This episode reveals how Jito's new Block Assembly Marketplace (BAM) is a strategic overhaul of Solana's core infrastructure, designed to enhance transaction privacy and empower applications to compete directly with specialized, high-performance chains.
The Accidental Rise of Jito
- Jito Labs was founded in 2021 by Lucas and his co-founder Zano to address potential MEV (Maximal Extractable Value)—value extracted from users by reordering, inserting, or censoring transactions—on Solana. They anticipated that Solana's high speed and low fees would create opportunities for arbitrage and other timing-based strategies.
- The initial vision was to minimize spam and capture MEV by running off-chain auctions to find the most profitable transactions for validators.
- However, as Solana faced significant network congestion and performance bottlenecks, Jito's block engine became an essential tool for simply landing transactions on the network. This was an unexpected development that expanded Jito's user base far beyond sophisticated MEV searchers.
- Lucas notes, "The core piece that we didn't really predict is just like people using us to send a lot of transactions, a large amount of transactions flowing through the network." This surge in general usage, especially during late 2023 and early 2024, led Jito to rethink its architecture, culminating in the development of BAM.
The Genesis of BAM: A New Vision for Solana
- Scalability: The team realized their existing architecture wouldn't scale to the 5,000-10,000 TPS (transactions per second) they envision for Solana's future.
- Transparency & Decentralization: The original Jito block engine is closed-source. BAM is designed to be open-source, allowing anyone to verify the code. This move aims to decentralize the transaction sequencing process, which is currently concentrated within Jito's proprietary system.
- Value Creation over MEV Extraction: The focus shifts from just capturing MEV to creating tangible value for applications and users. The goal is to build infrastructure that directly addresses the needs of Solana's dApp ecosystem.
BAM Explained: A New Architecture for Solana
- Validators will have the option to run an upgraded "BAM Jito Solana client."
- Instead of the validator's local scheduler ordering transactions, sequencing will occur off-chain within a network of dedicated BAM nodes.
- These nodes use TEEs (Trusted Execution Environments), which are secure, encrypted enclaves within a server's processor. TEEs ensure that transaction data remains private until it is finalized and ordered, preventing front-running and other forms of toxic MEV.
- Once sequenced inside the TEE, the ordered block of transactions is streamed to the validator, which then executes them in a simple FIFO (First-In, First-Out) manner. This separation of sequencing and execution is designed for massive performance gains and iteration speed.
The Role of Trusted Execution Environments (TEEs)
- When a user's transaction is sent to a BAM node, it remains encrypted and is processed inside the TEE. This makes its contents invisible to outside observers, including the node operator, until it is scheduled.
- This privacy mitigates sandwich attacks, where a malicious actor places trades before and after a user's trade to profit from the price impact.
- Crucially, TEEs provide attestations—cryptographic proof of the code that is running. This allows anyone to verify that the BAM nodes are running the official, open-source sequencing logic without manipulation. Lucas states, "You'll be able to go to the BAM repo and like look at... the hashes so you know what version's running."
Introducing Plugins and Application Controlled Execution (ACE)
- ACE gives applications control over their specific market microstructure. For example, a decentralized exchange could implement a "maker speed bump," giving market makers a 10-20 millisecond advantage to update their quotes.
- This allows them to provide tighter spreads and deeper liquidity without the fear of being "picked off" by faster takers. For end-users, this translates to better pricing and a superior trading experience.
- Strategic Implication: ACE is a direct response to the rise of specialized app-chains. By offering this functionality on Solana's mainnet, BAM aims to retain and attract high-performance applications that might otherwise build their own Layer 1 or Layer 2.
Competing with Hyperliquid: The Strategic Angle
- Hyperliquid, a perpetuals DEX on its own Layer 1, has gained significant market share by optimizing its chain for its specific use case, including features like maker speed bumps.
- BAM's plugins are designed to give Solana-native protocols like Drift the same capabilities. Lucas explains that without BAM, an app would need to fork the Solana client and convince validators to run their custom version—a monumental task.
- With BAM, an application can enable ACE "basically overnight," drastically reducing the barrier to implementing sophisticated market designs. Lucas emphasizes, "If we can build this like generic infra to enable ACE in BAM and get validators to run it, then that will enable a lot of applications to compete with some of the more specialized chains."
Revenue, Value Flow, and the Jito DAO
- Plugins create a new revenue stream for applications. By optimizing their order flow, apps can generate more volume and fees. A portion of this value can be captured by the app, its token holders, and the validators/stakers running the system.
- In a related but separate move, Jito Labs announced it will redirect all fees from its block engine to the Jito DAO. Lucas cites a more favorable regulatory environment in the US as a key driver for this decision, which better aligns the protocol's success with its token holders.
- Investor Insight: This shift in protocol economics is a critical trend. The ability for applications to generate revenue from transaction sequencing, and for protocols like Jito to direct fees to their DAOs, could lead to a "mass repricing of Solana DeFi" if successful.
Community Reception and Centralization Concerns
- He reports that feedback from key stakeholders like validators and application developers has been overwhelmingly positive, with many excited about the new capabilities.
- Regarding concerns that BAM further entrenches Jito's dominant position, Lucas's response is direct: "It's open source code. It's just code and... there's no requirement to run this. We hope that people run it because it's good."
- The plan is to decentralize the BAM network itself by encouraging a wide range of professional operators to run the nodes, aiming for nearly 100 independent operators by the end of the year.
Long-Term Vision: A Healthier, More Liquid Solana
- The ultimate goal of BAM is to create healthier, more liquid on-chain markets. This includes enabling the success of on-chain order books and a wider variety of financial products beyond memecoins, such as securities and chain-native IPOs.
- He believes Solana's architecture is one of the few that can truly scale to global demand while keeping fees low for everyone.
- His motivation is deeply personal after years of focusing exclusively on the ecosystem. He concludes with a powerful statement of conviction: "It's kind of a personal thing now where it's like this thing... it's got to succeed."
Conclusion
Jito's BAM represents a calculated move to evolve Solana from a general-purpose blockchain into a highly competitive environment for sophisticated financial applications. For investors and researchers, the adoption of BAM and its ACE plugins will be a key indicator of Solana's ability to retain top-tier protocols and capture significant on-chain value.
