Jupiter: The new king of Lego Dex

Author: Frontier Lab Chinese Source: X, @FrontierLab_ZH

Introduction

Jupiter was founded in 2021. Its project positioning is a decentralized trading liquidity aggregator on the Solana blockchain. After 3 years of development, Jupiter has now gathered more than half of the trading volume on the Solana chain. It can be said that it has developed to the ceiling level of Solana's on-chain transaction aggregator. There is not much room for development in the transaction aggregator of its main project, so it began to develop projects in the direction of horizontal development of its business, and launched the Launchpad platform and Jupiter respectively. Start and incubator Jupiter Labs, by incubating other high-quality projects, Jupiter achieves the goal of horizontal development in various parallel fields.

Basic information of the project

Basic information

Website: https://jup.ag/zh-SG

Twitter: https://twitter.com/JupiterExchange, 420,000 fans

Reddit: https://www.reddit.com/r/jupiterexchange/

Discord: https://discord.com/invite/jup

White paper: https://station.jup.ag/docs

Launch time: The token will be launched in 2024

Project Team

Core Team

Meow: Co-founder. He also built Meteora and R.A.C.C.O.O.O.N.S. He is also the co-founder of wBTC, the largest Wrapped token, and one of the founding contributors to the Handshake project.

Ben Chow: Co-founder. With many years of experience in interactive design and products, he is one of the founding team members of the social gaming company Hive 7, which received a Series A round of funding from True Ventures. In 2010, Hive 7 was acquired by Disney/Playdom. In late 2007, he helped design and launch Hive 7's popular social game Knighthood.

Advisory Team

Shun Fan Zhou: One of the authors of the Phala Network white paper, a Ph.D. from the System Software and Security Laboratory of Fu Ri University, published research on attack transactions and defense methods in the Ethereum ecosystem at the top international security conference USENIX Security, and collaborated in publishing several top international security conference papers.

Sandro Gorduladze: Angel investor and partner of HASH CIB. Sandro set up the research department at HASH, which has become famous for its in-depth reports. Prior to joining HASH, Sandro worked at PwC Russia, providing tax consulting to companies in the TMT industry.

Konstantin Shamruk: PhD in Economics from the University of Toulouse, France. Led the theoretical analysis of Phala Network's economic design.

Jonas Gehrlein: Research Scientist at Web3 Foundation. At Web3 Foundation, he is responsible for researching economic issues in the Polkadot ecosystem. Prior to joining W3F, Jonas received a PhD in Behavioral and Experimental Economics from the University of Bern, where he studied human behavior in markets and organizations. Prior to this, he obtained a master's degree in quantitative economics from the University of Konstanz.

Zo Meckbach: Polkadot senior ambassador, researcher and advocate for Web3 and cybersecurity. She is currently the COO of MH-IT& Service GmbH and worked in application analytics at Google before joining MH-IT .

Funding

The Jupiter  team has not announced any financing information.

Development Strength

Jupiter was established in 2021 and was founded by co-founders Meow and Ben Chow. The key events in the development of the project are shown in the table:

From the Jupiter project development roadmap, although the Jupiter team has achieved great success after the launch of the project, it can still continue to provide innovative functions to the project, continuously optimize the user experience, and can quickly discover and change its thinking to expand other parallel businesses after its main business transaction aggregator reaches the extreme on the Solana chain. It can be seen that the Jupiter project team has keen business insight and enterprising spirit, and can also complete development tasks in a timely manner in technical development.

Main Products

Transaction Aggregator

Transaction Aggregator is Jupiter's core product and the basis for its success. Trading aggregators are a type of Defi project that originated from the last bull market. Because the last bull market was ignited by the summer of Defi, many traders at that time gathered on the chain to use various DEXs to trade tokens. However, DEX has an obvious flaw, that is, each DEX has its own liquidity pool, and the liquidity pools of each DEX are not interoperable. Therefore, when investors trade, they often need to find the best trading pool to obtain the best trading price. This is not only time-consuming and labor-intensive, but also difficult to ensure the optimality of the transaction due to the dispersion of liquidity.

