to some of the scaling roadmap that involved in the EVM based restaking networks. But in the 6 weeks that it's been live, it's distributed over 500,000 in real denominated yield as opposed to token emissions. And so that's really the focus there is like powering better apps and sustainable yield. Um, and so anyways, those are the products of JTO, but I'm not really here to talk about JTO today.

It's really just like we have unique insight into how Salana has evolved since we've been on the chain over 3 years ago and want to flag some things that may be interesting to people, especially those that aren't involved in the day-to-day on Salana. So, disclaimer and here this is like right yield on Salana staking. Um, every proof ofstake blockchain starts with inflation. It's like, well, you need security to actually have the blockchain be usable, and so you need some inflation curve. Um, on Salano, they just copied the Cosmos curve.

It started out at 8% a year, and then it decreases by 15% per year. And so, it's steadily been going down and it's worked fine. Like, it wasn't the most important decision they made at the time. There's a lot of debate about like how inflation should evolve. it's probably going to get cut soon, which I can get into in a second, but for the now is like is very sleepy, right?

You have Salana, you stake it somehow, you get steady yield, it doesn't really matter what's happening, but it's not a healthy dynamic. Like, we all know that inflation is not a sustainable way to fund anything. And so, it did its job, bootstrapped the network, and today we're in a very different place on the network. So I mean you can see on the chart the green which is just inflation and then the purple um which is like showing a little bit of life towards the end of the chart but like small relative to all of this um at least historically certainly tiny. So then we kind of catch up to where are we today where it's not just inflationary rewards on Salana.

So this is about rev. Um all these charts are from block works. They're doing awesome work across all of crypto and kind of analyzing the real metrics. And so REV is a coin, a term that they coined. It stands for real economic value.

What this means is what fees are users of the blockchain actually paying to use the blockchain and it's specifically to interact with the L1. So it goes to stakers, validators, and other people involved. And so this strips out inflation because inflation is like not real. And um it's a much better way to compare how crypto networks compare on actual usage, right? Like volume on chain, all these other metrics like daily active addresses, like they're all fake.

Like they can't be relied upon because it's so easy to cibble, wash trade, anything like that. But this is real value that is being paid and paid out to third parties. And so it's actually in my opinion the best metric for the health of any crypto network. And so what you see here is this chart is like blank up until the fall of 2023, right? It's just there was inflation on Salana.

There was some trading activity. It wasn't really captured and you know the network was usable and it was fine, but like it this chart really speaks to the evolution of how Salana has matured and actually become extremely successful. And so I don't want to get too in the weeds for you guys um in terms of like the tips like the supply chain on Solana is complicated. There's like the GTO tips which is interfacing with JO's MBV system. That's a predominant way that people get better execution.

So, especially like time-sensitive trades, like if you're aping a memecoin, you know, and you want to get in in the next two seconds because you think it's gonna 100x or something like that, then you're probably fine to pay five bucks for the trade because you think you're about to make a,000 bucks when it 10xes. Um, and so that's actually what's unique also about RAV is like fees on Salana are so low that like at any given time, even during congestion, you can pay fractions of a penny and still get a USDC transfer to your buddy for drinks included. Like it's awesome. But when you want to actually buy something that a lot of other people are buying, i.e.

contested state that cost decent money because like there's only so many people that can buy a memecoin 30 seconds after it's launched and the guy is doing something kind of crazy on pump. Fun and like everyone wants in. So, um this is how it is and like that's geo tips. There's also this other mechanism called priority fees which is like the native way to get your transaction prioritized in Salana. Um, but for this purpose, you can just look at them aggregated and it really shows like so Salana didn't have anything up until around the fall of 2023.

Like I personally remember that time like obviously Salana was quiet post FX. There wasn't too much DeFi activity and then there was Breakpoint which is a Salana native conference in Amsterdam and like there started to be some pretty cool signs of life. So Bonk had been issued earlier in the year and like Bonk started to go parabolic. There was a few other meme coins. It was like that was really when the first seeds of Salana's memecoin theme started to launch.

