In this report, we present an overview of the key events and advancements that have contributed to the growth of Solana's ecosystem in the last quarter. Here, we outline the various use cases for the Solana blockchain in 2023, encompassing fields such as finance, gaming, NFTs, Decentralised Physical Infrastructure Networks and more. Data on active addresses, developer activity, on-chain volume and liquidity are, among others, metrics we use to suggest sustained growth and adoption of the Solana ecosystem, even during the bear market.
This report will also highlight the most prominent narratives and projects that have emerged in the Solana ecosystem during the last quarter.
We examine the impact of the FTX crash on the Solana ecosystem and evaluate the platform's resilience in overcoming this adversity. Data supports the assumption that Solana is on the path to a full recovery from the effects of the crash, debunking the notion that the platform's survival was solely dependent on FTX.
In conclusion, this research report provides a detailed overview of the Solana ecosystem, its most relevant events, technological innovations, and use cases for 2023. Despite facing significant challenges, the Solana ecosystem has demonstrated remarkable resilience and continued growth, positioning itself as a leading player in the mass adoption of Blockchain.
In the last year, the world economy faced many challenges, making it a particularly tumultuous period for emerging and developed markets. One of the most significant factors contributing to this unease has been the sharp rise in interest rates, which led to a considerable decrease in market liquidity. This tightening of available funds has placed substantial pressure on businesses and consumers. In addition, the impact of interest rate increases is now in full effect.
Several banks in Europe and the United States found themselves on the brink of collapse or suffering significant financial impairment. This development has heightened concerns about the stability of the global financial system and the potential implications for the broader economy.
Although the situation is complicated, many look at Crypto from a new perspective. The promise of real ownership of money derived from its decentralisation properties is finally starting to make sense to the masses.
Over the past three months, the Solana token price ($SOL) witnessed a period of high volatility. Just before the end of the year, Solana plunged to a multi-year low of $8.90, right before initiating a drastic shift in momentum to a high of $27.00 in February. With the current market uncertainty derived from the collapse of two crypto-friendly banks in the US, with other regional banks and more in Europe, the Solana token price has stabilised in the $20.00 area.
Solana is one of the very few cryptocurrencies that have outperformed Bitcoin Year-To-Date.
The Solana Foundation published a report highlighting the most recent developments in the ecosystem, focused on decentralisation and validator data.
In March 2020, the mainnet was launched and has since expanded to include more than 3,400 validators, with over 2,400 consensus nodes. The number of nodes on Solana is significantly higher than on other proof-of-stake blockchains. The Foundation is now focusing on node quality, not just quantity.
Solana's Nakamoto Coefficient is 31, meaning that the lowest number of validators that would have to collude to censor the network is 31 and has remained unchanged since August 2022. The coefficient steadily increased from the network's launch in March 2020 through September 2022, before stabilising.
The Solana Foundation is exploring ways to attract more high-quality validators, possibly leading to a rise in the Nakamoto Coefficient, as users have incentives to stake with a larger pool of validators.
The stake distribution of Solana by country is as follows: 23.5% from the US, 13.2% from Great Britain, 11.9% from Ireland, 8.6% from Lithuania, 7.6% from Japan, 6.0% from Canada, 5.8% from Singapore, 5.1% from Poland, 4.2% from the Netherlands, 3.2% from Germany, 1.9% from France, and 2.2% from Russia. Additionally, 4.0% of Solana's stake comes from Other countries.
While December was tough for Solana, the last quarter has seen consolidation as well as a renewed sense of confidence in the network. Total-Value-Locked (TVL) has increased 40% from the low of $200M to $280M at the time of writing.
It is undeniable that TVL is not the best metric for Solana. It is one of the metrics that has suffered the most from the FTX crash in November. Although low, a direct comparison of Solana's Total Value Locked (TVL) with other blockchains may not provide a comprehensive view, for several reasons. The cases for adopting Solana have often been for products serving use cases other than DeFi, such as NFT-DeFi and DePIN. Both use cases are not accounted for when calculating TVL.