However, the emergence of trading aggregators has changed this situation. Trading aggregators can aggregate the liquidity pools of different DEXs on the same chain. When using trading aggregators, users can clearly see the depth, slippage, etc. of all pools in the market for the tokens they want to trade. Traders can choose the DEX that suits them for trading according to their needs.

Jupiter aggregates many liquidity pools in the Solana ecosystem, automatically finds and aggregates the best liquidity resources through algorithms, and provides users with a one-stop optimal trading path. Jupiter's operating interface is very user-friendly, similar to the trading interface of Uniswap, allowing most users to adapt and become familiar with it. Before operating Jupiter, users can set various transaction parameters according to their needs, such as transaction fees, transaction slippage or transaction path, so that users can choose the transaction price and slippage that best suits them. Jupiter mainly uses its own smart contract algorithm to monitor and analyze in real time. Through real-time monitoring and analysis of these market data, Jupiter will intelligently help users choose the best transaction path in the market to improve the success rate of user transactions and the efficiency of capital use.

Among them, in order to ensure the safety and transaction quality of traders, Jupiter requires that the pool of trading pairs connected to Jupiter has a minimum guaranteed liquidity of US$500,000, and must undergo a more rigorous audit. Because of the above reasons, Jupiter aggregates most of the trading volume on Solana, and now accounts for more than 50% of the trading volume on the entire Solana chain, occupying an absolute dominant position on the Solana chain.

Limit Order

Solana has placed its main development positioning on the trading chain, and because the Solana chain's unique consensus mechanism and SVM parallel capabilities make it very friendly to traders, many traders choose to trade on the Solana chain. Because Jupiter itself serves traders, it provides traders with the function of limit orders, helping traders to effectively avoid the cost increase and slippage problems caused by price influence during transactions, while avoiding the MEV problem.

Jupiter's user-friendliness is also reflected in its interface operation. Jupiter cooperates with Birdeye and TradingView. Birdeye provides Jupiter with on-chain price data of tokens, and Jupiter uses TradingView's technology to display chart data, which makes Jupiter's operation interface very similar to the traditional CEX interface, making users more adaptable to Jupiter's operation interface and providing users with a better experience.

When used specifically, the limit order is set to be partially traded and the tokens of the traded portion can be obtained. When proposing a transaction, users can choose the order validity period, exchange price and exchange quantity to execute their own trading strategies more accurately. This allows users to more conveniently avoid the cost increase and slippage caused by price influence during trading, while avoiding the MEV problem.

DCA Fixed Investment

Dollar-Cost Averaging (DCA) is an investment strategy that is used a lot in reality. Users can reduce their purchase costs to their expected price range by setting regular and fixed investments in the future. This method can help investors reduce the investment risk of a single price point in a volatile market environment. Jupiter provides DCA fixed investment products. Users only need to set their own purchase frequency, purchase price range, total time period and the currency they want to purchase. After the fixed investment takes effect, the tokens purchased by the user will be transferred to the user's own account in Jupiter, and the transaction will be automatically executed according to the preset price range and transaction frequency. After the fixed investment ends, the tokens will be automatically transferred back to the user's wallet.

Jupiter's DCA has the advantages of controllable cost price, low fees and fully managed trading process. Since the bear market, DCA has been very friendly to traders. Due to the large price fluctuations and high uncertainty, DCA allows investors to buy assets evenly at a lower cost price over a period of time, thereby reducing the risk of a single investment. In addition, DCA can also help investors avoid the emotional impact of market fluctuations and maintain a rational and stable investment strategy. However, in a bull market, the advantages of DCA no longer exist. Since the market is on an upward trend, a single investment can often achieve higher returns, so the use of DCA fixed investment may not be able to fully seize the opportunity of rapid market growth.

Therefore, DCA, as a long-term investment strategy, has certain advantages in a specific market environment. However, due to its certain requirements for market trends and cycles, the overall demand for this function is relatively small at present. When choosing whether to use DCA fixed investment, investors need to make comprehensive considerations based on their own risk preferences, market environment, and long-term investment plans.

Jupiter Labs

Jupiter Labs is an independently operated project investment laboratory independent of Jupiter. Its operation is based on its own and community promotion and is not affected by the Jupiter project. However, it is strongly supported by Jupiter in technology and funds, so Jupiter users and community members enjoy certain priorities, including priority use rights and token incentives.

