Problem Statement

Jito currently lacks a systematic approach to quantify the impact of its incentive programs, making it difficult to assess their success or failure. Establishing a structured evaluation framework would enable Jito to better direct its incentive spend, ensuring that future programs are aligned with the protocol's long-term objectives and contribute meaningfully to its growth.

Approach

To assess the effectiveness of an incentive program in a given liquidity pool (such as a DEX, lending, or perpetual pool), we calculate a composite Return on Investment (ROI) that incorporates both the specific pool's ROI and the ROI in Jito itself. In addition, it includes adjustments for Solana market trends, LST market trends, and the longevity of the ROI.

Definitions

Incentive Program Definition

$I$: The name or index of the incentive program in question.
$A$: The distributed incentive amount in JTO over some timeframe $[t - n, t]$ (in days).
$p$: The specific liquidity pool (in a specific DeFi protocol, e.g., Kamino) $p$ to which incentives are distributed.

Total Value Locked (TVL)

$\text{TVL}_{\text{Jito}}$: The number of SOL staked in Jito itself.
$\text{TVL}_p$: The TVL of the recipient pool $p$ in units of USD. Though asset prices fluctuate, USD is the most intuitive value measurement unit across diverse DeFi pools of different assets, compositions, etc.

Evaluation Window

To assess the long-term effectiveness of a given incentive program, we evaluate not only over its distribution timeframe $[t - n, t]$ but also for an additional two-week period post-completion. This extended timeframe serves to gauge the durability of the program's impact on Total Value Locked (TVL) within both the targeted pool $p$ and Jito itself.

Taken together, the evaluation window $W$ is defined as:

$$ W = [t - n, t + 14] $$

Adjustments

LST Market Adjustment

The LST market adjustment $L$ is defined as the ratio of the TVL (in SOL) of Solana’s non-Jito LST market at the end vs. the beginning of the evaluation window: