Jito blindsides whales with airdrop that gives small investors advantage

Almost 10,000 people who have used Jito, a liquid staking protocol on the Solana blockchain, can begin claiming an airdrop for JTO, the protocol’s newly issued governance tokens today.

But the windfall comes with a twist that’s garnered attention in crypto circles: it has snubbed “whales,” the power investors who ploughed hundreds of thousands or even millions of dollars of crypto into Jito, for the protocol’s more modest users.

The airdrop was a pleasant surprise for the vast majority of claimants, and was met with praise online. It prompted some to wonder whether small-dollar investors eager to find more low-hanging fruit might take a look at the rest of the Solana ecosystem, in case other up-and-coming projects without tokens also launch their own.

But it also sowed frustration among larger users accustomed to being rewarded in proportion to the risk they took using a novel product in a famously volatile industry.

The Jito airdrop

Jito is the second-largest protocol on Solana, with almost $400 million worth of crypto deposits.

JTO will give holders a say in Jito’s direction, functioning somewhat similar to shares in a publicly-traded company. Almost 10,000 people who used the protocol before November 25 will be eligible to claim JTO beginning today.

Airdrops are generally proportional to user activity: the more active the user, the larger the claim. Some projects that plan on issuing tokens will say so outright or drop hints in a bid to draw users.

Others, wary of mercenary users who intend to leave the moment they can claim airdropped tokens, try to keep their plans a secret until the very last minute, believing claimants who came for the product rather than free money will be more invested in governance.

The distribution of the Jito airdrop came with a “steep curve,” according to Patrick Scott, an advisor to DeFi projects.

“For example, someone who was in the lowest tier would get about 5,000 tokens a user. The highest tier is about 100,000 [tokens] a user,” he told DL News. “People in the lowest tier could have staked one SOL, and the highest tier, which there’s only a few people in, would have had, in some cases, tens of millions of dollars worth.”

But the curve was steepest for mid-tier users.

“Someone who may have had tens of thousands of dollars or maybe even $100,000 for a short period of time only got two and a half times as many tokens as someone who had one SOL [staked],” Scott said.

Jito Labs CEO Lucas Bruder did not immediately respond to a request for comments.

Some observers praised the move online. Scott said he considered the distribution fair for a company serious about trying to decentralise.

“You need to have some sort of logarithmic curve to distribution, because otherwise you end up with situation where the vast majority of tokens go to to 10 or 50 people,” he said.

“And you could argue they deserve it more, but if you’re trying to build a community, which I imagine they are, and you’re trying to get some sort of distribution of governance tokens to a large number of holders, then you really don’t want those concentrated in the hands of just a couple of people.”

But some complained that they deserved a larger reward, having taken a bigger risk by putting large sums into Jito products in its earliest days.

There’s another downside, according to Scott. It was “relatively easy” to sybil.

Some airdrop hunters will create tens, or even hundreds of dummy crypto wallets they use to interact with protocols they believe will eventually announce an airdrop. Doing so allows them to claim a greater share of the eventual reward.

The practice is known as a sybil attack, and in the case of Jito, such an attempt would have been lucrative.

“So someone who just spread out one SOL across 20 wallets could have gotten more tokens than the guy who put in tens of millions of dollars,” Scott said.

Fewer than 10,000 people are eligible to claim the airdrop, however — a sign that it wasn’t on airdrop hunters’ radar, according to Scott.

“You have some chains like zkSync where you have hundreds of thousands of wallets farming it.”

Pseudonymous DeFi developer Foobar also highlighted the discrepancy between oversubscribed zkSync airdrop farming and the hidden gem of Jito.

“This Jito airdrop is the funniest thing,” Foobar said on X.

“You have one million airdrop farmers dutifully spending one penny per day across multiple scam zkSync dexes,” he said. “Meanwhile, the three guys who each staked 1 SOL in Jito last month get $5k before Christmas.”

Solana airdrops

Jito is the fourth DeFi protocol on Solana to announce an airdrop this year, following Pyth, Jupiter and Meteora. And the hope that other up-and-coming protocols on Solana will soon follow has had a part in the blockchain’s meteoric recovery a year after the collapse of FTX.

They’re part of a crop of DeFi protocols that rose to prominence after the collapse of crypto exchange FTX last year.

FTX founder Sam Bankman-Fried was one of the largest holders of SOL and an investor in several earlier DeFi protocols on Solana.

Some within crypto looked askance at Solana, in part because tokens affiliated with Bankman-Fried and his crypto trading firm, Alameda, had token distribution schemes that critics said benefited venture investors at the expense of almost everyone else.

Some tokens would be sold to investors at inflated prices pre-launch, only to plummet the moment they began trading.

Others would launch with only 1% of their total supply in circulation — low float, in financial parlance — with eventual supply inflation diluting the value of existing tokens.

The newest crop of DeFi tokens on Solana have shunned that approach.

“The ecosystem has almost a natural immune response to predatory tokenomics at this point — so if someone spots someone else doing things that are unfair, they generally tend to call it out,” Mert Mumtaz, co-founder and CEO of Solana infrastructure startup Helius, told DL News.

“The old crop of tokens being predatory was due mostly to Alameda shenanigans.”

While the float is higher for these new tokens, it’s still “relatively low,” according to Scott. But they have another advantage: they’re creating applications people want to use, and are being patient about launching their tokens.

“If you try them out, they offer a product that oftentimes doesn’t exist elsewhere or that a lot of care was put into making it user friendly,” he said.

Aleks Gilbert is a DeFi Correspondent based in New York. Have tips? Send him an email at aleks@dlnews.com.