Jupiter Labs marks the beginning of Jupiter's horizontal development of its business. It achieves horizontal expansion of its share and influence in the entire Solana ecosystem through investment support in various horizontal fields. At this stage, Jupiter Labs is committed to the development of two project areas: perpetual contracts and LST stablecoins. We can also know that perpetual contracts and LSD stablecoins are the two most profitable and influential areas in an ecosystem.

Perpetual Contract

Jupiter Perpetual is Jupiter's first step towards perpetual contracts. Its operating model is similar to that of GMX. The participants in Jupiter Perpetual are: liquidity providers and traders. Liquidity providers provide funds to the pool, which are converted into a basket of tokens, mainly including BTC, ETH, SOL, USDC and USDT, among which SOL and USDC have a higher weight and become the main trading objects. When traders conduct leveraged transactions, they use the tokens in the liquidity pool to establish leveraged positions. Traders need to pay transaction fees and borrowing fees. Liquidity providers receive 70% of the transaction fees and all borrowing fees. Similar to GMX, liquidity providers are the opposite of traders in transactions. Traders who conduct contract transactions are acting as counterparties of liquidity providers. Therefore, this model will have a lot of liquidity providers in a bear market, but it is not very friendly to liquidity providers in a bull market.

Jupiter Perpetua supports traders to trade perpetual contracts with up to 100x leverage, while LPs can provide funds to earn fees. In perpetual contracts, traders are able to take on larger positions with less capital allocation (leverage) in order to take advantage of future price fluctuations. In Jupiter Perpetua, traders can open long or short positions on SOL, ETH, and wBTC using almost any supported Solana token as collateral. Long positions require the corresponding underlying asset, while short positions require stablecoins as collateral. Traders can take on leverage by borrowing assets from liquidity pools.

LST Stablecoin

XYZ is a LST stablecoin project supported by Jupiter Labs. In XYZ, users can mint interest-free stablecoins SUSD by pledging SOL. The user's collateral is locked in the smart contract until the user repays the corresponding SUSD. This lending model allows users to obtain stablecoins without incurring loan interest. And the income obtained by XYZ through LST staking will be distributed to SUSD holders and governance token holders to encourage more users to actively participate in the protocol. In addition, the XYZ protocol also uses a leveraged arbitrage strategy to maximize returns. When the LST yield is higher than the SOL borrowing rate, users can adopt a leveraged arbitrage strategy to obtain higher returns. XYZ also uses a redemption mechanism similar to Lybra to maintain the price stability of SUSD. In order to reduce the impact on the borrower's position, XYZ uses governance tokens to redeem SUSD in a small price range. When the price of SUSD is between 0.95-1 US dollars, XYZ uses SUSD to redeem governance tokens to reduce the frequency of borrowers being redeemed.

Jupiter LFG Launchpad

LFG Launchpad takes an innovative approach to supporting new projects, emphasizing a model centered on community-driven and transparency. Traditional project launch platforms often have complexity, while LFG Launchpad abandons this complexity and adopts an open market and community participation approach. At the same time, the platform also abandons complex incentive structures and isolated price discovery mechanisms, highlighting its uniqueness. The core advantages of LFG Launchpad lie in its huge community support, customizable Launchpad to prevent robot operations, user-friendly design tools for liquidity management, and comprehensive trading functions. These features ensure that users can discover fair prices and instant liquidity, while providing good support for technical aspects. First of all, LFG Launchpad relies on huge community support to promote the development of new projects. The community-driven model enables projects to receive wider attention and support, providing a broader space for the development of new projects. Secondly, LFG Launchpad uses a customizable Launchpad to prevent robots from operating on its behalf, effectively ensuring the fairness and transparency of transactions. This feature makes transactions safer and more reliable, effectively avoiding malicious manipulation and improper intervention, and providing users with a more stable and reliable trading environment. In addition, LFG Launchpad also provides user-friendly design tools for liquidity management, allowing users to manage their assets and liquidity more conveniently. This feature is conducive to improving user experience and providing users with a more convenient and efficient operation method. Finally, LFG Launchpad has comprehensive trading functions, providing users with richer and more diverse trading options. Regardless of the type of transaction or the type of transaction, users can find a trading method that meets their needs on LFG Launchpad, which is conducive to improving trading efficiency and meeting users' personalized needs.

