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CoinEasyet al 1
Xangle Partner Research
Apr 25, 2024

 

Table of Contents

1. Project Overview

2. 1Q24 Highlights
2-1. Ecosystem expansion focused on DEX, DePIN, and mobile
2-2. Creating development environment for seamless transition to Web3
2-3. Partnerships across Web2 and Web3
2-4. Key Metrics

3. On-Chain Performance
3-1. Performance
3-2. Network activity
3-3. Network security
3-4. Development activity

4. Ecosystem Highlights, Events, and Partnerships
4-1. Ecosystem highlights
4-2. Key events
4-3. Partnerships

5. Recap

 

 

1. Project Overview

Solana is a high-performance blockchain platform designed for optimal throughput and minimal transaction latency. It employs a unique proof-of-time mechanism known as Proof of History (PoH) to effectively manage network synchronization, theoretically capable of processing hundreds of thousands of transactions per second. Solana aims to attract both developers and users by offering a fast and cost-effective environment for decentralized applications (dApps) and cryptocurrency transactions. With its high scalability and development flexibility, the platform facilitates blockchain application across various sectors, enabling the creation of applications such as DeFi, NFTs, DePINs, and more.

 

2. 1Q24 Highlights

2-1. Ecosystem expansion focused on DEX, DePIN, and mobile

  • Record-breaking DEX trading volume amid meme coin craze
  • DePIN ecosystem continues to expand with major projects like Render Networks and Grass choosing Solana
  • Attempting mass adoption off-chain through Saga

2-2. Creating development environment for seamless transition to Web3

  • Launching the Token Extensions program to support the design of its own tokenomics
  • Launching game development kit, GameShift, to create game developer-friendly environment
  • Solana Foundation explores entry into the TradFi industry by joining TAC

2-3. Partnerships across Web2 and Web3

  • Decentralized storage environment by partnering with Filecoin
  • Supporting Abu Dhabi Web3 regulation by partnering with ADGM

2-4. Key Metrics

 

3. On-Chain Performance

3-1. Performance

Solana's fee in 1Q24 amounted to $98.88M (QoQ +587.8%), while revenue stood at $49.44M (QoQ 597.3%). The fee represents the total USD value paid by users for utilizing the Solana network, whereas revenue denotes the USD value accruing to token holders. Notably, Solana burns 50% of transaction fees and allocates the remaining 50% as incentives to validators. Consequently, revenue for token holders corresponds to the 50% of tokens burned. Solana's fees and revenue have experienced significant growth since 4Q23, mirroring the surge in fees amidst a rapid increase in daily transactions.

3-2. Network Activity

Solana's daily transaction volume experienced a downward trend in Q3 but reversed course in Q4. During 1Q24, the number of daily transactions surged by 31.5% QoQ, reaching 26.3 million. This uptick in daily transactions can be attributed to the introduction of airdrop point programs by major protocols within the Solana ecosystem, as well as the rising popularity of meme coin trading. Presently, prominent projects like DFLOW, IONET, and Marginfi are actively engaged in Airdrop Points program. As of April 9, the DEX aggregator DFLOW boasted approximately $30M in deposits and a user base of 410,000 individuals. Moreover, the daily trading volume on the Solana DEX achieved a new ATH of $3.8B as of March 15, primarily driven by the success of meme coin trading.

In 1Q24, Solana experienced a notable increase of approximately 112% in daily active wallet count compared to the previous quarter. This surge can be attributed to several factors, including the introduction of airdrop point programs by major protocols within the Solana ecosystem and the rising popularity of meme coin trading. The significant rise in daily active wallets, outpacing the growth in daily transactions, suggests a surge in multi-account activity aimed at participating in airdrops.

Solana's TVL has seen remarkable growth for the second consecutive quarter, with a staggering increase of +346.9% QoQ in 4Q23 and an impressive +240.6% QoQ in 1Q24. The surge in TVL during Q4 was primarily fueled by the growth of major DeFi protocols within the Solana ecosystem, including Kamino, Marginfi, and Solend. These protocols introduced loyalty programs, sparking anticipation for airdrops and resulting in a substantial uptick in TVL. In 1Q24, TVL witnessed further growth, with Kamino increasing by +539%, Marginfi by +233%, and Solend by +44%.

