Jito Proposes Creation of SubDAO to Enhance Governance Token Value

Jito Tokenholders Vote on New SubDAO Initiative

Jito, a decentralized finance (DeFi) protocol operating on the Solana blockchain, is moving forward with plans to establish a new subDAO aimed at enhancing the governance of its JTO token. This initiative is currently under consideration by Jito tokenholders, who are actively participating in the voting process.

The Role of the Cryptoeconomics SubDAO

The proposed Cryptoeconomics subDAO will be managed by a select group of DeFi specialists. Their primary objective will be to develop and execute innovative strategies, including token buybacks, yield subsidies, and a fee switch vault, all intended to stabilize and potentially increase the value of the JTO token. This proposal has been drafted by Nick Almond, who leads governance at Jito.

JTO Token Performance and Market Challenges

Launched in late 2023, the JTO token initially experienced a surge, reaching a peak of $6.01 due to heightened interest in Solana’s DeFi ecosystem. However, it has since faced significant challenges, experiencing a decline of 67% from its all-time high.

Strong Support for the SubDAO Proposal

The response from Jito tokenholders has been overwhelmingly positive, with voting already indicating strong support for the subDAO initiative. As of now, approximately 12.7 million votes have been cast in favor, with only five opposing votes. This level of support has already met the quorum requirement, ensuring the proposal’s passage.

Governance Structure and Efficiency Concerns

Jito operates under a decentralized autonomous organization (DAO) model, where tokenholders have a say in protocol changes. However, many DAOs are recognizing the inefficiencies of having tokenholders vote on a wide array of proposals. To address this, some are delegating specific governance responsibilities to specialized subDAOs.

Urgency Behind the Proposal

The proposal emphasizes the pressing need for the Cryptoeconomics subDAO, citing the substantial revenue generated by Jito—approximately $30 million annually. This revenue is currently unutilized, representing a significant opportunity cost for the protocol.

Funding and Strategic Initiatives

Upon its establishment, the new subDAO will be allocated $7.5 million in JitoSOL, the protocol’s liquid staking token, to facilitate JTO token buybacks. Additionally, it will receive 5 million JTO tokens for incentive programs and market strategies. The decision-making authority will rest with a group of six experts, including Almond, who will determine how these buybacks and incentives are executed.

Addressing Token Value Challenges

Despite being the second-largest DeFi protocol on Solana, with nearly $3 billion in deposits, Jito has struggled to translate its success into a rising governance token value. This is a common issue faced by various DeFi protocols recently, prompting some to allocate a portion of their revenue for token buybacks in the open market.

Market Reactions to Token Buybacks

For instance, the perpetual futures exchange Hyperliquid has successfully repurchased over $1 billion worth of its HYPE token, leading to a remarkable 647% increase in its value. However, the effectiveness of token buybacks remains uncertain. DYdX, another exchange, announced its own buyback strategy but has seen its DYDX token value stagnate since then.

Conclusion and Next Steps

A recent report from crypto research firm Messari indicates that market performance is primarily driven by growth metrics and narrative development rather than token buybacks. The voting period for Jito’s Cryptoeconomics subDAO will conclude on Tuesday, marking a pivotal moment for the protocol’s governance and future direction.

Tim Craig is a DeFi Correspondent based in Edinburgh. For tips, contact [email protected].

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research before making any investment decisions.