SOL’s skyrocketing suggests ecological prosperity? Analysis of Solana’s market and ecological development

Solana's Soaring Prices An Indicator of Environmental Success? A Comprehensive Review of the Solana Market and Its Impact on the Ecosystem

Author: Jiang Haibo, LianGuaiNews

Solana has become the top-performing project in recent price performance, ranking first with a 34.9% increase in SOL in the top 100 cryptocurrencies in market capitalization during the week of October 26th to November 2nd. At the same time, the overall volatility of the crypto market was not significant, with BTC rising by 2.5% and ETH falling by 0.5%. This solidifies its position as one of the best-performing crypto assets this year.

After a continuous significant increase, the recent high point of SOL at $46.9 is a 586% increase from the December 2022 low point of $8, and it is also higher than the price of around $35 before the FTX scandal. Solana was once skyrocketed in popularity thanks to capital from FTX and other sources, but also suffered a setback due to the bankruptcy of FTX, falling to around 20th place in market capitalization. Now it has risen to 7th place again. How is its ecosystem developing? Is the price just short-term speculation or a renaissance of the ecosystem?

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Rising asset prices and the carnival of the Solana ecosystem

In bull markets, public chain tokens often give birth to a number of impressive wealth creation stories. In the 7-day increase of the top 100 tokens in market capitalization mentioned earlier, most of them are public chain assets. However, except for the top projects on Ethereum, most application projects on public chains struggle to obtain relatively high valuations. For example, Aptos, a public chain with a valuation of over $6 billion, despite recent good performance, the largest native DEX+stablecoin+liquidity staking project in its ecosystem, Thale, dilutes its valuation to only $14 million in Fully Diluted Valuation (FDV), and the price of THL is close to its all-time low. Near, which raised hundreds of millions of dollars in financing during the last bull market, has recently increased more than twofold. However, Ref Finance, a decentralized exchange on Near that was valued at $200 million in financing, now has an FDV of only $7.5 million, and it also oversees the management and development of lending protocol Burrow.

In addition to SOL, multiple projects on Solana have recently experienced explosive growth, covering various categories. In the 7-day increase on November 2nd (the data is unified to the afternoon of November 2nd), Marinade (MNDE) in the liquidity staking sector rose by 149.5%, POLIS and ATLAS in the Star Atlas game rose by 81.7% and 35.6%, respectively, and the decentralized exchange Raydium (RAY) rose by 43.4%. On November 1st alone, RAY’s closing price was 63.83% higher than its opening price.

Although these assets on Solana have also experienced significant declines, they are still more sought after than similar projects on other networks when opportunities arise, indicating that investors have a more optimistic view of projects on Solana.

Liquidity staking projects see significant funding growth, still lagging behind DEX, lending protocols, and other chains

As the token price of Solana’s ecosystem projects skyrocketed along with SOL, is the data of the Solana ecosystem equally impressive? To delve deeper into this, LianGuaiNews has selected the Total Value Locked (TVL) of Solana and other public chains for comparison, exploring the TVL changes of various projects on Solana and the NFT trading situation. Through these data analyses, LianGuaiNews hopes to reveal the health and activity of the Solana ecosystem, as well as its performance compared to other blockchain networks.

Firstly, according to DefiLlama’s data, in the comparison of TVL on public chains, in the past month, Solana’s TVL has risen by 21.7%, second only to Bitcoin and Cardano in terms of growth rate. However, Solana’s TVL of $410 million ranks only 8th among all smart contract platforms, lower than Tron ($7.96 billion), Polygon ($760 million), Avalanche ($550 million), as well as Layer 2 solutions like Arbitrum ($1.87 billion) and Optimism ($660 million) with market valuations lower than it.

Among the DeFi projects within the Solana ecosystem, the fastest-growing TVL is in liquidity staking projects such as Marinade Finance, Jito, Lido, Jpool, BlazeStake. This is partly due to the rise in the price of SOL, where even if the number of staked SOL remains unchanged, TVL calculated in USD will increase. Comparing the closing prices on November 1st and October 1st, SOL’s price has risen by 96.5% in the past month. The TVL of most liquidity staking projects has exceeded the increase in SOL’s price, indicating that there are indeed many new funds participating in liquidity staking.

However, in terms of assets on DEX and lending protocols, Solana has seen faster TVL growth in the top lending protocols like Solend and marginfi, and average growth in DEX like Orca and Raydium. If we compare them based on TVL values, they are all below $100 million, which is lower than similar projects on public chains like Polygon.