And in a recent media interview, Jupiter's co-founder Meow clearly affirmed the H2 plan that LFG Launchpad will enhance Jupiter's brand influence, and it is expected that in the third quarter, Jupiter will continue to explore and develop in depth around the rules and development of LFG Launchpad.

Compared with projects in the same track

Jupiter, as the most successful decentralized trading liquidity aggregator in the Solana ecosystem, has accounted for half of the trading volume in Solana, so its main competitor is 1inch, the decentralized trading liquidity aggregator giant in the Ethereum ecosystem.

Underlying operating logic

Jupiter is a decentralized trading liquidity aggregator running on the Solana chain. It enjoys the high performance advantages of the Solana chain, which is mainly reflected in the use of SVM. SVM supports smart contract codes written in Rust, C, and C++. After being connected to SVM, they will be automatically converted to BPF bytecode, which is particularly friendly to project developers. However, the biggest advantage for Jupiter is SVM's ability to support parallel processing. The Sealevel engine is a key component for implementing parallel processing on Solana, and with the integration of state access lists in Solana transactions, non-conflicting transactions can run simultaneously, resulting in faster overall performance. SVM supports multi-threading and can process more transactions in a shorter time. Each thread contains a queue of transactions waiting to be executed, and transactions are randomly assigned to the queue. This makes Jupiter have very powerful transaction processing capabilities, can support a huge number of transaction operations at the same time, and is very friendly to trading users.

1inch is a decentralized trading liquidity aggregator running on the Ethereum chain. The underlying logic of its operation is based on EVM, and EVM is a single-threaded operating environment, which means that it can only process one contract at a time, which makes it incomparable with Jupiter in terms of transaction processing capabilities. Although Ethereum has experienced the Cancun upgrade in 2023, coupled with the proposal of various L2 solutions, the performance on Ethereum has been improved, but it is still not comparable to Solana. As a result, Jupiter has a natural advantage in performance compared to 1inch.

Gas Fee

Decentralized trading liquidity aggregator is a high-frequency on-chain transaction behavior, which makes users very sensitive to Gas fees. The Solana chain adopts a historical proof consensus method to improve the efficiency and reliability of the system, and uses SVM to give Solana extremely high processing speed and low latency, which allows transactions to be confirmed quickly, thereby reducing the Gas fees that need to be paid. Based on this, Jupiter's trading users only need to pay $0.00015 per transaction, which is enough to support users to adopt high-frequency operations to complete their trading strategies, which plays a vital role in Jupiter's limit orders, DCA fixed investments and perpetual contract transactions.

Although Ethereum has declined after the Cancun upgrade, the average transaction fee on Ethereum has reached $0.3 per transaction, which is much higher than the Gas fee on Solana. Then 1inch, a decentralized trading liquidity aggregator, is essentially a high-frequency on-chain transaction behavior. The gas fees paid by traders will increase exponentially with the frequency of trading, which is very unfriendly to traders during bull markets. The essence of aggregators is to provide users with better prices by obtaining liquidity from multiple sources, rather than just from one specific DEX. The high gas fees on Ethereum will make it very expensive to use trading aggregators to obtain liquidity from multiple different pools, which will worsen the problem that was originally intended to be solved. It may actually be more beneficial to trade on liquidity from only one place.

Product Diversity

Jupiter provides traders with a variety of products, such as limit orders, DCA fixed investment, and derivatives trading, so as to meet the different needs of users. In this regard, Jupiter can be said to be doing its best to help customers solve various problems encountered in transactions. It is not just a single product from the perspective of liquidity aggregator, but provides users with a full range of financial services from the perspective of financial development. It can not only meet the various financial needs of users, but also provide the most appropriate financial services for trading users in various market stages.

1inch is slightly single in terms of products. 1inch only focuses on the product positioning of DEX aggregator, and only provides better prices for trading users by obtaining liquidity from multiple sources, and does not provide other financial service products.

