Jupuary Round 2: Conflict of Interest Among JUP Stakers

Jupiter DAO
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Introduction

In doing analysis I noticed a Conflict of Interest among DAO / JUP Stakers. This especially pertains to any voting about ASR & Airdrop related proposals.

Most of you have noticed my proposal for a balanced and fair airdrop distribution method for Jupuary round 2, which was updated multiple times to implement all the feedback from community members and stakeholders.

Although the proposal was generally very well received, there was some strong resistance from certain DAO / JUP staking whales. Looking more into this matter I noticed a clear and troubling Conflict of Interest among DAO / JUP Stakers.

Examples of this are seen not only in the 100+ comments to my above proposal, but also in separate proposals and discussions like the below proposal.

The proposal literally states: ‘’ Summary of the Proposal: The next airdrop should provide the heaviest rewards for the stakers in the next jupuary.‘’

Think about this for a moment: when there is any proposal regarding any rewards for JUP stakers, who are the ones who will be deciding the outcome of the proposal? JUP stakers!

A related proposal was the proposal by Meow where JUP Stakers decided about the addition of 215 MILLION JUP to to the ASR (Active Staking Rewards).

We are looking here at JUP stakers voting about adding 215M JUP as rewards for JUP stakers. Note the conflict of interest.

Imagine the US congress voting about a new proposal. The proposal is: ‘‘Should US congress receive $215 Million in addition compensation, divided over all members of congress?’’. It is impossible by any measure for such a vote not to reach a majority.

As we can see in this dashboard about the ASR vote below, everyone in the top 17 voted exactly the same! Which is to continue funding the ASR with 200 Million JUP more.

ASR vote 1 - 8
ASR vote 1 - 81908×754 129 KB

ASR vote 9 - 17
ASR vote 9 - 171866×654 91.8 KB

We therefore have to be very careful that the Jupuary round 2 distribution will not be skewed by personal interests of the ones ‘at power’.

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DAO Power Dynamic

What is additionally concerning is how much of the voting power is held by a few JUP Staking whales. There has been the topic ‘‘Ranking JUP Voters’’ by @BTC.

The JUP Voters Leaderboard discussed in the topic, shows the following distribution of voting power among the top voters:

  • 3.68% of voting power in the hands of the top 3 users (128.8 Million (128,823,250) out of 3,5 Billion votes were decided by the top 3 ranked voters)

  • 7.43% of voting power in the hands of the top 15 users (260 Million (260,064,316) out of 3,5 Billion votes were decided by the top 15 ranked voters)

  • 12.95% of voting power in the hands of the top 50 users (453.4 Million (453,388,780) out of 3,5 Billion votes were decided by the top 50 ranked voters)

The main reason for this top heavy power dynamic is that in the current DAO every 1 JUP equals 1 vote, no matter if you hold 1 JUP or 1 Million JUP.

Note that other tiered proposals with weight adjustments have been discussed in the past but have not been implemented:

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Financial compensation to top voters

It becomes even more interesting if you consider the amounts of money involved in these votes. Let’s examine for example the top 3 power users and consider the amount of money they gained with passing the vote to add 215M JUP as reward for JUP stakers:

Top 3 voters
Top 3 voters1954×388 55.8 KB

JUP stakers voted to add 215,461,850 JUP to the Active Staking Rewards, which after the vote passed would be used to pay them for their own votes (note the conflict of interest).

DAO
DAO1546×852 109 KB

Considering that there is currently 443,979,469 JUP Staked, the additional 215M ASR rewards is an allocation of 215,461,850 / 443,979,469 = 0.485 JUP per 1 JUP staked.

That’s an Additional Active Staking Reward of:

  • 0.485 JUP per 1 JUP staked
  • 4.85 JUP per 10 JUP staked
  • 48.5 JUP per 100 JUP staked
  • 485 JUP per 1,000 JUP staked
  • 4,850 JUP per 10,000 JUP staked
  • 48,500 JUP per 100,000 JUP staked
  • 485,000 JUP per 1,000,000 JUP staked

Let’s have a look at the additional awards for the top 3 JUP Stakers in the DAO.

