Last week, the Solana chain was bustling, and Jupiter's token $JUP has also seen its price in the secondary market nearly double in the past two weeks, closely following the rhythm of Solana. Research on Jupiter and $JUP in the market is more from a secondary perspective. Behind the impressive (or temporarily impressive) market capitalization performance, in addition to an excellent market maker and community, it also relies on its outstanding product design as support. So today, let's delve into Jupiter's product design philosophy from a product perspective.

The emergence of Jupiter in the Solana ecosystem is not accidental; it is a strong proof of technological innovation and user experience optimization among many DEXs. As one of the most competitive DEXs on the Solana network, Jupiter is a primary choice for Solana trading users.

Three Core Functions of Jup

The key to its product's attention lies in three core functions: liquidity aggregator, limit orders, and DCA/investment plans. The application of these three innovative technologies not only enhances Jupiter's competitiveness but also sets a new benchmark for the entire DEX track.

Core Function Module 1: Liquidity Aggregator

Jupiter's liquidity aggregator technology is one of its core competitive advantages. In traditional DEX models, each exchange's liquidity pool exists in isolation, and users often need to find the best trading pool themselves to obtain the optimal trading price, which is not only time-consuming but also labor-intensive. Due to the dispersion of liquidity, it is challenging to ensure the optimality of trades. Jupiter's liquidity aggregator technology can traverse numerous liquidity pools within the Solana ecosystem, automatically finding and aggregating the best liquidity resources through algorithms, providing users with a one-stop optimal trading path.

Before trading, users can choose to modify parameters such as trading fees, slippage size, and whether to use a direct path. This means users can obtain the best trading prices and lowest slippage across the entire ecosystem on a single interface, improving the efficiency and economy of asset exchanges. The realization of Jupiter's trading aggregation is based on its backend smart routing technology.

On the backend, Jupiter monitors and analyzes the entire market's trading data in real-time through complex algorithms, including price, depth, slippage, and other dimensions. Based on this data, the smart routing algorithm can dynamically select the best trading route for each transaction, ensuring the success rate and cost efficiency of user trades even in the face of significant market fluctuations. Specifically, once Jupiter obtains market data, its multi-path search algorithm begins to look for the best trading path.

This process involves complex calculations, as it must consider not only direct trading pairs but also analyze whether better trading prices can be obtained through a series of intermediate token conversions. For example, if a user wants to exchange token A for token C, the smart routing will consider not only the direct A→C trading path but also possible intermediate paths like A→B→C or A→B→D→C, thus finding the lowest-cost trading solution.

Although the technology behind smart routing is very complex, Jupiter is committed to providing users with a simple and easy-to-use trading experience. The operation of smart routing is completely transparent to users; they only need to input the tokens and quantities they wish to exchange, and the rest of the work is done automatically by the smart routing. This design maximizes the reduction of operational difficulty for users, allowing them to trade easily even without a strong technical background.

Core Function Module 2: Limit Orders

Jupiter provides traders with limit order functionality, effectively avoiding cost increases and slippage issues caused by price impacts during trading, while also circumventing MEV issues. When not fully executed, limit orders can be partially filled, allowing users to receive the tokens for the executed portion. When placing a trade, users can choose the order validity period, exchange price, and exchange quantity to execute their trading strategies more precisely. The protocol collaborates with Birdeye and TradingView, with Birdeye providing on-chain price data for tokens, and Jupiter using TradingView's technology for chart data display. This functionality makes the actual experience provided by Jupiter closer to that of centralized exchanges.

Core Function Module 3: DCA Investment Plans

Dollar-Cost Averaging (DCA) is an investment strategy where investors spread their investments over a preset price range at specific time intervals, helping to reduce the risk of investing at a single price point. In Jupiter, users can set the purchase frequency (with a minimum frequency of minutes and a maximum frequency of monthly), purchase price range, total duration, and the assets they wish to buy. After setting up the DCA, the user's tokens will be transferred to the relevant account, and trades will be executed automatically based on the preset price range and trading frequency.

At the end of the DCA period, the tokens are automatically transferred back to the user's wallet, and the protocol charges a fee of one-thousandth for the DCA. The controllable cost price, low fees, and fully managed trading process make DCA a good choice for traders to accumulate assets during bear markets. However, in bull markets, this mechanism tends to be relatively unnoticed, so the overall demand for this functionality remains relatively low.

Other Ecological Modules of Jup

Upstream Incubator: Jupiter Labs

An independent laboratory operating separately from Jupiter, which will operate independently in the future, dedicated to promoting innovative projects. Jupiter users and community members enjoy certain privileges, including priority access and token incentives. Currently, Jupiter Labs is focusing on two major project areas: perpetual contracts and LSD stablecoins.