But even now, if you look at this chart, like those bars are tiny relative to where it's been. And then you see like they're pretty sustained at about 100 million per month for all of 2024. And then obviously in the fall of 2024 and January and February when meme coins were um kind of taking over the world in like almost a literal sense when you think of the world leader launching his own memecoin on Salana uh you saw like $500 million of rev was generated in that month and yeah I think it's just awesome to see right like one just the prevalence of like how much of that is going through goto's system it's actually like a pretty interesting anecdote that so there was the Trump memecoin and then there was the Melania memecoin shortly after that goto system like actually broke during the Melania memecoin launch um which is pretty unfortunate but like what it showed is like transaction throughput on Salana actually went way down and fees on Salana went way up um which is just rewarding to see that like JO's transaction execution system is so core to Salana that when it had periods of downtime because like it just had overwhelming demand and it crashed uh like it fundamentally impacted the cost to transact on Salana through the default mechanism and so it's a good reminder that like this is core tool for anyone utilizing Salana to be there and then yeah so you know you see rev is traded down a lot of is just driven by memecoin inclusion it's actually less arbitrage than you would think like traditionally people think our like me is you know like back running different pools or even front running but it's mostly just people want to land their trades fast um but like what is very interesting is Salana is actually number one in rev for any crypto network over the last 6 months and that is actually on pace to you know I think it actually is now set for April and looking on pace to do that continually and so despite how cheap the fees are on Salana then it's just an insane amount of economic value so here's like more of like the staking components I will not get into this complicated chart that has all these lines but like the punch line here is that the supply chain of how all of these fees get distributed is actually quite complicated. It's like layering different systems and different mechanisms on top of each other. And so it's something that anyone that holds Salana and is trying to stake their Salana or get yield on it needs to be aware of.

And this is like effectively, again, I I I don't want to like get in the weeds um because this is probably a little too detailed for some of you, but like there's three different fee streams as a staker on Salana that you should be entitled to. So inflation is fairly straightforward. Um you know, we talked about it before. I think people are mostly used to like knowing that Salana validators have some commission on inflation rewards. It's been that way forever.

it's very heavily flagged and you get whatever the balance of that is. In practice today, Salana validators don't really charge um commissions on inflation, at least like a standard retail validator because the other two revenue streams are so significant that inflation is like the most competitive revenue stream. And so that's zero. The next one is go tips. It's again, this revenue stream was irrelevant as of like a year ago, 15 months ago, but Geto tips were boosting staking yields by 25% for most of Q1.

So, this is a very significant factor for anyone that is staking and holding Salana. You need to be aware of what your validator is charging on those geo tips because it is a separate and discrete commission. And so, if your validator isn't passing through MEV rewards to you, then you're not getting the best yield that you can. And then the third is block rewards. So this is like that other priority fee bucket that I mentioned.

And I think it's something that isn't being passed through today, but like GTO actually with the restaking platform is going to be passing that through. And so that's a fee that is going to be very emergent and people that are holding stake soul should be aware of because it's going to start being very competitive or you could stake with Getool and it's being taken care of for you. So there's like some other macro changes that are like probably worth discussing here on what yields on stake Salana mean. So I referenced this at the beginning. You know those of you that follow Twitter closely have probably seen some chatter on this.

There was a Salana governance proposal like Salana actually has real governance about core economic changes which is like very fun. Um well mostly fun but sometimes painful. But uh in February there was this huge debate about like changing the inflation curve. It's frankly just too high today. Like Salana is generating so much rev which funds the network that you don't need to inflate away all soul holders to pay for it.

And so there was a proposal it was by Multicoin Capital as well as Max Resnik um economist at Anza. You guys might know him from his EVM days as well. And uh it narrowly passed. It was extremely controversial. Um, but the punchline is like probably inflation is going down later this year.

So, there's going to be some form of recrafted proposal here. It makes a lot of sense. And it's really just like the details of like do you just cut the curve in half? Um, the original proposal that failed was like a market-based mechanism, which is very elegant, maybe a little complicated. I'm personally a fan, but it's something that uh you guys are probably going to see your sole yield cut in half.

um at least on the inflation side like by the end of this year and that also impacts like a lot of other things. though you know like as ETFs think about what their inflation like their rewards are and funding trade like there's a lot of ripple impacts of how inflationary yields being cut are the other is just like the bigger thing to be aware of is like yield is going to get a lot more volatile and so back in the day you could like you're getting 7% yield it doesn't change at all because it's just inflation but now that you have all of the me tips on top of that plus you're getting priority fees soon and then you're cutting the yield in half with this governance change of how salon is being done then you know yield was bouncing between 8 and 12% in Q1 uh and so like it's definitely it's can be a set and forget a product but like if your mental model is just it's stagnant and um it's not moving around like that is need going to need to be updated um and then there's also this like in protocol block reward sharing so and then lastly like restaking jet restaking launched in February so people with soul can now use that in restaking and get incremental yield. I think we have over 500,000 in yield that's been distributed on restaking to date and it's going to continue growing as more ass are onboarded and so I think we'll see more activity and more soul stake soul end up in restaking especially as inflation yields are cut and people chase it. So anyways that's what I wanted to cover. I mean really excited that Salana is killing it frankly like number one in crypto on all of these transaction fee networks and we're going to continue to evolve very fast as we see it but hope you get involved and can always think about staking with goto soul if you don't want to worry about any of this complicated math.

So thanks guys.