Future Development Direction

Jupiter now occupies an absolute leading position in the decentralized trading liquidity aggregator track in the Solana ecosystem. It does not have much room for development in the original track, so it has shifted its attention to other parallel tracks and launched Jupiter Labs and LFG Launchpad to increase its influence by supporting and investing in projects in different tracks in other Solana ecosystems. Therefore, from the perspective of future development, in addition to constantly updating and adding various functions to its own liquidity aggregator, Jupiter's development focus is to vigorously promote Jupiter Labs and LFG Launchpad. Its co-founders made it clear in the work plan of H2 that Jupiter will continue to explore and develop in depth around the rules and development of LFG Launchpad.

Although 1inch occupies a major position in the decentralized trading liquidity aggregator track in the Ethereum ecosystem, it is not as dominant as Jupiter in the Solana ecosystem, because Uniswap is a very successful DEX in the Ethereum ecosystem, and Uniswap has also gathered a considerable number of users. Therefore, 1inch's future development path is different from Jupiter. 1inch mainly focuses on the decentralized trading liquidity aggregator track, and optimizes the transaction speed and Gas fee by deploying itself to different L2s.

Project model

Business model

Jupiter is a decentralized trading liquidity aggregator and also provides derivative contract services and project incubation, so Jupiter's economic model consists of three roles: trading users, liquidity providers, and new incubation projects.

Traders: Traders are the foundation of the success and development of the Jupiter project. Traders enjoy a variety of financial services on the Jupiter platform, such as liquidity aggregation, limit orders, DCA fixed investment and contract services. For this reason, traders need to pay a certain percentage of transaction and service fees to Jupiter, which is also the main source of income for the Jupiter project.

Liquidity providers: Because Jupiter not only limits its own business to liquidity aggregators, but also extends it to perpetual contracts. Its operating model is similar to GMX, so it must have users who specialize in providing liquidity to ensure the normal operation of perpetual contracts. Liquidity providers obtain 70% of transaction fees and all lending fees, and the remaining 30% is used as the source of income for the Jupiter project.

New incubation projects: After Jupiter launched LFG Launchpad, it adopted an innovative way to support new projects, in which Jupiter not only provides technical support but also provides certain financial support. In return, the newly incubated projects will give part of their tokens to Jupiter, which is also a source of income for the Jupiter project.

From the above analysis, it can be seen that Jupiter's income is:

• The fee to be paid for using Jupiter's liquidity aggregator is within 2%, and the fee depends on different liquidity pools.

• To use Jupiter's limit order function, users need to pay a fee of 0.3%.

• To use Jupiter's DCA fixed investment function, users need to pay a fee of 0.1%.

• Using Jupiter's perpetual contract products, you need to pay 0.1% for opening/closing positions, 2% or less for exchange fees (depending on the pool weight), 0.01%/hour*token utilization%, and 30% of transaction fees and all borrowing fees.

• Projects incubated or operated by Jupiter Launchpad will allocate part of their tokens to Jupiter.

Token model

According to the white paper: the total amount of JUP is 10 billion, the current circulation is 1.35 billion, and the circulation rate is 13.5%. The initial circulation is 1.35 billion, of which 1 billion are used for airdrops, 250 million for Launchpool, and another 50 million for CEX market making and on-chain LP needs. The overall token distribution is as follows:

The protocol promises to allocate 50% of the tokens to the community, and allocates a cold wallet to the team and the community respectively. The initial circulating tokens are expected to be 5% for adding liquidity and 10% for airdrop tokens (there may be an additional 2% or so tokens unlocked).

Token Empowerment

According to the white paper, the uses of JUP in Jupiter are as follows:

• Governance Warrants: JUP token holders can participate in the DAO (decentralized autonomous organization) governance of the Jupiter platform, express their opinions through voting, and influence the operation and development direction of the protocol.

• Liquidity Mining: Users can earn JUP token rewards by providing liquidity to the Jupiter liquidity pool, which encourages users to increase platform liquidity, reduce transaction slippage, and improve transaction efficiency.