It should be noted that when DefiLlama calculates the TVL of public chains, it does not include the funds in liquidity staking projects (to avoid double counting). From the above data, it can be observed that the main source of new funds in DeFi applications on Solana comes from liquidity staking projects, which also leads to Solana not showing a clear superiority over other public chains when directly viewing the TVL.

As for NFT trading volume, NFTScan data shows that the trading volume for the two days on November 2nd and November 3rd is still within the range of 25,000 SOL, remaining near historical lows.

If we look at major DeFi applications like DEX and lending protocols, Solana’s on-chain funds have indeed suffered a major collapse and have not recovered. In November 2021, the liquidity on Raydium exceeded $2.2 billion, but now it is only $36 million, a drop of over 98%. Although Orca’s liquidity has now surpassed Raydium, it is only slightly over $50 million, far from enough to replace Raydium’s position. Orca’s liquidity also ranks only 25th among all DEXs on the chain.

New projects like Render have been brought into the ecosystem, and various parties have expressed support for Solana

Despite the difficulties Solana has faced, many institutions and well-known figures in the industry remain optimistic about its prospects. For example, Kyle Samani, Managing Partner at investment firm Multicoin, continues to have a positive outlook on Solana. Arthur Hayes, the founder of BitMEX, publicly stated that he purchased SOL. Jump Crypto has shown strong support for Solana’s development and ecosystem, and MakerDAO is also considering adopting Solana’s technical framework as the infrastructure for creating Newchain.

At the same time, the official Solana Labs continues to provide support to ecosystem projects. In late October, Solana Labs announced the launch of Solana Startup Incubation, which will provide customized support for startups on Solana, including design and development work, financial support from Solana Ventures and other VC firms, and help projects seek market opportunities using Solana’s branding advantage.

During the Solana Breakpoint 2023 conference held in Amsterdam from October 30th to November 3rd, Solana and its ecosystem projects also announced various developments. The key points are summarized below.

• The Solana client Firedancer developed by Jump Crypto is now running on the testnet. This client optimizes Solana’s network performance and scalability, reducing reliance on clients developed by Solana Labs and the risk of network-wide interruptions caused by software failures.
• The decentralized computing network Render Network has successfully upgraded its core infrastructure from Ethereum to Solana.
• Infrastructure code to quickly deploy Solana nodes on AWS is now available in the AWS Blockchain Node Runners repository, and Solana data can now be accessed on Google Cloud’s serverless data warehouse BigQuery.
• SwissBorg has achieved integration with Solana through Orca.
• Sling has built a P2P payment platform based on USDC.

During the conference, the Solana Foundation also announced the winners of the Solana Hyperdrive Hackathon, with FluxBot receiving the top prize of $50,000 USDC. Hyperdrive is the 8th Solana hackathon and aims to bring high-impact projects into the Solana ecosystem. It is reported that it attracted over 7,000 participants who submitted 907 final projects, making it the largest online Solana hackathon to date.

In addition, with the recovery of SOL price and attention to Solana, some projects in the Solana ecosystem, such as the oracle Pyth and aggregator Jupiter, have recently announced airdrop news. Both are well-known projects in the Solana ecosystem, and the airdrops target a large number of users, which may bring traffic to Solana in the short term. Pyth is the oracle project strongly promoted by Jump Crypto and will distribute airdrops to over 75,000 wallets based on on-chain activities from 27 blockchains and over 200 applications. Jupiter is the best trading aggregator in the Solana ecosystem, and 40% of JUP tokens will be airdropped to 955,000 users.

Summary

SOL is one of the best-performing cryptocurrencies this year, and its recent surge has also led to an overall increase in the Solana ecosystem. Looking at the data from Solana ecosystem projects, liquidity staking projects have seen significant growth in total value locked (TVL) over the past month, with Marinade Finance growing by 207% and Juto growing by 318%. Among lending protocols, marginfi has grown the fastest, followed by Solend, but TVL growth in DEX platforms has been lacking. Additionally, the amount of funds in the top lending protocols and DEX on Solana still lags behind similar projects on other public blockchains.

Meanwhile, Solana continues to be favored by industry experts, and the official team is actively supporting startups. Firedancer, a Solana client developed by Jump Crypto, may optimize Solana’s network performance and scalability. In an optimistic scenario, SOL’s early uptrend may also serve as a prelude to the recovery of the Solana ecosystem.

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