  • The #1 user has a current voting power (JUP holdings) of 12,098,978 JUP

    • Their financial benefit is $5,868,004 (5.8 Million US Dollars)
    • (12,098,978 JUP staked x 0.485 JUP extra rewards per 1 staked JUP = $5.8M)

  • The #2 user has a current voting power (JUP holdings) of 7,867,808 JUP

    • Their financial benefit is $3,815,886 (3.8 Million US Dollars)
    • (7,867,808 JUP staked x 0.485 JUP extra rewards per 1 staked JUP = $3.8M)

  • The #3 user has a current voting power (JUP holdings) of 6,281,141 JUP

    • Their financial benefit is $3,046,353 (3 Million US Dollars)
    • (6,281,141 JUP staked x 0.485 JUP extra rewards per 1 staked JUP = $3M)

The above data clearly shows personal conflicts of interests in the range of 3 to 5.8 Million US Dollars among the top 3 JUP Stakers and Voters.

We can’t undo the ASR vote, and it may have been necessary, but it would harm the broader Jupiter community if the Jupuary round 2 distribution method is heavily influenced by a few powerful voters with a strong personal interest in the counts of Millions of US Dollars.
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Conclusion

The broader Jupiter community consists of 3.9 Million users (considering only users with over $100 in trading volume) across a wide scale of Jupiter’s products and services.

JUP Stakers are a very important part of this community, who hold a lot of power. The majority of the voting power is in the hands of a few (tens of) thousands of JUP Stakers.

Vital decisions are vulnerable to be skewed by bias and conflict of interest. This is especially the case when the voters are individually affected by the outcome of such vote in a big way.

The Jupuary round 2 period (November 2023 - November 2024) is coming to a close, with only the distribution strategy left to be decided upon and to be implemented.

A big decision needs to be made in regards to how to distribute the 700M JUP airdrop. The fate and the future of Jupiter and JUP is being decided in the coming months.

The 700 Million JUP ($750,000,000 / 750 Million USD) decision about the round 2 airdrop distribution might be the most important decision about the future of Jupiter and JUP.
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Proposal

To address these conflicts of interest, I propose a distribution method that includes JUP stakers as part of a broader comprehensive community allocation.

Ideally the DAO / JUP Stakers are included and rewarded in the distribution method, as one of the categories / recipients. The ASR already rewards them with 215 Million JUP. In my below proposal there is a 70 Million JUP (10% of the total) allocation for JUP stakers.

It is of vital importance however to be very careful that the decision about the distribution won’t be manipulated into the interest of JUP stakers. We can’t afford to allocate disproportionate amounts to JUP stakers, as proposed by some of the largest JUP stakers.

I’m asking @meow and the Jupiter team to ensure that the entire Jupiter and JUP community as a whole is being considered in the 700 Million JUP ($750,000,000 / 750 Million USD) decision about the round 2 airdrop distribution - like was the case in round 1.

If we ‘‘just leave it up to the DAO / JUP voters’’ how the round 2 airdrop is being distributed, we know that they’ll vote to give as much allocation to DAO / JUP voters as possible, since some of them would again personally benefit Millions of USD from such a vote. This would come at the cost of Millions of genuine Jupiter users whose voice may not be heard.

333B Volume and 15.3M Traders
333B Volume and 15.3M Traders3406×1364 335 KB

I propose that the team presents a comprehensive and inclusive distribution proposal.

Ideally it includes all Jupiter users and stakeholders in a fair manner, benefitting the distribution and decentralisation of JUP and rewarding users for their participation during the last 12 months.

The team’s proposal can then be put up for a yes/no vote. Jupiter and JUP need a proposal that considers every user and stakeholder.

We have drafted a comprehensive proposal. This community proposal might not be perfect, but it was fine-tuned based on community feedback from over 100+ comments on this forum.
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Complete Airdrop Distribution Analysis & Proposal

Our proposal attempts to provide a data-driven, inclusive, fair and comprehensive distribution proposal considering all Jupiter users and stakeholders. It furthermore excludes 11.3 Million likely spam, bot and farming wallets below-$100 volume from the JUP airdrop distribution.

Adjusted trading volume and user count / onboarding is and will always be the most important metric for any cryptocurrency exchange; centralised or decentralised.

The volume tiers help identify which users are more valuable and contribute more to the trading volume. It would be irrational to remove an adjusted volume-based allocation all together.

Trading volume is however not the only metric. That is why DAO / JUP Stakers, Community contributors, New Feature Users, Perpetual Traders and JLP Holders were added to the proposal with many sub-categories of Jupiter ecosystem users.

