TipRouter upgrade: Facilitating Priority Fees

As described in JIP-16, the Jito DAO voted to extend the TipRouter NCN to distribute priority fees (commonly referred to as block rewards). Today, we are excited to announce a live upgrade to TipRouter that allows Solana validators to distribute priority fees to their stakers, unlocking a significant rewards stream for stakers, maintaining economic alignment with validators, and standardizing a crucial component of Solana economics. The upgrade is now live, and validators can share priority fees via TipRouter by following this installation guide. 

With the new frontend UI, users can view onchain activities, including consensus, distributions, and staked node operators. Visit our blog post for more information about TipRouter, and for a comprehensive deep-dive into the inner workings of Solana’s economics and why TipRouter maintains economic alignment between validators and stakers, read this article by Lucas Bruder (CEO, Jito Labs). 

TL;DR

1. TipRouter standardizes a sustainable and transparent economic foundation for distributing Solana’s block rewards with stakers.
2. Stakers have a new economic lever to stake with validators that share block rewards, significantly increasing yield potential on their staked SOL and encouraging more economic alignment.
3. Validators who share block rewards may attract more stake, potentially increasing their total earnings through higher block production and tip volume.
4. Sharing block rewards is a new competitive dimension for validators.

Overview

Priority fees make up roughly 35-40% of Solana’s REV; however, since SIMD-0096 passed, validators capture 100% of priority fees, and stakers do not realize any of this revenue stream. While there are efforts to create an in-protocol mechanism to share these fees with stakers (via SIMD-123), the timing of the implementation is unclear. In the meantime, non-standardized methods are cumbersome and not widely adopted, and they introduce fragmentation.

TipRouter already standardizes the distribution of Jito tips (over 50% of Solana’s REV). It has processed upwards of $250M since its inception in February. Introducing priority fees to its operation is a natural progression of the protocol. It is also designed to be highly flexible. In particular, it is agnostic to the source of SOL being distributed, which means the program can handle the distribution of priority fees, or application revenues, with the same level of transparency and efficiency. Furthermore, TipRouter is a viable battle-tested solution that validators can adopt to immediately standardize sharing priority fees with their stakers.

How TipRouter works 

TipRouter is a node consensus network (NCN) that consists of 15 Solana full node operators and (re)stakers and secures the distribution of Jito tips, all built on the Jito (Re)staking protocol.

TipRouter operates as follows: 

1. Vaults receive and (re)stake deposits to a set of node operators. 
2. (Re)staked node operators run an offchain process that: 
   1. Takes a snapshot of Solana validator and stake accounts at the end of the last slot of each epoch
   2. Builds a merkle tree of that distribution
   3. Submits the root of the merkle tree (i.e. a vote) to an onchain BallotBox that achieves stake-weighted quorum (>66%) on the same merkle root.
3. After reaching quorum, the Tip Distribution Program: 
   1. Sets the winning merkle root
   2. Sends Jito tips to validator and stake accounts according to the merkle tree of the winning root. 

All-in-all, TipRouter decentralizes Jito tip distributions by enabling a set of stake-weighted node operators to deterministically achieve quorum on the correct Jito distribution in a transparent manner. Validators can now share priority fees via TipRouter by following this installation guide. 

The Priority Fee Upgrade

TipRouter Program Changes: Priority Fee Distribution Program

The TipRouter program has been extended to work with the new Priority Fee Distribution Program in the exact same ways it interfaces with the Tip Distribution Program. Now, TipRouter operators create a new merkle tree that contains the merkle root for both Priority Fee Distribution Accounts and Tip Distribution Accounts. 

In a nutshell, TipRouter operators are now calculating the correct distribution of both Jito tips and priority fees, and submitting the merkle root of the tree to a BallotBox. Once quorum is reached, the winning merkle root is set for both the Priority Fee Distribution Program and the Tip Distribution Program.

In addition to TipRouter changes, other components of the Jito Network have also been reconfigured.

Jito-Solana Changes: priority-fee-sharing module

The priority-fee-sharing module is a separate system service that validators configure, stores records locally of priority fees earned for a given validator, and transfers to the Priority Fee Distribution Accounts after fees are earned. See installation guide to install the module.

StakeNet Changes: Validator History and Steward Programs

The Validator History Program creates an account per validator and tracks information in a 512-epoch rolling buffer. Several new fields have been added to this program to track stats around priority fees and block metadata.

In order to enforce priority fee sharing for JitoSOL validators, the Steward program’s scoring mechanism is updated to evaluate validators based on their priority fee commission. If the average commission is <=50% with a 5% margin of error (so <=55%), the score for this parameter is 1. Otherwise, the score is 0.

TipRouter Economics

Over $300M in JitoSOL and JTO is (re)staked to a set of 15 node operators who are paid a portion of distributions on a stake-weighted basis. Since inception in February, TipRouter has processed upwards of $250M. With the addition of priority fees, there is potential for a substantial increase in SOL rewards flowing through the system.

Assuming a run-rate of 4M SOL in priority fees per year (slightly below the H1 ‘25 run-rate) and 50% distribution, stakers could see their effective APY increase by 7% (from 7% to 7.7%). This represents a meaningful improvement in staker economics while maintaining strong validator alignment.

TipRouter operates with a fee structure designed to sustain the infrastructure while ensuring all participants are properly incentivized. It takes a 3% fee and a 1.5% fee on distributed Jito tips and priority fees, respectively, split between LST vault operators (5%), JTO vault operators (5%), and the Jito DAO (90%). These vault operators (listed here), in turn, share portions of the rewards with their respective (re)stakers and node operators, creating aligned incentives throughout the system. 

Importantly, the 1.5% fee on priority fee distributions only applies to the portion of rewards that validators choose to distribute. E.g. If a validator decides to keep 70% of their priority fees and distribute 30% to stakers, the 1.5% fee is calculated only on the 30% distribution. This means validators maintain complete control over their commission structure and only pay fees on the portion they choose to share with stakers.

Stake for good.

Jito Network is the economic engine of Solana. These changes to core components of Jito infrastructure create more opportunities for stakers, increase the transparency of onchain economics, further align incentives between stakers and validators, and promote more dynamic competition amongst Solana’s validators. As Solana accelerates into the mainstream, updates economic policies, increases bandwidth, and reduces latency, it becomes increasingly important for stakers to possess more power over the set of validators that participate in the network.

If you are a validator, please visit this installation guide to share block rewards with stakers. To participate in TipRouter governance, visit the Jito DAO forum. If you are a developer interested in leveraging TipRouter infrastructure to facilitate rewards or fee distributions to key stakeholders, please email "hayden (at) jito (dot) network"

For more information on Jito Network, visit our documentation hub.