Derivatives Protocol: Jupiter Perpetual

This is a derivatives protocol launched by Jupiter Labs, similar in model to GMX V1, and is currently in actual use. The protocol defines two main types of participants: liquidity providers and traders. Liquidity providers supply funds to the pool, which are converted into a basket of tokens, mainly including BTC, ETH, SOL, USDC, and USDT, with SOL and USDC having a higher weight, becoming the main trading objects.

Traders, when engaging in leveraged trading, use the tokens in the pool to establish leveraged positions. They do not need to worry about trading slippage and only need to pay trading fees and borrowing fees, the latter of which is calculated based on the utilization rate of the tokens. Liquidity providers receive 70% of the trading fees and all borrowing fees, but they also bear the risk of losses from traders' profits and token depreciation.

LST Stablecoin Protocol XYZ

This project has not yet launched. The protocol is similar to Lybra V1, allowing users to mint interest-bearing stablecoin SUSD without borrowing interest by collateralizing SOL. Income obtained from LST staking will be distributed to SUSD holders and governance tokens. Notably, when the LST yield is higher than the SOL borrowing rate, a leveraged arbitrage strategy will be employed to maximize returns.

Additionally, the protocol introduces a redemption mechanism to maintain the price stability of SUSD, although this may impact borrowers' positions, especially during market fluctuations. To mitigate this issue, the protocol may adopt a strategy of redeeming SUSD with governance tokens within a small price range. When the price of SUSD is between $0.95 and $1, the protocol may use governance tokens to redeem SUSD to reduce the frequency of borrower redemptions. However, this scheme may lead to the majority of redemptions being for governance tokens, and if the price continues to stay below $1, it could result in significant token inflation.

Returning to the $Jup Economic Model

The JUP token is the governance token within the Jupiter ecosystem, allowing token holders to vote on key ecosystem decisions, covering topics such as project launches, controversial listings, and grants. The Jupiter team promises that token distribution will strictly adhere to the roadmap, and any transfers of tokens in cold wallets must be announced six months in advance. The initial circulating supply has been adjusted to 1.35 billion, and future circulation will be managed through a community multi-signature wallet to ensure the healthy development of the Jupiter ecosystem.

After Building High Towers - Reflections on the Prosperity of the Jup Ecosystem

Compared to other DEXs in the Solana ecosystem, Jupiter stands out in terms of trading efficiency and user experience. Although projects like Raydium, Orca, and Serpent are also competing for market share, Jupiter still aggregates over 50% of the trading volume on Solana, making DEX a true underlying liquidity protocol on the Solana network. However, with limited room for further growth in trading volume, Jupiter has chosen to expand horizontally in the DeFi sector as a long-term strategy to broaden its business scope. Jupiter Start may be a primary direction for Jupiter's expansion.

Currently, Jupiter Start only has introduction, education, and pre-launch features. The core functionality of Jupiter Start, LFG Launchpad, has not yet been launched, but the first round of launchpad voting was initiated on March 7, with the top three projects being Zeus Network (cross-chain communication), SharkyFi (NFT lending protocol), and UpRock (DePIN). Jupiter has a large user base and strong traffic effects. Considering its resource advantages, the projects it launches may have higher quality.

On the other hand, the financial innovation product incubation platform Jupiter Labs launched by Jupiter fills the gap for related projects on Solana and still has significant potential with Jupiter's support. This project demonstrates an in-depth exploration of financial derivatives and stablecoins, aiming to bring new momentum to the DeFi sector under the Solana ecosystem. However, these innovations, while increasing returns, also bring additional risks, such as protocol risks and oracle pricing risks, which need to be balanced through a well-structured economic model, appropriate incentive mechanisms, and dynamic redemption strategies.

As a rising star in the Solana ecosystem, Jupiter has quickly established a foothold in the DeFi space despite its relatively short launch time. Its user-centered product design philosophy, comprehensive and uniquely innovative product features, and smooth trading experience have successfully captured users' trust, making it the largest DEX by trading volume on the Solana chain. Furthermore, the Jupiter team strives to break through the limitations imposed by the development of public chains on traditional DEXs, actively exploring broader development spaces, which gives Jupiter the potential to grow into a vast ocean of stars.

However, the potential problem that arises is that in exploring derivatives and stablecoins, whether as an incubator or self-developed products, it will face greater risks. Due to the nature of these financial products leveraging to achieve high returns, without a sound economic model and stable token prices to support them, it is easy to fall into a death spiral, which could have fatal consequences for Jupiter itself.