Our proposal ensures a fair and diverse allocation of 700M JUP across the community. We propose a 250M JUP New Jupiter Features & Community Allocations and a 450M JUP in Adjusted Volume-Based tiered allocations, with all Jupiter user types represented.

Read the Complete Airdrop Distribution Analysis & Proposal.

16 Likes
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Here’s my perspective: you raise fair and sensible points, and you’ve opened my eyes to data that I believe most people here aren’t aware of. I appreciate how clearly you illustrate the benefits that top staking wallets receive from these distributions. While I’m not opposed to this, it’s certainly eye-opening and highlights the need for a more balanced distribution approach to benefit a wider range of contributors and stakers in the ecosystem. Your argument, supported by factual data, sheds light on the bigger picture and reveals behind-the-scenes figures that often remain hidden or not easily accessible by many who haven’t got the technical ability to retrieve or access them. Having such insights can influence a lot of voting outcomes related to rewards. As we get closer to this #2 Jupuary, the debates & proposals are getting juicier!

8 Likes
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When you have $1k in the game and you lose it, you can go to McDonalds and earn it all back within a month. When you play with bigger stakes, McDonalds doesn’t really help. Bigger players take considerably bigger risk locking their assets while they get rewarded exactly the same as everyone else % wise.

Thus far all the proposals have been pretty obvious. What ever the core team has decided to put out there, we’ve known it will pass or what’s the best option to choose (excluding LFG). The only exception was Reddit working group proposal. The ultimate power is not among the whales, it’s the team who decides what goes out there and in what form.

While your name is JUPWhale, you don’t seem to truly understand that the biggest risk is to have your assets locked during events which potentially cause volatility and the risk doesn’t go lower if your personal opinion is that jupuary may cause price appreciation. People taking the biggest risk are rewarded with 10% of jupuary in your proposal. Most who benefit from jupuary has very low risk or totally risk free, they may have 0 JUP to begin with. Also ASR is not related to jupuary and the 215M is still 200M. The team knew that ASR extension will be voted in, with no rewards people would not vote or the participation would be very low compared to how it is now and the so called DAO would not function the way it does now.

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I appreciate the effort of showing all the data unbiased as it should be. There is and always have been whales in crypto and Jupiter as well. The way we can prevent enriching of the top 50 wallets is by going the tiered approach instead of the linear which will undoubtedly increase the centralisation of Jup. I see that you have valid point with the comparison with the congress but here is what - that yield will be generated after 1 whole year. That in normal world is nothing as a time, but in crypto lots and lots of stuff can happen for a such period of time and the risk that we as stakers take is relatively high. By going the tiered path we can ensure that whales won’t be enriched and there will be enough rewards for new stakers which will be further incentivised to hold and participate in the governance process

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@JUPWhale what is your bias? Why are you spending so much time for this? What are your interests in getting jupuary as you’ve proposed it? We all have our reasons.

3 Likes
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Jupuary and airdrops broadly are a community building exercise and marketing, look at the state of projects such as Orbiter which is now faking bridge volume or Scroll which lost half of its TVL in a week, it makes sense to reward power USERS, not simply linearly reward power stakers. If you can’t do that, you will ultimately lose those users.

We are in an industry of networks, the voices and experience of hundreds of thousands of users matters more than simply the whims of 50 top ranking whale stakers who stand to further permanently entrench voting power if this drop ends up being a heavily linear allocation towards stakers.

On top of that, we already have the ASR allocation towards stakers. Personally, I’d prefer the project not to operate as a defi yield ponzi for 50 whales and rather remain a central part of the Solana community, and a project with the best good-will towards it in the entire ecosystem.

5 Likes
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Totally agree and from my personal perspective, I will no long use Jupiter period if it leans entirely towards linear allocation directed towards stakers and will make sure to advocate others do the same.

We are in an industry built on NETWORKS, if the vote goes towards infinitely increasing the value of top stakers (therefore further intrenching their voting power) then the entire project goes to serve about 50 top whales, to the detriment of the project itself and 99.9% of users.

The purpose of Jupuary to a large degree is a community building exercise. Giving the top 50 holders even more voting power than they already had is totally antithetical to decentralization, and essentially makes the voting process entirely useless beyond this point.