Should Solana choose to activate incentives, it is possible that its trading volume could rapidly approach levels similar to those of leading Layer 2 solutions.
BEN SPARANG◎ (@bennybitcoins), the Head of Strategic BD of the Solana Foundation, took a different approach to interpreting TVL. By introducing on-chain volume to the TVL data, @bennybitcoins calculated “DeFi Velocity”, which paints a different picture.
Although the Solana DeFi ecosystem has been through a lot of hardship over the last quarter, it remains the most actively used on a DeFi Velocity basis, as introduced by @bennybitcoins. On a 7-day volume, Solana had a score of 1.83, while Ethereum had a score of 0.43.
Solana is in close competition with Ethereum and Polygon in daily active addresses, which measures the number of unique active addresses on the blockchain on a given day.
On-chain data shows that the number of daily active addresses on Solana has remained relatively stable compared to the average in 2021, even as the price of Solana dropped 95% from its all-time high.
The stability in daily active addresses suggests that the Solana network and its user base are resilient.
Measuring developer activity on a blockchain is a critical task. It is important to note that there is no standardised method for accurately calculating this metric.
According to a recent report from the Solana Foundation, as of November 2022, there are a total of 2,053 active developers working on projects with a Solana integration, with 1,654 solely focused on Solana-based projects.
Isolated metrics might not paint the full picture nor provide an independent, accurate source of information, especially when the goal is to find where the best ROI might be at.
Market Capitalisation doesn’t tell a story, nor does the Active Addresses metric, but they can be used to build a strong metric: Market Capitalisation per Active Address. This metric can calculate how undervalued, or overvalued a protocol is based on its number of active addresses and the total market capitalisation of the blockchain. The smaller the result, the more undervalued a network is. Data shows that Solana is the most undervalued network, with a McA of $27,884.
For example, Avalanche’s Market Cap is 70% of Solana’s Market Cap, but its McA is 525% higher, allowing the conclusion that Solana is more undervalued than Avalanche, according to this metric.
One of the main narratives for Solana has been the decentralised perpetual trading, due to Solana’s low transaction fees and speed.
Orca Protocol is a decentralised finance (DeFi) project, built on Solana. It aims to provide users with a fast, secure, and easy-to-use DEX for swapping coins and providing liquidity to the ecosystem. The Solana community describes Orca as one of the most user-friendly platforms on Solana, due to its simple, fast, responsive UI.
Although many projects failed or weakened after the FTX crash, Orca outperformed with an increase in market share and liquidity provision. Orca averages 50% of the total daily DEX volume.
Drift Protocol is a decentralised exchange that offers transparent and non-custodial trading. Users can deposit collateral to trade perpetual swaps with up to 10x leverage, borrow or lend at variable rate yields, stake/provide liquidity, and swap spot tokens. Drift's cross-margined risk engine powers its suite of DeFi tools, providing traders with capital efficiency and protection. Each tool within the protocol extends functionality without over-extending risk.
In March, Drift Protocol reached a milestone of $250M cumulative volume traded.
Zeta is a derivatives exchange that aims to make it easy for anyone to trade derivatives.
Zeta's platform offers both options and futures, allowing traders to hedge against market movements, speculate on price changes, and take positions on several cryptocurrencies. Zeta also offers under-collateralised trading and cross-margin, which gives traders more flexibility and control over their positions.
The goal of Zeta is to democratise the derivatives market and make it accessible to everyone.
Blockchain technology has the potential to democratise the investment landscape. One of the most talked about use cases is Real Estate investing. Parcl is the first mover on Solana, with its user-friendly real estate trading platform, allowing users to either short or long several housing markets in the USA such as San Francisco, Los Angeles, Miami, Manhattan and more.
As blockchain adoption grows, narratives like Real Estate investing will draw more liquidity to certain ecosystems. Parcl is setting the stones for adoption and liquidity to increase on Solana.
Data and sentiment show that Solana’s strongest narrative of today is NFTs. The growth of NFTs on Solana resulted in fast innovation sparked by an ecosystem’s need to experiment with new use cases and forge new paths.
