Introduction

Founded in 2021, Jupiter is positioned as a decentralized liquidity aggregator on the Solana blockchain. After three years of development, Jupiter now accounts for more than half of the trading volume on the Solana chain, reaching the upper limit for aggregators on the Solana network. With limited growth potential left in its core aggregator project, Jupiter has shifted towards horizontal expansion by launching the Launchpad platform Jupiter Start and the incubator Jupiter Labs. Through these initiatives, Jupiter aims to achieve cross-sector growth by incubating other high-quality projects.

Project basic information

Basic information

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

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

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

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

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

Launch time: Token will be launched in 2024

Project team

core team

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

Ben Chow: Co-founder. With years of experience in interaction design and product development, he was a founding team member of the social gaming company Hive7, which secured Series A funding from True Ventures. In 2010, Hive7 was acquired by Disney/Playdom. In late 2007, he helped design and launch Hive7’s popular social game, Knighthood.

Advisory team

Shun Fan Zhou: Co-author of the Phala Network white paper. He is a Ph.D. candidate at the System Software and Security Lab of the University of Sun Yat-sen, and has published research on attack and defense methods in large-scale ecosystems at the top international security conference USENIX Security. He has also co-authored several papers presented at leading international security conferences.

Sandro Gorduladze: Angel investor and partner at HASH CIB. Sandro established the research department at HASH, which gained prominence for its in-depth reports. Before joining HASH, Sandro worked at PwC Russia, providing tax consulting for companies in the TMT sector.

Konstantin Shamruk: Ph.D. in Economics from the University of Toulouse, France. He led the economic design and analysis work for the Phala Network.

Jonas Gehrlein: Research scientist at the Web3 Foundation. He is responsible for researching economic issues within the Polkadot ecosystem. Prior to joining W3F, Jonas earned a Ph.D. in Behavioral and Experimental Economics from the University of Bern, where he studied human behavior in markets and organizations. He also holds a Master’s degree in Quantitative Economics from the University of Konstanz.

Zo Meckbach: Senior Ambassador for Polkadot, researcher, and advocate for Web3 and cybersecurity. She is currently the COO of MH-IT & Service GmbH, and previously held an application analyst position at Google.

Funding status:

The Jupiter team has not announced any funding information.

Development strength

In 2021, Jupiter was established by co-founders Meow and Ben Chow. Key events in the project’s development are listed in the table below:

From Jupiter’s project development roadmap, it is evident that despite the significant success achieved after the project’s launch, the Jupiter team continues to innovate and enhance user experience. After reaching the pinnacle of trading aggregation on the Solana chain, they swiftly identified and adapted to expand into other parallel sectors. This demonstrates the team’s sharp business insight, enterprising spirit, and ability to complete technical development tasks in a timely manner.

Main products

Trading aggregator

The trading aggregator is Jupiter’s core product and the foundation of its success. Originating from the DeFi projects of the previous bull market, which was ignited by the “DeFi Summer,” many traders flocked to various DEXs (Decentralized Exchanges) for token trading. However, DEXs have a significant drawback: each has its own liquidity pool, which are not interconnected. This means investors often need to search for the best trading pool themselves to achieve optimal prices, which is time-consuming and labor-intensive. Furthermore, due to fragmented liquidity, it’s challenging to ensure the best trade execution.

The advent of trading aggregators has changed this scenario. A trading aggregator combines liquidity pools from different DEXs on the same chain, allowing users to see the depth, slippage, and other details of all pools in the market. Traders can then choose the most suitable DEX for their trades based on their needs.

Jupiter aggregates numerous liquidity pools within the Solana ecosystem, using algorithms to automatically find and combine the best liquidity resources, providing users with a one-stop optimal trading path. The interface of Jupiter is user-friendly, resembling the Uniswap trading interface, making it familiar to most users. Before trading, users can set parameters such as transaction fees, slippage, or trading paths to select the most appropriate price and slippage for their trades. Jupiter uses its smart contract algorithms to monitor and analyze market data in real-time, helping users choose the optimal trading path, thereby improving trade success rates and capital efficiency.

To ensure trader safety and trade quality, Jupiter requires a minimum liquidity of $500,000 for trading pairs integrated into its system, and these pools must undergo rigorous audits. Due to these measures, Jupiter now aggregates over 50% of the trading volume on the Solana chain, holding a dominant position in the Solana ecosystem.

limit order

Solana has positioned its primary development focus on trading, and its unique consensus mechanism and SVM parallel processing capabilities make it very trader-friendly. As a result, many traders choose to trade on the Solana chain. Since Jupiter is designed to serve traders, it offers features like limit orders to help mitigate costs and slippage issues caused by price impact during trades, and to avoid MEV (Maximal Extractable Value) problems.

