Will Jupiter Become an Amplifier for Investing in Solana?

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Is Solana the “Ethereum Killer”?

Solana is making a strong comeback from the FTX collapse, leading the crypto market rally in Q4 2023, and continues to ignite market sentiment in 2024 through ecological airdrops and high-growth MEME tokens, positioning itself as a top contender to be the “Ethereum killer.” We review the growth of the Solana ecosystem from perspectives such as data and market sentiment, and ecological prosperity, explaining why in this cycle, positioning in the Solana ecosystem should be significantly elevated.

Solana‘s metrics are soaring rapidly. Solana’s TVL began to rise sharply in Q4 2023, growing from about $500 million on October 1, 2023, to a recent $8 billion—an increase of 1500% within two quarters, approaching the November 2021 peak of $12 billion. Influenced by MEME tokens, DEX trading volume is rapidly increasing, with transaction volume breaking a record high of $3.8 billion on March 16, nearing and even temporarily surpassing Ethereum. Token performance is also robust, with Solana’s token price soaring continuously since October 2023, approaching a peak of $250, surpassing the market cap of the previous bull market.

Solana has moved beyond the negative impact of the FTX incident: As the trial of SBF concludes, the FTX collapse is drawing to a close. From the Solana ecosystem’s perspective, it has gradually recovered from the FTX low, whether in terms of ecological development, investor perspective, or market sentiment. The negative impact of the FTX incident on Solana has dissipated. According to The Block, citing insiders, the 41 million SOL locked by FTX has attracted multiple buyers, and the market demand for acquiring SOL tokens is high, providing positive indicators for Solana’s future growth from both a capital and institutional sentiment perspective.

Solana has become a major base for DePIN projects, with multiple ecological projects issuing tokens soon: Solana, with its low fees and high performance, has become the main ecosystem for carrying the DePIN narrative. Besides top DePIN projects like Helium, Shadow, and Hivemapper, a slew of AI×DePIN projects have also chosen the Solana ecosystem, including io.net, Render, Grass, Nosana, etc. Meanwhile, several projects within the Solana ecosystem have yet to issue tokens, such as io.net and Magic Eden. Referencing JUP and JTO, these upcoming issuances and airdrops will continuously inject vitality into the Solana ecosystem.

Solana has achieved product-market fit and may become the main interaction ecosystem for retail and new users this round: Solana’s high performance and extremely low transaction fees make it highly suitable for retail trading and lower the barriers for new users. Ethereum L1’s transaction fees can peak at tens or even hundreds of dollars during high periods, a number that rises as ETH prices increase. L2 liquidity is dispersed and the operation complexity increases for new users. Furthermore, the concept of Fair Launch is popular in this cycle among retail investors, who generally see Ethereum as dominated by VC plays. In contrast, Solana’s strong support for MEME coins drives bottom-up market sentiment. Simple operations, low-cost tokens, and wealth creation effects will be the main drivers attracting new retail investors.

Overall, whether in terms of data performance, ecological prosperity, or market sentiment, the Solana ecosystem has demonstrated strong capability and continuous growth potential, presenting a logical path for growth in a bull market. Whether or not Solana is the “Ethereum killer,” from an investment perspective, the Solana ecosystem deserves a status comparable to Ethereum’s, and from a growth potential standpoint, it is even more aggressive.

Jupiter to Resonate with Solana

Jupiter, as liquidity infrastructure on the Solana ecosystem, will resonate at the same frequency as Solana.

Firstly, on the Solana network, Jupiter directs about 50%-60% of the transaction volume, and over 80% of organic transaction volume (excluding Trading bots), which means that most transactions within the Solana ecosystem, apart from those using Trading bots, need to interact with Jupiter’s front end. Jupiter, with its trading infrastructure status and massive customer capture volume, has become one of the most important protocols in the Solana ecosystem. Moreover, as a DEX aggregator, its importance to the Solana ecosystem is actually much greater than 1inch’s to Ethereum, because Solana is naturally more suitable for liquidity aggregators. A transaction divided into multiple parts would generate higher gas costs, which would be problematic for Ethereum with its already high gas fees. In Solana, however, the cost to users remains minimal. Thus, in terms of transaction volume, Jupiter is essentially on par with Uniswap and has even temporarily surpassed it, making it the Uniswap of the Solana ecosystem.

Secondly, Jupiter has launched Jupiter Start and Launchpad.