One of the winning narratives is NFT DeFi, a merge of DeFi principles with the gamification of NFTs. Solana has seen a unique shift in its NFT ecosystem. Teams are developing winning products far before releasing an NFT collection, the opposite of what was happening during the last bull cycle.
It is apparent how the Solana NFT Community matured to the point where the majority of its members do not mint collections that claim too much, backed by too little. Instead, they pay a premium on already established projects.
The SolanaFloor NFT Index consists of a carefully selected basket of Blue Chip collections based on multiple weighted criteria: volume, social trends, age, and other statistics.
The SolanaFloor Chart presents the index in SOL (green) and USD (purple).
The index in SOL terms is a valuable tool for any long-term NFT investor, trader, or researcher. While Technical Analysis is arguably inaccurate for most NFT projects under 4 months of existence, this chart presents a big enough timeframe (Year-to-Date) for valid analysis.
The USD index sits at a 3-month high of $1,167, representing a 250% growth since the beginning of the quarter.
The SOL Index is near its highest level of the quarter, at around 140 SOL.
Claynosaurz is one of the biggest surprises of 2022, and according to a large percentage of the Solana NFT community, one of the most promising projects for 2023. Claynosaurz minted on arguably the worst month of Solana's history. They were always very vocal about the decision to take on the challenge to contribute to the revival of the Solana NFT community. Data and public sentiment suggest they’re doing a great job.
The collection is now ranked in the TOP10 by Market Cap, with a floor price hovering around $1,800.
Famous Fox Federation (FFF) is a well-known project that has released several successful products. The team has developed more than 20 tools used by the Solana NFT community.
These tools include an exchange, a platform for NFT raffles, a peer-to-peer swap platform, and an NFT lending platform named Citrus, rivalling Sharky.
Most of these tools are free or require a small fee in $FOXY tokens. FFF has created a functioning economy around its tokens, which are widely used and provide utility to many Solana NFT users.
The peer-to-peer NFT lending and borrowing platform has seen steady growth since launching its 10,000-item NFT collection.
Sharky currently has a large user base and a significant market share, with more than 15,000 users, over 236,000 loans taken and over 4 million Solana in total volume.
Galactic Gecko Space Garage (GGSG) is one of the oldest NFT projects in the Solana ecosystem. Launched in 2021, the project has been through hardship and even what many call a slow rug. Since the project changed hands from the founders to a group of community members, it has been climbing through the leaderboard, having reached a SOL floor price all-time high.
One of the many achievements of the Geckos this quarter was CoinGecko’s change of PFP to a GGSG.
Many analysts and thinkers argue that DePIN will play a vital role in the future of Blockchain Technology. Due to its infrastructural and technical advantages, several DePIN projects are building on top of the Solana network.
Decentralised Physical Infrastructure Networks are networks designed to distribute physical infrastructure and resources across a network of nodes, rather than relying on a centralised infrastructure. In these networks, each node is responsible for maintaining and managing a portion of the infrastructure.
DePIN can be applied to several infrastructure systems, such as energy grids, transportation networks, and water systems. By decentralising the infrastructure, these networks can increase resilience, reduce the risk of catastrophic failures, and improve efficiency by reducing the need for long-distance transportation of resources.
The Helium blockchain network is a decentralised wireless network designed for Internet of Things (IoT) devices. It uses a consensus mechanism called Proof of Coverage (PoC) to validate wireless coverage and data transmissions. The Helium network enables low-power, long-range wireless communication for IoT devices by leveraging the LoRaWAN technology.
The network is built on blockchain technology and uses its native HNT token to incentivise network participants to contribute their resources, such as bandwidth and coverage, to maintain the network's operations. The Helium network has gained significant adoption for IoT use cases, including asset tracking, environmental monitoring, and smart city applications.
Global maps are largely controlled by a small number of companies which leads to high costs for businesses, abuse of personal data, censorship, and uneven coverage.