Jupiter’s user-friendliness is also evident in its interface. Jupiter collaborates with Birdeye and TradingView, with Birdeye providing on-chain price data for tokens, and TradingView’s technology being used to display chart data. This makes Jupiter’s interface resemble traditional CEX (Centralized Exchange) platforms, allowing users to adapt more easily and providing a better user experience.

When using Jupiter, limit orders can be partially filled, and users receive the portion of tokens that have been executed. Users can set the order’s validity period, exchange price, and exchange quantity, allowing them to execute their trading strategies more precisely. This helps users conveniently avoid increased costs and slippage due to price impact during trades and mitigates MEV issues.

DCA fixed investment

Dollar-Cost Averaging (DCA) is a widely used investment strategy where users set up regular and fixed investments to reduce their average purchase cost to within their target price range. This approach helps investors minimize the risk associated with investing at a single price point in a volatile market environment. Jupiter offers a DCA product where users only need to set their purchase frequency, target price range, total duration, and the cryptocurrencies they wish to buy. Once the DCA is in effect, the purchased tokens are transferred to the user’s Jupiter account and are automatically traded according to the preset price range and frequency. At the end of the investment period, the tokens are automatically transferred back to the user’s wallet.

Jupiter’s DCA features controllable cost basis, low fees, and a fully managed trading process. During a bear market, DCA is very user-friendly. Given the high volatility and uncertainty, DCA allows investors to buy assets at a lower average cost over time, thus reducing the risk of single-time investments. Additionally, DCA helps investors avoid the emotional impact of market fluctuations, maintaining a rational and steady investment strategy. However, in a bull market, the advantages of DCA diminish. As the market trends upward, single-time investments often yield higher returns, so DCA may miss out on rapid market gains.

Therefore, DCA is a long-term investment strategy with certain advantages in specific market conditions. However, due to its requirements related to market trends and cycles, the overall demand for this feature is currently relatively small. Investors should consider their risk tolerance, market conditions, and long-term investment plans when deciding whether to use DCA.

Jupiter Labs

Jupiter Labs is an independently operated project investment lab separate from Jupiter. Its operations are driven by its own initiatives and the community, not influenced by the Jupiter project team. However, it receives strong technical and financial support from Jupiter, which provides Jupiter users and community members with certain privileges, including priority access and token incentives.

Jupiter Labs marks Jupiter’s entry into horizontal business expansion. By investing in various horizontal sectors, it aims to increase its share and influence within the Solana ecosystem. Currently, Jupiter Labs is focused on the development of perpetual contracts and LST (Liquid Staking Token) stablecoins. Both perpetual contracts and LST stablecoins are among the most lucrative and impactful areas in the ecosystem.

Perpetual contract

Jupiter Perpetual represents Jupiter’s initial step into perpetual contracts, operating similarly to GMX. In Jupiter Perpetual, participants include liquidity providers (LPs) and traders. LPs contribute funds to a pool, which are converted into a basket of tokens, primarily BTC, ETH, SOL, USDC, and USDT, with SOL and USDC holding significant weight as the main trading assets. Traders use the tokens from the liquidity pool to establish leveraged positions and must pay trading and borrowing fees. LPs receive 70% of the trading fees and all borrowing fees.

Like GMX, liquidity providers act as the counterparties to traders in this model. During a bear market, there are typically many liquidity providers, but the model is less favorable to them during a bull market.

Jupiter Perpetual allows traders to use up to 100x leverage for perpetual contracts, while LPs provide capital to earn fees. Traders can assume larger positions with less capital (leverage) to capitalize on future price movements. In Jupiter Perpetual, traders can use almost any supported Solana token as collateral to open long or short positions in SOL, ETH, and wBTC. Long positions require corresponding assets, while short positions require stablecoins as collateral. Traders can leverage assets by borrowing from the liquidity pool.

LST stablecoin

XYZ is an LST stablecoin project supported by Jupiter Labs. In XYZ, users can mint the interest-free stablecoin SUSD by collateralizing SOL. The collateral is locked in a smart contract until the user repays the corresponding amount of SUSD. This lending model allows users to obtain stablecoins without incurring borrowing interest.

