Jupiter's Empire Expansion: Is Vertical Integration the Endgame for the Encryption Industry?

Original Title: “Jupiter Crypto Conglomerate”

Authored by: Marco Manoppo, Investor at Primitive Ventures

Translation: Ashley, BlockBeats

Editor’s note: Jupiter announced a number of major initiatives at the Catstanbul conference, including acquisitions, AI funding, token repurchases and destruction, and the launch of the fully interconnected network Jupnet, demonstrating its ambitions for vertical integration. This article analyzes its business strategy, and discusses how in the permissionless crypto environment, brand, community, and user experience determine value capture, revealing the inevitable trend towards integrated applications.

The following is the original content (for easy reading comprehension, the original content has been reorganized):

Last month, Jupiter released a series of heavyweight news at its flagship conference Catstanbul. In summary - a massive amount of information. There are Burning Cat, acquisition announcements, and most importantly: Jupiter publicly admits that its ambitions are not limited to the current ecosystem. In today’s article, we will dissect Jupiter’s latest business strategy and discuss why, over a long enough period of time, every encrypted application that controls users will eventually choose to vertically integrate to maximize value capture. Let’s delve into it.

TL;DR

Acquisition

Jupiter has acquired a majority stake in Moonshot, a popular mobile trading app that generated $35 million in transaction fees following the Trump Meme coin craze. At the same time, Jupiter has also completed the full acquisition of Sonar Watch, a Solana DeFi asset management tool.

Financial support

Jupiter is partnering with ElizaOS’s Shaw to grant $10 million to support AI developers launched through the Jupiter Launchpad.

Token Repurchase

50% of the transaction fee for the Jupiter trading protocol will be used to repurchase JUP tokens.

Token burn

3 billion JUP tokens (approximately 36 billion US dollars) have been destroyed to reduce supply and lower the protocol’s fully diluted valuation (FDV).

Jupnet

Jupiter plans to launch Jupnet, a full-chain interoperability network that aims to integrate the entire crypto ecosystem into a single decentralized ledger to maximize the user experience for users and developers.

Honestly, this is one of the strongest product roadmaps and new plan announcements I have seen in the past few quarters. The Jupiter team’s execution is first-rate, from extremely detailed communication (Meow basically posts long articles on Twitter almost every day) to the high level of transparency they maintain with the community, all demonstrating outstanding execution capabilities.

A typical example:

Jupiter recently released a transparency audit report detailing the team’s key funding flows. “We’ve been publicly tracking token flows since our inception and have passed two audits to account for all token flows (except for 1 JUP) and integrate tokens into verified wallets.”

Read the last sentence again. For any cryptographic protocol that has completed TGE, it is crucial to make every effort to trace the ownership of each token. Similarly, public companies will clearly record the ownership structure of their stocks. In the field of cryptocurrencies, due to the permissionless nature of blockchain, tracking ownership is relatively more challenging, but there are still tools available to help teams achieve high-precision tracking.

At the same time, Uniswap …

As long as the time is long enough, every application will vertically integrate.

The core point of today’s article is that business strategy in the crypto world is fundamentally different from the business model in the traditional permissioned environment.

Outside the cryptocurrency industry, companies usually build a “moat” through regulatory barriers, long-term B2B contracts, proprietary innovation, and other means.

However, in the cryptocurrency industry, this ‘moat’ mostly no longer exists, because the permissionless nature of blockchain allows anyone to build on top of existing products, and users can almost always choose alternative solutions.

Therefore, what really matters are brand, user experience, and community, because as the industry matures, we will see more and more experienced entrepreneurs entering the crypto track, they will build on existing infrastructure and launch vampire attacks on existing industry giants.

Ironically, this is exactly what Deepseek is currently doing with OpenAI.

In the end, in the field of encryption, “moat” will evolve into the following three points:

Brand → Users trust you

Real community → Users want to be part of your organization and have real ownership (through profit sharing)

User experience → Users like your product

Aggregation strategy without permission is a wise move

Before the success of Jupiter, many people were skeptical of the aggregation model, especially in the EVM ecosystem, the market performance of this model is not impressive. For example, 1inch failed to surpass Uniswap’s market value, as most users still prefer to directly use Uniswap (too lazy to switch), or choose other MEV-friendly DEX such as CoW Swap.

However, in the Solana ecosystem, Jupiter managed to convince users that it provided the best trading experience, successfully aggregated traffic, and achieved value capture.

To be honest, I’m not sure when this transition happened. I remember using Orca and Raydium during the DeFi Summer of 2020-2021, and I also tried an early version of Jupiter. If my memory serves me right, by the end of DeFi Summer, the user experience of Orca and Raydium had become very bad, for reasons including:

Lack of a unified token standard (e.g., multiple bridged USDC versions)

The UI runs stuttering

This terrible user experience can still be seen a year later.

In the past, Jupiter would display the best trading path to prove its optimal exchange rate. In hindsight, this was a very clever move, as there was no obvious DEX market winner in the Solana ecosystem at the time. Even though Raydium occupies the highest market share, its market dominance is far less than Uniswap on Ethereum.

Excellence in business strategy and operations

To put it simply, Jupiter executes better on its core business – providing the best token swap experience for Solana users. Many protocols have tried similar strategies in the EVM ecosystem, but few have succeeded. In addition, the Jupiter team was originally formed by Racoon Dev, led by Meow, which meant that they could maintain operations in low-cost emerging markets with minimal capital consumption during a bear market with a handful of engineers.

Not all successful startups need a “sexy startup angle”, and many successful crypto startups start out just running development studios. This “traditional service-oriented business” can teach extremely efficient cost management experience and teach founders how to target market opportunities.

In 2024, this savvy business savvy is on full display in the Jupiter team.

In just 12 months, Jupiter has acquired 5 teams:

Moonshot: Acquired this platform specializing in mobile meme trading

SonarWatch: Acquiring on-chain asset management tool

Ultimate Wallet: Acquire a self-custodial wallet

Coinhall: Acquisition of a decentralized trading terminal

SolanaFM: Acquisition of Blockchain Explorer

Forgive me for being blunt, but it’s a genius-level operation. Some of the acquired projects face intense competition and market challenges, making them excellent acquisition targets. And, I don’t have any inside information, but I wouldn’t be surprised if these acquisitions were done primarily through JUP tokens. Considering JUP’s current FDV, the Jupiter team has undoubtedly expanded its footprint at a low cost and brought in a group of talented developers.

conclusion

This idea is not new. In a 2022 article titled “The Inevitability of UNIchain”, Nascent’s Dan Elitzer made the central point that “control over the block space becomes more and more important as applications reach a certain scale… The solution is to build a dedicated chain or rollup, where the block space is managed by validators who care about the success of the application.”

My argument is similar but more straightforward – that’s what human nature is like in a capitalist business society: optimizing value capture, vertical integration.

The cryptocurrency industry is still operated by humans, and we still cannot escape the instinctive desire to control the value chain. Let’s be realistic.