The Hivemapper Network is a system that incentivises map coverage, freshness, and quality with ownership. By installing a simple 4K dashcam on a car or truck, a contributor can earn crypto, own part of the decentralised global map, and support the world’s critical geospatial infrastructure cost-effectively.
The Render Network is a decentralised cloud computing network that enables developers to deploy and scale web and application services without the need to manage the underlying infrastructure. The platform uses blockchain technology to create a trustless network of computing resources contributed by users worldwide, eliminating the need for centralised cloud providers.
Developers can deploy and scale their applications using the Render Network's easy-to-use interface and pay only for the resources they use. Render Network uses the RND token to facilitate transactions within the platform, including paying for services and incentivising resource providers. The Render Network's mission is to democratise cloud computing by providing a more accessible and cost-effective alternative to traditional cloud providers.
Remittances, the financial transfers made by migrant workers to their families in their home countries, are vital to the global economy, especially in developing nations. They improve the living standards of poor people, providing access to education, healthcare, and better hygiene, and enabling them to save for retirement.
Despite the COVID-19 pandemic, the inflow of remittances to low and middle-income countries was not significantly affected, with over $540B received in 2020, accounting for 75% of total remittances.
With its low fees, high throughput, and user-friendly interface, Solana is a good blockchain platform for handling remittances, making it easy and affordable for migrant workers to send money back to their families quickly.
CandyPay is a decentralised payment system that facilitates seamless payments through blockchain technology. Completing a transaction on the Solana network costs less than $0.01 while paying with a credit card can range from 1.8% to 3.5%. This payment system allows merchants to accept US digital dollars directly at the point of sale with almost no cost and immediate settlement, without requiring intermediaries or significant fees
The FTX crash paved the way for the renewal of an old narrative: trading in decentralised protocols. The FTX bank run sparked runs on other exchanges, as mass panic and fear of contagion led investors to do everything possible to safeguard their funds. Decentralised protocols saw a big inflow of funds previously held in centralised exchanges.
Although centralised exchanges (CEX) dominate transaction volume, decentralised exchanges (DEX) are more secure, transparent, and less prone to errors and bugs. In addition, trading fees are generally lower.
When it comes to handling millions of users on decentralised trading protocols, most Layer 1s and Layer 2s fall short. Solana, however, shines brightly as one of the top contenders, if not the champion, for this purpose.
Solana's qualities as a blockchain for decentralised protocol trading stem from its lightning-fast latency and sky-high TPS. This combo allows for high-frequency trading without a hitch. Add in its near-zero fees, and you've got a recipe for frictionless, seamless transactions.
On Christmas day, the announcement of the NFT collections DeGods and y00ts bridging to Ethereum and Polygon came when the sentiment was already negative. Contrary to the overall sentiment, the Solana NFT community responded to the fear by doubling down on their conviction. Famous Fox Federation, Taiyo Robotics, ABC, and more hit all-time highs in the following days as the community showed their support for the ecosystem.
Something else sparked a new sentiment: BONK.
BONK is a memecoin that launched on the Solana Network on Christmas Day (December 25th). It has since taken over the Twitter timeline and even mainstream media, with Forbes covering its explosive growth.
BONK’s tokenomics were designed to counter the Alameda-style tokenomics of certain Solana DeFi projects, where the Fully Diluted Market Cap would reach up to 20x the Circulating Supply. The BONK team selected a list of Solana NFT collections and airdropped their holders 50% of the token supply.
Data shows the rise of BONK contributed to a revival of the Solana DeFi ecosystem. Many DeFi protocols rushed to integrate BONK trading/staking/LP farming, more users were able to add liquidity to DeFi.
Weekly DEX volume on Solana is up over 200% while overall DEX volume (all blockchains combined) is up less than 3%.
One added benefit of BONK is that it may have created a connection between Solana NFT and DeFi, as many NFT users have never used any Solana DeFi protocol in the past other than the basic token Swap feature.
The Solana Grizzlython attracted over 10,000 participants from 70 countries, with a record-breaking 800 projects submitted. Mattytay, Solana Foundation's Head of Growth, shared on Twitter that 91% of participants plan to continue developing their hackathon projects full-time and secure seed funding.