3-3. Network security

The Nakamoto coefficient serves as a metric to gauge the minimum number of independent entities required to collectively disrupt a blockchain, with higher coefficients indicating greater decentralization. Solana's Nakamoto coefficient for 1Q24 stands at 21, ranking third among the top 10 projects. Additionally, an analysis of data center distribution hosting Solana nodes reveals that no single data center controls more than 20% of Solana's nodes. This underscores the considerable decentralization of Solana nodes compared to other leading mainnets.

3-4. Development activity

Solana witnessed a -2.6% QoQ decrease in the average number of active developers and a -4.0% QoQ decrease in the number of smart contract deployments in Q4. This decline in development activity has been consistent since 2Q23. Nonetheless, it's encouraging to observe that the pace of decline is decelerating.

 

4. Ecosystem Highlights, Events, and Partnerships

4-1. Ecosystem highlight: Expansion focused on DEX, DePIN, and mobile

Record-breaking DEX trading volume amid meme coin craze

The meme coin frenzy has captivated the cryptocurrency market in 2024, with notable gains seen in Dogecoin (+158%), Sibainu (+189%), and PEPE (+546%) during Q1. This surge in meme coin popularity has notably boosted trading activity on the Solana network, renowned for its rapid transaction processing and minimal fees. As of March 15, Solana's DEX witnessed a staggering $3.8B in trading volume, marking a new ATH.

The surge in Solana DEX trading volumes also mirrors the rise of meme coins within the Solana ecosystem, such as Bonk and dogwifhat. Bonk, a memecoin distributed for free to Solana token holders, developers, and SAGA holders following the FTX incident, gained momentum alongside Solana based on its unique narrative. Its value skyrocketed upon listing on Binance and Coinbase in December 2023, with Bonk witnessing a staggering 3,661% growth over the past year as of April 10, securing its position as the sixth-largest memecoin with a market capitalization of $1.4B.

Meanwhile, dogwifhat, featuring an endearing image of a dog adorned with a hat, garnered attention for its charming aesthetic, the surge in popularity of dog-themed meme coins, and its listing on Binance Futures. Launched on December 20, dogwifhat experienced a remarkable 1,982% increase in value by April 10, ranking third in market capitalization ($3.5B) among all memecoins, following Dogecoin and Sibainu.

DePIN ecosystem continue to expand with major projects like Render Networks and Grass choosing Solana

Source: Solanians

Solana is rapidly expanding the DePIN (Decentralized Physical Infrastructure Networks) ecosystem. In 2Q23, the decentralized wireless network Helium migrated to Solana, followed by other major DePIN projects such as Render Network and Grass. They chose the Solana network because of its fast processing speeds and low fees. Since DePIN aims to provide physical infrastructure such as computation, storage, and communication on the blockchain, the network's scalability and fees are very important elements—ergo, most DePin projects are built on the Solana network. Recently, Solana Ventures invested in io.net to further expand the DePIN ecosystem. With the decentralization of physical infrastructure and the increased focus on generative AI, DePIN is expected to become a major sector of the Solana ecosystem in the future.

Attempting mass adoption off-chain through Saga

Source: Solana Mobile

In 1Q24, Solana opened the preorders for "Solana Saga Chapter 2," the 2.0 version of its Web3 smartphone, Saga. Preorders for Saga 2.0 exceeded 100,000 in 30 days, as Saga 1.0 buyers received an airdrop of tokens above the purchase price of the smartphone.

Solana is providing an open source software development kit, the Solana Mobile Stack, to make it easy to develop applications on Saga. Saga offers features such as "Seed Vault," a custody solution for securely storing wallet seed phrases, and "Solana Pay," a cryptocurrency payment system. Saga users can sign transactions in wallet applications such as Phantom by entering a pin, touching a sensor, etc. and easily use cryptocurrency payment services. Saga is expected to ease the high entry barrier of Web3 and attract users to the Solana network.