Look at the recent reception to Scroll, which had a liquidity based drop in which within a week the chain lost half of its value overnight, and in user tops vastly more than that.

I have millions in volume in both perps and spot, I am not a whale but an upper middle class power user, if the project tells me my vote doesn’t matter going forward and neither do I matter as a user, then I’ll simply stop using the project and as I said spend my time advocating others to avoid Jupiter broadly.

3 Likes
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There have been +100 airdrops in the past year and many are Ethereum L2s. People are farming these airdrops with their existing assets, which is not the case here with voters. I’ve also been farming L2s and almost all tokens depreciate after TGE. Thus, the correct strategy to farm in average, is to get out on day1 and move on. This is not the case for jupuary. Using minor share to reward DAO voters reduces the influence of current voters. Voters get relatively less as the major part of jupuary go to others and some of it into staking as new people lock their JUP to vote.

Comparing jupuary and scroll airdrop is comparing apples to oranges.

If a real whale like Justin Sun would decide to come here, he would need to use his assets to buy JUP to get voting power and rewards. That would cause JUP value to sky rocket. It’s not the case for all these L2 airdrops which you can farm with your existing ETH/BTC etc.

On the other hand, if the current voters would be left out, they would become the ones who would pay all the fun for the rest, which would cause some of them to unstake and move on. ASR is not to cover the risks stakers take when circulating supply gets increased by 50%. ASR is to incentivice people to vote and provide rewards for locking their assets.

4 Likes
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The comparison makes perfect sense because so far Jupiter has done the exact opposite of only rewarding insiders and whales.

You can’t say its comparing apples to oranges because its a matter of criteria. If Jupuary becomes a second ASR rewards system (which some people clearly want or want it dead entirely) then this will be the outlook of the vast majority of users.

And as a rare instance of a token that didn’t merely reward whales, the token has performed very well even in a bad market and even with huge ASR incentives. The first airdrop was an example of the opposite of what you’re advocating for and performed exceedingly well.

If users aren’t rewarded, but rather only those passively sitting on assets then you’re sending a message to the vast majority of users, including those that are power users that the outlook of whales is that this should be treated like an increasingly less decentralized stake ponzi.

Again, networks of people matter, the opinions of users matter. Projects live and die off the basis of how they treat users, not VCs or passive stakers who click a vote button a few times a year.

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So are you suggesting that the proposal @JUPWhale introduced would be rewarding insiders and whales?

This proposals suggests 10% of jupuary allocation going towards DAO voters.

It performed well because no one was farming it. No one knew beforehand. That is why Uniswap airdrop was also successful. L2 airdrops are different. People know they are coming and thus people farm them. You lock your assets (BTC/ETH/Stable coins) to collect points, which you can convert into token at TGE. You couldn’t farm Jupuary as you didn’t know it was coming. Regarding jupuary 2, you can try to farm it and lots of people are trying to do that. You simply generate trading volume in to several wallets. Voters can’t farm this, they can only vote with the JUP they have. The locked assets can’t be used to generate any trading volume.

Makes me think you have not even read the proposal introduced by the OP. Please read it carefully and we can then continue to discuss about it.

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When I wrote that a proposal on the quorum only was “rushed” I meant exactly this. You cannot modify one part of a DAO process without considering the whole scenario. In my opinion, the whole DAO should undergo a due diligence performed by people with some experience on the field and reshuffled in a more “professional” way. If somebody wants to start a working group on this topic, I would be glad to join it as I do have that experience because of my real life job and career

Just as an idea, a possibility to tackle the conflict of interest could be to cap the voting power to a certain amount leaving intact the weight of the staked JUP hen it comes to reward distribution

3 Likes
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Here’s my perspective on the back-and-forth in this debate: we should trust the team. They weren’t naive when they came up with these incredible ideas that have already changed so many lives. They’re more than capable of thinking this through to make it fair for everyone involved. As Meow has often reminded us, this is ultimately a gift. Let’s stay patient and see what they come up with. The debate across the DAO is getting intense, so let’s all take a step back, catch our breath, and remember that—no matter what—this is a gift. Let’s trust the team.

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If the solution is to simply trust the team, then there is no reason at all to have a DAO :wink:

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I believe they’re following these debates and feedback closely, as they’ve mentioned several times, and they often refer to them when making decisions. So, in that context, I think we should trust them. The reality is that we’ll never reach a scenario where everyone is completely happy. Tomorrow, I might be the one saying I’m disappointed that I wasn’t rewarded enough—or at all—but I understand that it’s impossible to please everyone.