Out of the 800 projects, 37% were submitted by university students, demonstrating that Solana is drawing talent from the upcoming generation of creators.
For context, the final hackathon of the 2021 bull market saw approximately 550 projects submitted. Despite taking place during a bear market, Grizzlython exhibited a 45% growth compared to the Ignition hackathon.
Solana Monkey Business (SMB), one of the earliest early NFT projects on the Solana blockchain, unexpectedly changed ownership. Hadeswap, a Solana-based NFT marketplace, announced it acquired the intellectual property rights to the project.
In a statement on their website, Hadeswap committed to "respecting the heritage" of Solana Monkey Business while addressing its limitations and expanding its scope.
Solana Monkey Business launched in June 2021 as one of the first Solana NFT projects, initially releasing 205-pixel collectables depicting a space monkey. The Gen2 collection included 5,000 NFT profile pictures (PFPs), which have become popular among Solana collectors over the past year.
SMB ACQUIRED BY MONKEDAO
Recently, MonkeDAO made a proposal to acquire SMB. A HadesDAO governance vote passed the proposal with over 90% supporting vote.
Tensor, a startup focused on NFT trading on the Solana blockchain, raised $3 million in a funding round. The funding was led by venture capital firm Placeholder, with participation from other notable investors such as Solana Ventures and Big Brain Holdings.
Tensor has been executing a strong marketing campaign around airdrops based on NFT Trading and Liquidity provisioning, which allowed it to reach close to 50% market share on the Daily Timeframe, for several days in the last month. It has averaged a 30% market share, thus reducing the almost monopolistic status of Magic Eden. Users support the platform claiming a seamless and easy user experience.
The Web3 offering from Saga is centered around the Seed Vault, an inbuilt custody solution that safeguards your wallet's seed phrase within a protected environment on your phone.
This feature is complemented by an integrated store for decentralized applications (dapps). Currently hosting just over a dozen dapps, this store offers a more seamless and user-friendly experience than conventional web applications. By utilizing wallet apps like Phantom or Solflare, you can authorize Solana network transactions with a simple touch of the sensor, accompanied by screen taps and occasional PIN inputs for added security.
Since its release, orders paid with crypto have almost reached $1M worth of SAGA phones.
The Helium Network, a DePIN project, is set to migrate to the Solana blockchain network, as stated in a blog post by the core developers. After "months of meticulous planning and technical development," the Helium Foundation has established April 18th as the official migration date.
With nearly 1 million hotspots onboarded, the Helium community is increasingly focusing on commercial demand for the network.
Form Function, one of the two biggest NFT marketplaces for 1/1 art, unexpectedly announced its decision to shut down. FormFunction had established itself as a go-to platform for many artists looking to grow an audience and make a living off their art. FormFunction’s shutdown led to an exodus of artists to the biggest 1/1 NFT Art Marketplace, Exchange Art (EA).
The FormFunction team made the last move of open-sourcing the code, allowing anyone to recreate and revamp the website. The 1/1 Art Community applauded the move.
Solana Crossroads is an in-person event organised by Step Finance, in partnership with several prominent organizations of the crypto ecosystem such as Coingecko and The Defiant.
The first-ever Solana Crossroads event took place in Istanbul, for several reasons. Turkey is one of the biggest crypto adopters in the world, with over 35 Million Adults having had contact with it one way or another. The country has one of the youngest populations in the world. The goal of Crossroads is to expand blockchain, and more specifically Solana, to the Turkish crypto community. The first event was a success, with an attendance of over 800 people.
The DePIN narrative is gaining momentum as Helium, Hivemapper, Render, and other projects consolidate their ground on Solana or begin weighing a migration.
The Solana ecosystem remains strongly committed to the NFT-DeFi narrative, which has proven to be a significant driving force.
Despite facing fear, uncertainty and doubt, Solana perseveres with events like the Solana Grizzlython hackathon, which saw an overwhelming response with over 10,000 applicants and more than 800 project submissions.