Understanding Jupiter’s tokenomics ahead of its first airdrop

JUP will have an initial total circulating supply of 1.35 billion

article-image

Jupiter and Adobe Stock modified by Blockworks

share

The upcoming airdrop of Jupiter’s native token (JUP) is drawing attention in the DeFi sector, particularly within the Solana ecosystem.

DeFi projects have often been challenged by issues like liquidity fragmentation and uneven token distribution. At times, this has led to trading inefficiencies and centralization concerns.

Jupiter, a Solana-based liquidity aggregator, tackles these problems by pooling liquidity from multiple decentralized exchanges in an effort to improve trade rates and reduce slippage for users. This approach is somewhat akin to that of 1inch, a well-known liquidity aggregator, which similarly consolidates liquidity to optimize trades.

Recently, the network announced an airdrop of its native JUP token, which the protocol will distribute to existing users of the platform, rewarding them for their participation and support.

Read More: Solana-based Jupiter to launch token on Jan. 31

Jupiter is one of the largest liquidity aggregators on the Solana blockchain, whose trading volume rivals Uniswap’s. 

The exchange saw a 24-hour trading volume of $406 million, according to the Jupiter Aggregator. This trading volume surpasses that of Uniswap v2, which saw a 24-hour trading volume of $108 million. This is still less than Uniswap v3, which saw a 24-hour trading volume of $801 million at the time of writing. 

According to Jupiter’s founder, who goes by the pseudonym meow, the JUP token will have a 10 billion total circulating supply.

The Jupiter team will manage 50% of the supply, and the remaining 50% will be distributed to the community. Unlike originally stated in the Jupiter green paper, there will be no token sale. 

Mert Mumtaz, the CEO of Helius Labs, views this move positively.

“Horrible VC sales scarred Solana DeFi 1.0 — Solana DeFi 2.0 is changing that definitively,” Mumtaz said.

Breakdown of tokenomics 

Of the 50% of JUP tokens distributed to the Jupiter team, only 20% of the tokens will be given to current team members. This 20% will not begin vesting until after two years, which means in order to receive JUP tokens, existing team members must be with the Jupiter team for at least that duration.

Another 20% of JUP tokens will head into a strategic reserve. This reserve will be used for future team members, future strategic investors and past Mercurial stakeholders, meow wrote on X.

These tokens, which equate to 4 billion JUP tokens, will be held in a 4/7 Team Cold Multisig wallet. This means that in order to execute any changes, a majority of four out of seven signature holders must come to a consensus. 

Meow notes that these tokens will be locked for at least one year, and a minimum notice of six months must be given to the community before any liquidity event can occur.

The remaining 10% of JUP tokens will be used as liquidity provision and moved into a Team Hot Multisig wallet. 

On the community side, 4 billion JUP tokens will be distributed over four separate airdrops, which will occur on Jan. 31 of each year. 

The initial airdrop will distribute 1 billion tokens, and the remaining 3 billion tokens will be held in a community cold wallet managed by a 4/7 multisig. 

The remaining 1 billion JUP tokens will be available to community contributors through grants. These tokens will be held in a community 4/7 multisig hot wallet, and the Jupiter DAO will be responsible for determining where the funds will be allocated.

For the Genesis launch, there will be an initial maximum circulating supply of 1.35 billion instead of the 1.7 billion that was initially communicated — this initial maximum circulating supply includes tokens from both the community side and the team side. 

One billion of these tokens will be allocated to community members in an airdrop that is scheduled for tomorrow. 250 million tokens will be allocated to the launch pool, 50 million will be allocated to loans to centralized exchange market makers and an additional 50 million tokens will cover any immediate liquidity provider needs. 

Mumtaz told Blockworks he believes this latest Jupiter airdrop to be fair.

“They clearly thought about it and worked with data folks to approach all angles — these things are mostly subjective but I don’t see any wrongdoing here,” he said.

Jupiter’s tokenomics breakdown is relatively similar to that of Uniswap’s UNI token. Both the Uniswap team and the Jupiter team were allocated around 20% of the token supply. The slight difference, though, was that in the case of the UNI token at Genesis, over 60% of UNI tokens were handed to its community, with investors and advisors receiving less than 20%. 

It is important to note that the JUP token is not designed to be utility-focused. Meow advised in an AMA on Reddit that users should not be involved in JUP if there is an expectation that it will have a lot of utility.

“I believe that the idea that utility of a token drives value is a myth created to justify why things have value or by project founders who are desperate to explain why their token has value. And I believe that most people could care less about utility, but rather they care about value,” meow wrote, further discussing the notion on the Lightspeed podcast (Spotify/Apple).

In its initial stages, the JUP token will be designed to govern the incoming DAO, and its purpose will be to coordinate and drive growth and bring more users onto the Solana blockchain.

“Over time, we will definitely want to allow JUP holders to be able to do a lot more with their JUP, including being involved in key ecosystem initiatives etc., but that cannot be confused with why JUP is valuable,” he wrote.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference

article-image

Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour

article-image

Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of

article-image

Franklin Templeton has the lowest intended ETH fund fee so far, though a similar advantage did not help it win the race for bitcoin ETF assets

article-image

It’s now time for the entire Bitcoin community to recognize that Satoshi’s design transcends the confines of a single chain