Interpret Jito's re-staking: How to maximize your SOL earnings?

Original Title: "Jito (Re)staking is here- Who will win the Solana restaking race?"

Written by: flow, crypto researcher

Compiled by: zhouzhou, BlockBeats

*Editor's note: This article introduces Jito Labs' Jito (Re)staking, a re-staking protocol on Solana, which allows the use of staked SOL assets to earn higher yields and potentially participate in airdrops. Users can restake SOL through three providers (Renzo, Fragmetric, and Kyros), each of which differs in risk, liquidity, and potential returns. The article compares their features in detail, and recommends a preference for Kyros, which supports a fair launch and has potential airdrop returns. *

The following is the original content (for ease of reading and understanding, the original content has been compiled):

After successfully creating the largest liquid staking protocol on Solana, Jito Labs brings another important development: the launch of a new re-staking protocol - Jito Re-staking. This re-staking project goes live today and will soon open for deposits, with an initial re-staking cap of approximately 25 million USD (147,000 SOL). For those looking to achieve higher annualized returns on SOL and hoping to seize the airdrop opportunity, this is a very attractive opportunity currently available in the market.

Before introducing how to maximize the use of this opportunity, let's briefly review the basic principles of Jito's re-staking.

What is Jito Re-Staking

In simple terms, re-staking refers to using assets that have already been staked to provide security for specific decentralized services again. Although it seems not very important, in fact, this is one of the most promising innovations in this cycle. The concept was pioneered by EigenLayer and was first launched on the Ethereum mainnet in June 2023.

Example of how restaking works in action

Today, Jito has finally brought this new technology to Solana through its re-staking program.

Diagram of the components of Jito's re-staking

The core component of the Jito re-staking framework

The Jito re-staking framework consists of two main components: the re-staking program and the vault program. They can be seen as two independent entities that collaborate to provide a flexible and scalable infrastructure for creating and managing staked assets, vault receipt tokens (VRT), and node consensus operators (NCN). VRT is Jito's term for liquid re-staking tokens, while NCN is similar to the active validation services in EigenLayer, representing entities that will utilize the Jito re-staking solutions.

The main function of the re-staking program is to manage the creation of Node Consensus Operators (NCN), the user selection mechanism, and the reward distribution and penalty mechanisms. This part is invisible to users and can be regarded as the core support of the Jito re-staking solution.

The treasury program is responsible for managing the liquidity re-staked tokens (VRT) and customizing different re-staking strategies through DAO or automated protocols. This is the main interface for users to participate in re-staking. It can be likened to the re-staking role of EigenLayer, which is taken on by the re-staking program on Solana, while the treasury program is similar to EtherFi, acting as a liquidity layer between users and the core re-staking protocol.

Image demonstration of how the Vault program works

3 VRT Providers

In the early stages, Jito only collaborated with three VRT providers: RenzoProtocol ($ezSOL), fragmetric ($fragSOL), and KyrosFi ($kySOL), which will collectively allocate an initial cap of 147,000 SOL. Therefore, any user wishing to re-stake SOL through Jito needs to choose among these three VRT providers.

Jito (Re) staking login page image

The following is a summary of the main features provided by each VRT provider:

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How to Choose the Right VRT for SOL Re-staking?

When choosing which VRT, the key is to find the best risk-return ratio.

The following is the analysis of each provider:

1. Risks: In terms of risks, the main focus is on protocol penalties (i.e., penalty risk) and liquidity risk. Given the current low number of NCN and its early stage, it can be considered that all providers have basically the same level of risk. Renzo and Kyros accept the best liquidity JitoSOL, while Fragmetric accepts a wider variety of liquid staking tokens (LST), which may increase its liquidity risk. Furthermore, Renzo and Kyros' VRT will have liquidity from the very beginning, whereas Fragmetric's tokens will be non-transferable initially. Therefore, in terms of risk, Renzo and Kyros have the lowest risk, while Fragmetric has a slightly higher risk.

2.APY Returns: The APY for each project is expected to be similar, but it can be considered that Renzo and Kyros, by only using JitoSOL, are expected to have a slightly higher APY than Fragmetric, although the difference will not be significant.

3. Airdrop Potential: Given that all VRTs have similar risks and expected returns, the key factor in selecting a specific VRT lies in the potential for airdrop rewards. Renzo already holds tokens, and although re-staking may yield some future airdrop points, the potential is relatively low. On the other hand, Kyros and Fragmetric currently do not have tokens, thus presenting higher airdrop potential.

Further Analysis of the Differences Between Kyros and Fragmetric:

Features of Fragmetric: Expected to be backed by venture capital and may follow a high FDV, low liquidity model; bias towards technology and decentralized user groups; partnered with risk management firm Gauntlet; Tokens are non-transferable at the initial stage; Multiple LSTs are accepted.

Features of Kyros: Supported by SwissBorg, helping to distribute $kySOL and possibly collaborating with major participants in Solana; potential fundraising through a fair community-driven token model; large-scale promotion has not yet started; NCN distribution method may be based on DAO voting; supports JitoSOL.

Overall, KyrosFi is more attractive in several aspects. First, the support from SwissBorg makes it easier to distribute $kySOL and opens the door for its main partnership with Solana. Second, Kyros may adopt a fair launch approach. Finally, Kyros is relatively low-key at the moment, which makes its airdrop return potential more appealing.

Of course, this is a personal opinion for reference only, and I hope this analysis can help you make a more informed decision when choosing to re-stake SOL.