Given Jupiter’s tremendous capture of users and traffic within the Solana ecosystem, it is foreseeable that future projects in the Solana ecosystem will have a high degree of association with Jupiter, whether through Jupiter Launchpad or direct airdrops to JUP holders, greatly benefiting Jupiter.

In terms of token performance, Jupiter and Solana’s price growth have been synchronized, with JUP’s increase exceeding SOL’s over the past month, further indicating that JUP will become a leveraged play on SOL.

Liquidity Aggregation

Token prices change rapidly, and the best trading prices aren’t always on one DEX but may involve combinations of trades across multiple DEXs. Jupiter, as a liquidity aggregator, will find the most favorable price routes across all major DEXs and AMMs on Solana, minimizing slippage and transaction fees, making the trading process more efficient and user-friendly. Aggregators mainly work in two ways: Multi-hop routing and order splitting. Multi-hop involves using an intermediary token C (A-C-B) to achieve better exchange from token A to token B, while order splitting involves dividing a transaction into multiple parts to be completed on different DEXs.

Jupiter currently uses a routing algorithm called Metis, aimed at providing the best price routes within Solana’s fast block times. Compared to V1 and V2, Metis offers more flexible and complex trade paths for better price discovery. Additionally, the Metis algorithm has increased the number of supported DEXs and shows stronger quoting capabilities in large transactions. According to official data from Jupiter, Metis’s quoting capabilities are on average 5.22% higher than the V2 engine, and this improvement increases rapidly with the transaction amount.

Currently, the Jupiter aggregator does not charge users, serving mainly as a user trading front-end, attracting attention and traffic from the Solana ecosystem, making it highly suitable for Launchpad operations. However, it should be noted that during the last Solana MEME wave, Jupiter’s position as a trading front-end was impacted by Trading bots. On one hand, Trading bots offer more user-friendly operations, equipped with sniping and token information querying features, naturally born for MEME tokens. On the other hand, Jupiter’s token update speed cannot meet the demand of MEME tokens at their launch, and tokens must meet certain liquidity requirements before they appear on Jupiter.

Limit Orders

Jupiter provides a limit order function, giving users a CEX-like trading experience, avoiding issues like slippage and MEV caused by rapid price changes on-chain. Like other on-chain limit order platforms, Jupiter’s limit orders are not an order book system, but are executed by Keepers using Jupiter Price API to monitor on-chain prices and execute trades when prices meet specified standards. Benefiting from Jupiter’s liquidity aggregation feature, limit orders can also utilize multiple liquidity pairs on Solana to complete transactions.

Jupiter currently supports transactions between any token pairs, in fact, offering a more convenient trading experience than CEXs. Jupiter also collaborates with Birdeye and TradingView; Birdeye provides on-chain price data, while TradingView integrates into the front-end for more convenient chart data display. Jupiter currently charges a 0.1% platform fee.

Perps Trading

Perps trading is based on LPs providing liquidity and Pyth oracles providing price data, and is currently in the beta testing stage. The operational mechanism of Perps trading is similar to GMX’s GLP pool model. LPs provide liquidity to the JLP pool, and contract traders use various Solana assets as collateral, selecting leverage ratios from 1.1x to 100x, borrowing corresponding liquidity from the JLP pool (for example, long SOL contracts require borrowing the corresponding amount of SOL according to the leverage ratio, short SOL requires borrowing stablecoins). After closing positions, traders gain profits/settle losses and return the remaining tokens to the JLP pool. For instance, if traders profit from a long SOL position, the number of SOLs in the JLP pool decreases, and the traders’ profit comes from the JLP pool.

Currently, the JLP pool supports five assets: SOL, ETH, WBTC, USDC, USDT. The JLP pool will receive 70% of the exchange revenue, which includes the fees for opening and closing positions, as well as the interest charges for borrowing (the related fee standards are shown in the following table). The current TVL of the JLP pool is $331,384,506.56, with the corresponding asset proportions shown in the figure below.

LFG Launchpad

Jupiter launched the beta version of its Launchpad in January 2024, and has completed the token issuances of JUP, WEN, and ZEUS. Participants in the Launchpad are mainly divided into three groups: project teams, the JUP community, and token purchasers.

For project teams, Jupiter is the largest traffic entrance on Solana, and choosing Jupiter as a launchpad greatly captures Solana ecosystem users. Additionally, projects participating in the Launchpad need to provide a certain amount of tokens (generally 1% of the tokens) to incentivize the JUP community and team.