Additionally, XYZ distributes the income earned from LST staking to SUSD holders and governance token holders to incentivize active participation in the protocol. XYZ also employs a leveraged arbitrage strategy to maximize returns. When the yield from LST is higher than the SOL borrowing rate, users can use leveraged arbitrage strategies to achieve greater profits.

Furthermore, XYZ incorporates a redemption mechanism similar to Lybra to maintain the stability of SUSD’s price. To minimize the impact on borrower positions, XYZ uses governance tokens for SUSD redemptions within a narrow price range. When the price of SUSD is between $0.95 and $1, XYZ employs a redemption process involving governance tokens to reduce the frequency of borrower redemptions.

Jupiter LFG Launchpad

LFG Launchpad adopts an innovative approach to support new projects, emphasizing a community-driven and transparent model. Unlike traditional project launch platforms, which often involve complexity, LFG Launchpad rejects such intricacies in favor of an open market and community participation approach. The platform also avoids complicated incentive structures and isolated price discovery mechanisms, highlighting its uniqueness.

The core advantages of LFG Launchpad include its extensive community support, customizable Launchpad to prevent bot operations, user-friendly design tools for liquidity management, and comprehensive trading functionalities. These features ensure users can access fair prices and immediate liquidity while receiving robust technical support.

Firstly, LFG Launchpad leverages its large community to drive the development of new projects. The community-driven model helps projects gain broader attention and support, providing a larger development space for new initiatives. Secondly, the customizable Launchpad prevents bot operations, effectively ensuring fairness and transparency in trading. This feature enhances the security and reliability of transactions, minimizing malicious manipulation and improper interference, thus offering a more stable and trustworthy trading environment.

Additionally, LFG Launchpad provides user-friendly design tools for liquidity management, enabling users to manage their assets and liquidity more conveniently. This enhances user experience by offering a more streamlined and efficient operational approach. Lastly, LFG Launchpad offers comprehensive trading functions, providing users with a diverse range of trading options. Whether it’s trading types or assets, users can find trading methods that meet their needs, improving trading efficiency and catering to personalized demands.

Furthermore, Meow, co-founder of Jupiter, recently affirmed the impact of LFG Launchpad on enhancing Jupiter’s brand influence in an interview about the H2 plan. It is anticipated that in the third quarter, Jupiter will continue to explore and develop LFG Launchpad’s rules and growth.

Comparison with projects on the same track

Jupiter, as the most successful decentralized trading liquidity aggregator in the Solana ecosystem, commands over half of the trading volume on Solana. Its primary competitor is 1inch, a major decentralized trading liquidity aggregator in the Ethereum ecosystem.

Underlying operating logic

Jupiter operates as a decentralized trading liquidity aggregator on the Solana blockchain, benefiting from Solana’s high-performance advantages, particularly due to its use of the Sealevel engine and SVM (Solana Virtual Machine). SVM supports smart contracts written in Rust, C, and C++, converting them into BPF bytecode, which is highly developer-friendly. The key advantage for Jupiter is SVM’s parallel processing capability. Sealevel is crucial for parallel transaction processing on Solana, allowing non-conflicting transactions to run simultaneously and improving overall performance. SVM’s support for multithreading enables handling more transactions in a shorter time, with each thread managing a queue of pending transactions. This results in Jupiter’s powerful transaction processing ability, accommodating a high volume of concurrent transactions and offering a user-friendly experience.

In contrast, 1inch operates on the Ethereum blockchain, built on top of the EVM (Ethereum Virtual Machine). EVM is a single-threaded environment, meaning it processes one contract at a time, which limits its transaction processing capability compared to Jupiter. Although Ethereum’s performance improved with the 2023 Cancun upgrade and various Layer 2 solutions, it still cannot match Solana’s performance. Consequently, Jupiter has a natural performance advantage over 1inch due to Solana’s superior capabilities.

Gas fee

Decentralized trading liquidity aggregators involve high-frequency on-chain transactions, making users highly sensitive to gas fees. Solana’s use of Proof of History consensus, combined with the Solana Virtual Machine (SVM), significantly enhances system efficiency and reliability. SVM provides extremely high processing speeds and low latency, allowing for quick transaction confirmations and reduced gas costs. As a result, Jupiter users incur only $0.00015 per transaction, enabling them to conduct high-frequency trades effectively. This low cost is crucial for Jupiter’s limit orders, DCA investments, and perpetual contract trading.