• Fee discount: Users holding JUP can enjoy a certain degree of fee reduction when using Jupiter for transactions, further enhancing the practical value of the token.

• Extended functions: As the Jupiter platform continues to evolve, the functions of the JUP token are also continuously expanding. For example, users may be able to use JUP to participate in perpetual contract transactions launched by the platform or obtain priority use rights for new products and services.

JUP value judgment

According to the white paper, in the Jupiter project, there is no scenario of centralized destruction or periodic destruction of JUP and staking and sharing of fees.

The lack of empowerment for JUP is a significant drawback of the Jupiter project. There is no staking mechanism in its design, which reduces the key point of locking JUP tokens to increase the value of the project. In addition, the current circulation rate of JUP tokens is 13.5%. In the future, with the unlocking of each airdrop, 1 billion JUP will be released to the market, which will then be a huge market selling pressure, so the   The value increase of JUP tokens comes more from the value of the Jupiter project itself, which is somewhat similar to the situation of UNI and Uniswap. In addition, JUP does not have the item of staking to participate in the sharing of project income, which leads to less empowerment of the project. The rise of JUP can only depend on the development trend of Jupiter and users' optimism about the future of Jupiter.

Token price performance

According to Coingecko statistics, since the issuance of JUP on January 31, 2024, the price has risen by more than 2.8 times (the lowest point is US$0.46 and the highest point is US$1.75). The main trading venues are first-tier exchanges such as Binance, OKX, HTX, and bybit.

JUP price trend (data source: https://www.coingecko.com/en/coins/jupiter)

Average daily trading volume

JUP's daily trading volume (data source: https://www.coingecko.com/en/coins/jupiter/historical_data)

JUP's daily trading volume is US$154 million, its market capitalization is approximately US$1.33057 billion, and its turnover rate is 11.57%, which is at a medium level.

Top ten token holding addresses

JUP top ten holding addresses (data source: https://solscan.io/token/JUPyiwrYJFskUPiHa7hkeR8VUtAeFoSYbKedZNsDvCN#holders)

As can be seen from the figure, the top ten PHA holding addresses account for a total of 91.93%.

TVL

Jupiter's TVL (data source: https://defillama.com/protocol/jupiter#information)

It can be seen that Jupiter's TVL has been growing in the past six months and has now reached US$602 million.

Daily Trading Volume

It can be seen that Jupiter's daily trading volume has continued to increase over the past year.

Project Risk

In addition to being Jupiter's governance token, JUP tokens are rewards for liquidity providers and holding JUP for trading can provide partial discounts on handling fees. However, the JUP token lacks the Ve token mechanism like Cruve, and there is no scenario of centralized destruction or periodic destruction and staking to share the handling fee. Therefore, JUP is like UNI, which is just a token of the Uniswap project, but it basically has no other functions and only serves as a project mascot. Therefore, there is no design of JUP token staking in Jupiter's token economics, which is not conducive to the increase of token prices.

Summary

Jupiter is a trading aggregation platform, and its business has reached its ceiling, so it has adopted a strategy of developing into other parallel tracks. In addition to the innovation of its main business, Jupiter has also launched the Launchpad platform and incubation platform, making full use of its own resource advantages. The projects launched by it are worthy of attention and have great development potential with the support of Jupiter. With the continuous development and growth of investments in other parallel tracks, I believe that Jupiter will achieve greater success in other fields.

However, Jupiter's own token economics is too simple, and there is no good staking mechanism, which leads to a large liquidity of tokens, which indirectly has an adverse effect on the rise of token prices. Although Jupiter has also empowered JUP with governance, fee reduction, etc., it has never involved the scenarios of staking, centralized destruction or regular destruction, and staking and sharing fees. This is not conducive to the rise of JUP token prices.

In short, Jupiter has consolidated its position in the decentralized liquidity aggregator track with the launch of innovative products such as limit orders, DCA fixed investment, and user contracts. It has also taken a long-term view and started to actively lay out the entire Solana ecosystem. If the projects it supports and launches are successful in the future, it will not only greatly increase its influence in the Solana ecosystem, but will also gradually grow into a unicorn project in the Solana ecosystem. So we are very optimistic about Jupiter's future development.