The JUP community consists of voters who own and stake JUP, who decide through voting which project will be launched next on Jupiter, and receive corresponding rewards. In terms of voting rules, users lock a certain amount of JUP to obtain a corresponding number of voting rights. There is no minimum token requirement for voting, but each wallet can only vote for one project. Tokens unlock after 30 days, during which users can still vote, but their voting power is proportionally reduced. After voting, the two projects to be launched on Jupiter are Zeus Network and Sharky. For JUP holders, the benefits of staking and voting include:

For token purchasers, JUP Launchpad uses the DLMM (Dynamic Liquidity Market Maker) model for token sales. The DLMM model subdivides a price range into multiple discrete price intervals. The team mainly provides Token liquidity, and users provide USDC liquidity, completing the token sale in this process. Additionally, to reduce the impact of complex mechanisms on users, Jupiter still offers DCA and limit order functions, allowing users to complete token purchases during the sale period based on suitable strategies.

Currently, the first unofficial project on Jupiter Launchpad, Zeus Network, is on sale, with ZEUS starting at a price range of $0.3 to $0.85 on the Launchpad, peaking at $1.11, with a current price of $0.83 (data as of April 11). At this price, the airdrop value shared by JUP voters is $8,300,000 (1% ZEUS). Additionally, in the issued JUP and WEN, the vast majority of participants have gained more than 3 times the return.

Who is the Best Leveraged Play in Solana?

Jupiter, as a trading aggregator, holds a unique position in the Solana ecosystem. With its unique features and significant capture of trading volume, currently, no other trading protocol in the Solana ecosystem can directly compete with Jupiter. Therefore, we need to consider whether JUP is a good choice if we need to pick a leveraged play in the Solana ecosystem.

There are many options for leveraging the Solana ecosystem: infrastructure (like JUP), leading MEME (like WIF), and other ecosystem projects (such as AI, DePIN projects), but the returns vary by category. MEME has stronger uncertainty, while other ecosystem projects have a greater relationship with their own narratives (for example, RNDR will benefit from the growth of the AI narrative, not necessarily the growth of the Solana ecosystem). Thus, the projects most in sync with Solana are the infrastructure protocols of the Solana ecosystem, such as trading infrastructure (Raydium/Orca/Jupiter), liquidity staking protocols (Jito), and oracles (Pyth). Compared to these projects, Jupiter’s advantages mainly lie in:

From a basic business perspective, Jupiter captures more users and traffic in the Solana ecosystem. Among all businesses, the most fundamental business users need is trading, especially since the Solana ecosystem’s recent main demand revolves around Memecoin, further emphasizing the importance of trading. Based on Jupiter’s monopoly position in Solana’s trading front-end, users entering the Solana ecosystem naturally become Jupiter users. Jupiter will become the first stop for users in the Solana ecosystem, having the strongest and most direct binding relationship with the Solana ecosystem, and representing it most strongly;
From the perspective of new ecosystem airdrops, Jupiter’s launchpad function enables JUP holders to receive airdrop rewards from new projects, while Raydium/Orca and Jito have not yet demonstrated strong competitiveness in this area. Other potential airdrop-capturing projects include Pyth, with multiple projects already providing airdrop rewards to Pyth stakers (such as Wormhole). Continuous attention should be paid to the progress of Jupiter’s launchpad and the wealth-creation effect of the tokens issued. If Jupiter leverages its traffic advantage to attract many high-quality projects for launch, JUP holders will gain higher returns and capture more value from new Solana ecosystem projects.

It has built a complete product matrix related to trading, greatly enhancing the user trading experience. Jupiter’s trading volume has risen rapidly, becoming the second largest trading infrastructure next to Uniswap.

Backed by the strong traffic and user base captured by Jupiter, Jupiter established a launchpad, capturing more value from new projects in the Solana ecosystem and providing numerous new project airdrop rewards to JUP token stakers. The few projects launched so far have achieved good price performance.

From a capital perspective, JUP tokens will not face large-scale unlocks and selling pressure in the next three quarters, making the chip structure relatively stable. From a price performance perspective, JUP has moved out of the bottom cost range and entered a new growth space.

Jupiter, with its close ties to the Solana ecosystem, can be considered a leveraged play on Solana. As Solana becomes as important as Ethereum in this cycle, with Solana’s market cap reaching new highs, a better way to go long on Solana might be to choose JUP as an amplifier.

Risks that may exist for Jupiter include:

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