This episode reveals how Jito's Block Assembly Marketplace (BAM) aims to solve Solana's 'dark forest' problem by creating a transparent and efficient trading layer to combat sandwich attacks and inconsistent block building.
Introduction to Jito and its Economic Flywheel
- Jito Solana Validator Client: This is a trading layer built on top of Solana that helps the network run more efficiently. It has generated over $2.5 billion in additional value for validators and stakers.
- JitoSOL: As the largest liquid staking protocol on Solana, JitoSOL holds approximately 14 million SOL.
- MEV (Maximal Extractable Value): Lucas defines MEV as the "explain like I'm five version" of "high-frequency trading on blockchains,” a concept central to Jito's origins and mission.
BAM: A Marketplace for Transparent Block Building
- BAM is a transparent block-building system for Solana that addresses the growing opacity in how transactions are ordered and processed.
- It operates within a Trusted Execution Environment (TEE), a secure and confidential computing space within a processor. This ensures that while the software version running is verifiable, the transactions being processed remain private until execution.
- Lucas states, "We think that there needs to be more transparency on what's actually happening on the network." This highlights the core motivation behind BAM—to create a fair and predictable environment for all network participants, especially traders.
The Dark Forest on Solana: Wide Sandwiching and Private Order Flow
- Wide Sandwiching: This is an evolution of a standard sandwich attack. A validator receives a user's transaction but, instead of processing it in their own block (slot), they delay it and execute the sandwich attack in the next validator's block. This makes the malicious activity harder to detect and attribute.
- This behavior creates significant uncertainty for market makers, who must widen their price spreads to account for the risk of their transactions not landing or being exploited. This ultimately results in worse execution prices for retail users.
The Problem of Multiple Schedulers
- Lucas reveals that Jito has detected at least seven different transaction schedulers running on the Solana network, with many more custom versions likely in operation. This fragmentation creates inconsistencies in how blocks are built across different validators.
- Different schedulers pack blocks with varying logic and timing, creating "jitter" for traders.
- This inconsistency forces market makers and sophisticated trading firms to price in uncertainty, leading to wider quotes and less efficient markets.
- For a market maker, understanding the unique behavior of each leader's scheduler adds another layer of complexity to operating on Solana, hindering new participants from entering the ecosystem.
BAM's Solution: TEEs and Application Controlled Execution (ACE)
- Verifiable Transparency: By running inside a TEE, BAM allows anyone to verify the exact version of the open-source code being executed. This guarantees that all participants understand the rules of transaction sequencing.
- Application Controlled Execution (ACE): This is a powerful feature that allows applications to build plugins within BAM to control how their own transactions are sequenced. This gives dApps the ability to create custom market microstructures without launching their own L1 or L2.
- Perpetual exchanges (perp DEXes) and proprietary automated market makers (prop AMMs) are key potential users of ACE. They can use it to prioritize liquidations or give market makers a slight timing advantage (e.g., a 10-millisecond speed bump) to encourage tighter spreads and deeper liquidity, benefiting end-users.
BAM Adoption and Performance Strategy
- Current Focus: The immediate priority is increasing validator adoption. The Jito DAO is considering delegating JitoSOL stake to validators running BAM as an incentive.
- Performance Parity: The team is focused on ensuring BAM's performance (measured in compute units, priority fees, and tips per slot) is on par with or better than the existing Jito Solana client.
- Future Value: Long-term, BAM is expected to generate additional fee streams for validators through ACE plugins and other functionalities, creating a strong economic incentive for adoption.
Why TEEs Over ZK or FHE?
- Performance: TEEs offer near-bare-metal performance, with only a 5-10% overhead, which is critical for a high-throughput network like Solana where millisecond and microsecond timings matter. ZK and FHE are not yet performant enough for this use case.
- Practicality: TEEs function like standard virtual machines, allowing developers to write code in common languages like Rust or C++ and run standard operating systems. This makes development and deployment far simpler than with more nascent technologies.
- Lucas maintains a technology-agnostic stance, noting, "I'm not a tech maxi in any means... there's the right tool for the job." He remains open to exploring ZK and FHE in the future as the technologies mature.
The Future of Solana and Jito
- Solana Network Upgrades:
- XDP (eXpress Data Path): A network optimization that enables over 100x faster state propagation, which is a key blocker to increasing network compute limits.
- Fire Dancer: A new, independent validator client designed for performance and client diversity.
- Alpenglow: A future upgrade that will change Solana's consensus mechanism for faster finalization.
- JitoSOL Initiatives:
- ETFs: Jito is in active discussions with multiple parties about creating a JitoSOL ETF and other related financial products.
- Directed Staking: A new feature that will allow large institutional holders of JitoSOL to direct the underlying SOL stake to their own validators. This removes a major barrier to adoption for institutions that rely on validator revenue.
Conclusion
This episode underscores that Solana's next growth phase depends on solving complex market microstructure issues. Jito's BAM is a strategic attempt to build a transparent, efficient, and extensible transaction layer using TEEs. Investors should monitor BAM's stake adoption as a key indicator of Solana's institutional readiness and market maturity.