On the other hand, despite improvements from the Cancun upgrade, Ethereum’s average transaction fees remain around $0.30, substantially higher than Solana’s gas fees. 1inch, being a decentralized trading liquidity aggregator, inherently involves high-frequency transactions. The gas fees incurred increase exponentially with transaction frequency, making it particularly unfavorable during bull markets. Moreover, the essence of aggregators is to source liquidity from multiple platforms to offer better prices, rather than from a single DEX. High gas fees on Ethereum can make sourcing liquidity from multiple pools costly, potentially exacerbating the problem it aims to solve. In contrast, trading with liquidity sourced from a single platform might be more cost-effective given the high gas fees on Ethereum.

Product diversity

Jupiter offers a range of products, including limit orders, DCA investments, and derivatives trading, to meet diverse user needs. It addresses various issues traders face by providing comprehensive financial services, not just focusing on liquidity aggregation but offering solutions from a financial development perspective. This approach caters to different market conditions and various financial requirements of users.

In contrast, 1inch has a more focused product offering. It specializes as a DEX aggregator, solely concentrating on sourcing liquidity from multiple platforms to provide better prices. 1inch does not offer additional financial services or products beyond this core function.

Future development direction

Jupiter has established itself as the leading decentralized trading liquidity aggregator within the Solana ecosystem. With limited growth potential in its core area, Jupiter has shifted its focus to parallel tracks, launching Jupiter Labs and LFG Launchpad. By supporting and investing in various projects within the Solana ecosystem, Jupiter aims to expand its influence. Looking ahead, Jupiter’s development will not only involve continuously enhancing its liquidity aggregator features but also prioritizing the advancement of Jupiter Labs and LFG Launchpad. The founders have highlighted in their H2 plans that further exploration and development around LFG Launchpad will be a key focus.

In contrast, while 1inch holds a significant position in Ethereum’s decentralized trading liquidity aggregator space, it does not dominate the ecosystem to the same extent as Jupiter does in Solana. Ethereum’s Uniswap remains a highly successful DEX with a substantial user base. Therefore, 1inch’s future strategy will differ from Jupiter’s. 1inch will continue to deepen its focus on the decentralized trading liquidity aggregator sector by optimizing trading speed and gas fees through deployment across various Layer 2 solutions.

Project model

Business model

Jupiter operates as a decentralized trading liquidity aggregator, offering derivatives contracts and project incubation services. Its economic model involves three key roles:

Trading users: They are the backbone of Jupiter’s success and growth. They benefit from various financial services on the platform, including liquidity aggregation, limit orders, DCA investments, and contract services. Trading users pay a percentage of transaction and service fees to Jupiter, which constitutes the primary revenue source for the project.

Liquidity providers: These users are crucial for the operation of Jupiter’s perpetual contracts, similar to GMX. They contribute liquidity to ensure the smooth functioning of contracts and earn 70% of the transaction and borrowing fees, with the remaining 30% being a revenue source for Jupiter.

New incubated projects: With the launch of LFG Launchpad, Jupiter supports new projects through technical and financial assistance. In return, these incubated projects distribute a portion of their tokens to Jupiter, contributing to the project’s revenue.

From the above analysis, Jupiter’s revenue sources are:

1. Fees for using Jupiter’s liquidity aggregator are up to 2%, depending on the liquidity pool.
2. Users pay a 0.3% fee for using Jupiter’s limit orders.
3. Users pay a 0.1% fee for using Jupiter’s DCA investment feature.
4. For perpetual contract products, users pay 0.1% for opening/closing trades, up to 2% for swap fees (depending on pool weight), borrowing fees are 0.01% per hour * token utilization%, and liquidity providers earn 30% of trading fees and all borrowing fees.
5. Projects incubated or managed by Jupiter Launchpad allocate a portion of their tokens to Jupiter.

Token model

According to the white paper, the total supply of JUP is 10 billion tokens, with a current circulating supply of 1.35 billion tokens, resulting in a circulation rate of 13.5%. The initial circulating supply was 1.35 billion tokens, including 1 billion tokens for airdrops, 250 million tokens for Launchpool, and 50 million tokens each 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 has set up separate cold wallets for the team and the community. The initial circulating tokens are expected to be used for adding liquidity (5%) and airdrop tokens (10%), with an additional 2% of tokens potentially being unlocked.