3 Likes
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I appreciate your reply and your take on things as someone taking significant risk.

Regarding earning $1K in a month at MacDonalds for the average Joe, that might be true but earning doesn’t equal saving (unless you’re a teenager). For a lot of people in wealthy countries with the costs of living it’s hard to save even 10%.

Regarding the risk of holding a certain crypto asset; if you’re swing trading you might not want to have everything staked. If you’re HODLing with a 5 year, 10 year or 20 year+ investment horizon this shouldn’t be an issue.

In the stock market you’d be happy to get 5% dividends on a yearly basis. With general staking of assets like ETH or SOL you’d be looking into the direction of 10% staking returns.

The fact that staking JUP would reward ~ 48.5% from ASR + 15.9% from Jupuary totalling 64.4% in my opinion is more than enough incentive for JUP whales to HODL JUP and to stake.

When there are (temporary) price fluctuations, these won’t effect you if you have a long term commitment in the long term (price) potential of the underlying asset you’re invested in.

Unrealised gains are not gains when they’re not realised, and unrealised losses are not losses when they’re not realised. On the other hand receiving ~ 64.4% in incentives in a year, you can choose to do with whatever you like. You can HODL the ‘‘dividents’’ or staking rewards in JUP but you can also cash it out for USD.

5 Likes
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Agreed with the benefits of a tiered approach as was discussed last February: The Jupiter DAO Voting System Proposal

On the other hand this would incentivise splitting up JUP holdings and staking over several wallets to just reach the right tier on each wallet. This might be the main reason why the decision went to a 1 JUP equals 1 vote solution in the end.

I honestly can’t think of any solution to this as of now, which may not make tiering a feasible option until someone comes up with a solution to the wallet splitting issue.

I don’t necessarily mind that the largest JUP stakeholders (those staking Millions of JUP) in the top 50 have that much power and are properly incentivised. The main issue I’m pointing out is the conflict of interest when they have to vote about their own potential rewards.

That’s why I think it might be best if the team makes a decision on how much of Jupuary to allocate to stakers, then communicate it and put it up for a yes/no vote.

If for example 10%, 15%, 20% or even 25% of the 700 Million JUP airdrop of round 2 is allocated to JUP stakers (my proposal includes 10%) that leaves the rest of the 700 Million JUP to be distributed among the general Jupiter community.

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It is important to have a DAO and it’s important to incentivice the DAO through ASR and Jupuary.

The fact that staking JUP would reward ~ 48.5% from ASR + 15.9% from Jupuary totalling 64.4% in my opinion is more than enough incentive for JUP whales to HODL JUP and to stake.

The main point of my argument to be careful to avoid a conflict of interest in having too much of an open vote when it comes to voting about their own rewards.

1 Like
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This may be one of the most important decisions of the future of Jupiter as @meow stated himself in the last Planetary call. This forum gives me the opportunity to potentially have some positive influence and contribute to the debate. I hope that this is something that every Jupiter and JUP community member aspires.

I started by simply addressing the fears about Jupuary causing sell-offs but it turned into drafting a community-refined proposal that is balanced, inclusive and comprehensive. It also provides a great level of JUP distribution and decentralisation. I love a good debate and am still following up on the replies now.

Like yourself, I’m not working at MacDonalds so I do have quite some time on my hands. You never know what good can come out of something when you just focus on adding value, putting effort into something and going the extra mile.

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This is a very important point and that’s the main reason why I’m advocating for a balanced community-refined distribution proposal that is inclusive and comprehensive - providing sufficient decentralisation and distribution of JUP.

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The fact that staking JUP would reward ~ 48.5% from ASR + 15.9% from Jupuary totalling 64.4% in my opinion is more than enough incentive for JUP whales to HODL JUP and to stake.

Also JUP is at $1,02 at time of writing with the bull market not yet in full effect.

With a FDV of $10 Billion and already #56 on CMC within one year, I think JUP is doing great and there’s no need to fear a 33% downturn in the price from a so-called 50% ‘‘inflation’’.

Even if there would be a 33% price downturn the 48.5% from ASR + 15.9% from Jupuary totalling 64.4% would more than cover that.

1 Like