4-2. Key updates: Creating development environment for seamless transition to Web3

Launching the Token Extensions program to support the design of its own tokenomics

In 1Q24, Solana announced the release of the Token Extensions program. Historically, Solana has supported tokens with a single program called the Solana Program Library (SPL). This is in contrast to Ethereum, which supports separate FT and NFT token standards with ERC-20 and ERC-721. Solana's single-program approach has advantages in terms of development speed and security, as it allows developers to share infrastructure. However, the downside is that it is difficult to customize the code, making it difficult to expand token functionality.

Therefore, Solana aims to help developers design and implement their own token features through the Token Extensions program. Token Extensions provide features such as charging transaction fees for revenue generation, metadata management, confidential transmission using zero-knowledge proofs, and a customizable development environment tailored to regulatory requirements.

With this, Solana aims to enhance revenue generation and regulatory compliance possibilities for projects. By autonomously imposing transaction fees, Solana creates a path for projects to swiftly generate revenue and supports flexible operations tailored to regulatory environments. This can be a valuable option not only for blockchain-based projects but also for Web2 companies attempting to transition to Web3, as it allows institutions to leverage the benefits of liquidity and regulatory compliance in an open network by using standardized and programmable tokens through Solana’s Token Extensions, instead of operating their own networks.

Launching game development kit, GameShift, to create game developer-friendly environment

Solana Labs announced the release of the Solana GameShift, a blockchain-based game development API developed by Solana Labs to support Web3 game development. GameShift provides features such as wallet services, in-game asset creation, in-game asset trading, and payment in over 170 countries. Game developers can use GameShift to develop Solana-based Web3 games more easily, thus contributing to the expansion of the gaming ecosystem.

Solana Foundation explores entry into the TradFi industry by joining TAC

The Tokenized Asset Coalition (TAC) announced that 15 foundations and companies, including the Solana Foundation, have joined as members through its report on tokenization status. TAC, consisting of Aave Companies, Base, Centrifuge, Circle, Coinbase, Credix, Goldfinch, and RWA.xyz, formed in 2023 to integrate traditional finance systems with blockchain. TAC aims to address the inefficiencies, opacity, and fragmentation of the current financial infrastructure by combining blockchain and financial systems. The 15 new members, including Solana, will contribute to TAC's initiatives and support events, annual report writing, and others.

4-3. Partnerships across Web2 and Web3

Decentralized storage environment by partnering with Filecoin

Source: X(@Filecoin)

Solana announced a partnership with the decentralized cloud project Filecoin, which is a great example of DePIN and aims to build decentralized storage. Through this partnership, Solana seeks to utilize Filecoin's decentralized storage instead of centralized storage, which will allow Solana to make block data visible to anyone, prevent data duplication, and enhance scalability and security.

Supporting Abu Dhabi Web3 regulation by partnering with ADGM

Solana Foundation announced a partnership with Abu Dhabi Global Market (ADGM), located in Abu Dhabi, United Arab Emirates. It is an international financial center aiming to become a hub for technology-based financial services. The Solana Foundation will support the development of distributed ledger technology (DLT) solutions and regulatory frameworks. The partnership aims to promote blockchain innovation and expand Abu Dhabi's Web3 ecosystem.

 

5. Recap

In 1Q24, Solana achieved significant growth across various fronts. The news of the Airdrop Points program by major protocols in the ecosystem and the meme coin trading frenzy led to a noticeable improvement in on-chain metrics. Daily active wallet count and TVL increased by 111.9% and 240.6% QoQ respectively, and Solana expanded the DePIN ecosystem based on its fast processing speed and low fees. Furthermore, Solana achieved notable success off-chain as well—Saga 2.0 preorders surpassed 100,000 within just 30 days. Such trends indicate that Solana will continue to play a significant role in blockchain technology and the cryptocurrency market. Particularly, the first quarter of 2024 was a period where Solana took a significant step forward in its envisioned future as its ecosystem expanded in areas such as DePIN and mobile, leveraging the benefits of its speed and fees. After being the most unfavored chain since the FTX incident in 1Q23, Solana seems to have made a magnificent comeback this year.

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