Token empowerment:

According to the white paper, JUP’s uses in Jupiter include:

1. Governance Rights: JUP token holders can participate in the DAO governance of the Jupiter platform, expressing opinions and influencing the protocol’s operations and development direction through voting.
2. Liquidity Mining: Users can earn JUP token rewards by providing liquidity to Jupiter’s liquidity pools, incentivizing them to increase platform liquidity, reduce trading slippage, and enhance trading efficiency.
3. Fee Discounts: Users holding JUP can enjoy discounts on fees when using Jupiter for transactions, further enhancing the token’s utility.
4. Extended Functions: As the Jupiter platform evolves, the functionalities of JUP tokens are also expected to expand, such as enabling users to participate in platform-launched perpetual contracts or gain priority access to new products and services.

JUP’s value judgment

According to the white paper, the JUP token in the Jupiter project does not involve mechanisms for centralized burning, periodic burning, or fee-sharing through staking.

The limited empowerment of JUP is a notable drawback of the Jupiter project. The design does not include a staking mechanism, which reduces the potential for increasing project value through JUP token lock-up. Currently, the JUP token has a circulation rate of 13.5%. Future airdrops will release 1 billion JUP into the market, leading to significant market pressure. Thus, the value increase of JUP relies more on the inherent value of the Jupiter project itself, similar to UNI and Uniswap. Additionally, JUP does not participate in revenue sharing from staking, resulting in limited empowerment of the token. The appreciation of JUP will depend on Jupiter’s development trend and users’ confidence in Jupiter’s future.

Token price performance

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

According to Coingecko statistics, since the issuance of the JUP token on January 31, 2024, its price has increased by more than 2.8 times (from a low of $0.46 to a high of $1.75). The main trading venues for JUP are top exchanges such as Binance, OKX, HTX, and Bybit.

Market Cap:

The current price of JUP is $0.973, with a circulating supply of 1.35 billion tokens, resulting in a market cap of approximately $1.33057 billion.

FDV (Fully Diluted Valuation):

With the current price of $0.973 and a total supply of 10 billion tokens, the FDV of JUP is around $9.73 billion.

Average Daily Trading Volume:

The average daily trading volume of JUP is approximately $154 million.

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

JUP’s daily trading volume is $154 million, and its circulating market cap is approximately $1.33057 billion. The turnover rate is 11.57%, which is considered moderate.

Top ten token holding addresses

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

The chart shows that the top ten PHA holding addresses account for a total of 91.93%.

TVL

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

It can be seen that Jupiter’s TVL has been continuously growing over the past six months and has now reached $602 million.

daily trading volume

It can be seen that Jupiter’s daily trading volume has been steadily increasing over the past year.

Project risk

The JUP token, besides serving as Jupiter’s governance token, is used to reward liquidity providers and offer transaction fee discounts. However, JUP lacks mechanisms such as the veToken model seen in Curve, and does not feature centralized or periodic burns or staking for fee sharing. As a result, JUP functions similarly to UNI in that it primarily represents the project itself, with minimal additional utility. This absence of staking mechanisms in Jupiter’s tokenomics does not support the appreciation of the token’s price.

Summary

Jupiter is a trading aggregation platform that has approached a growth ceiling in its core business, leading it to expand into parallel tracks. In addition to innovating within its primary domain, Jupiter has launched a Launchpad platform and an incubation platform, leveraging its resource advantages. These new initiatives are noteworthy and have significant potential for development with Jupiter’s support. As Jupiter continues to invest and grow in these parallel areas, it is expected to achieve considerable success in other fields.

However, Jupiter’s tokenomics are relatively simplistic, lacking a robust staking mechanism, which contributes to high token liquidity and indirectly hampers the token’s price appreciation. While Jupiter has implemented governance and fee discounts for JUP, it has not incorporated staking, centralized burning, or periodic burning, which would positively influence the token’s value.

In summary, Jupiter has solidified its position in the decentralized liquidity aggregation sector with innovations such as limit orders, DCA investments, and user contracts. By taking a long-term view and actively expanding within the Solana ecosystem, Jupiter is well-positioned to grow into a unicorn project in the Solana space, provided its supported and launched projects achieve success. We are optimistic about Jupiter’s future development.

References

Jupiter White Paper

Jupiter is about to launch its currency, this article comprehensively analyzes its products and business model

Aggregating over 50% of DEX trading volume, is Jupiter the future of Solana DeFi ecosystem?

First class warehouse research report: aggregator Jupiter on Solana

Detailed explanation of Jupiter H2 plans and recent updates

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