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.
This report will also highlight the most prominent narratives and projects that have emerged in the Solana ecosystem during the last quarter such as AI, DePIN, Gaming and more.
In the first half of the 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. The tightening of 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 loss. This development has heightened concerns about the stability of the global financial system and the potential implications for the broader economy.
The inflation rate has been trending down sharply, while the unemployment rate stays at surprisingly low levels, given the sharp rise of interest rates by the FED.
On Monday, the United States Securities and Exchange Commission (SEC) took the cryptocurrency world by storm, announcing a major lawsuit against cryptocurrency exchange giant, Binance. However, what has raised eyebrows in the crypto community is the SEC's assertion that certain altcoins, including Solana, Polygon, and Cardano, are classified as securities.
The list of coins labelled as securities extends to Binance's own BNB token, their stablecoin BUSD, and several others, encompassing some of the largest cryptocurrencies by market cap. The immediate impact of the SEC's enforcement action was a significant drop in the prices of these tokens. Solana, for instance, saw its value plunge by over 6% within an hour of the announcement. Other coins such as Algorand, Polygon, and Polkadot, also saw their prices fall dramatically. Less than 24 hours after Binance, the SEC filed a lawsuit against Coinbase, which also stated that Solana and other altcoins were a security.
In June, BlackRock, the world's biggest asset manager, filed for a bitcoin exchange-traded fund (ETF) that would allow investors to get exposure to the cryptocurrency, as the asset class comes under intense regulatory scrutiny.
BlackRock's iShares Bitcoin Trust will use Coinbase Custody as its custodian, according to a filing with the U.S. Securities and Exchange Commission (SEC). The U.S. regulator has yet to approve any applications for spot bitcoin ETFs, as it rejected more than 30 applications so far. Investors and analysts have shown a positive sentiment towards Bitcoin as Blackrock shows a track record of 575 ETF approvals out of 576 requests so far.
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 $19.00-$21.00 area.
Solana was consolidating for months until the unfortunate lawsuit of the SEC against Coinbase and Binance, which named SOL a security in both lawsuits. It has recently almost fully recovered from the SEC’s attack, as the token sees increased support and narratives seem to be positively affecting the price.
We’re almost a year into the collapse of the second-biggest crypto exchange at the time, and although many Crypto community members, influencers and analysts discard Solana due to what happened to FTX, the Solana community does not share the same opinion. The ecosystem continues to move forward with more than 1,000 developers at the forefront of blockchain innovation on all fronts, from Exchanges and trading to decentralised physical infrastructure networks.
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 33, 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.
Note: Ethereum is 20 and not 2.
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.
Solana is not only decentralized, but it is more decentralized than most blockchains, such as Avalanche, Cardano, NEAR and Aptos. Active Stake Hosting distribution is one of the most balanced, which provides further proof that Solana is resilient and decentralized.
According to the latest data from Electric Capital’s Developer Report, as of April 2023, Solana has 1,234 active developers. Active developers dropped by 12% YoY, however, this number is 339% higher than two years ago.
Measuring developer activity on a blockchain is a critical task. It is important to note that there is still no standardised method for accurately calculating this metric.
Monthly Active Developers saw a drop in 2023, mainly due to a decline in one-time developers and part-time developers. One-Time developers are developers who contributed code once in a rolling three-month window, whereas part-time developers have contributed code less than 10 days out of a month.
Although data points to a decline in the full-time developers of the Solana ecosystem, it does not represent a significant decline, whereas One-Time and Part-Time developers have seen a sharp drop from late 2022 levels. The sharp drop can be explained by the FTX collapse and the bear market conditions. Not only did many Solana-based projects have their treasury on the FTX Exchange, but also FTX was arguably the biggest investment source for Solana projects.
Recently, the Solana Foundation created several grants and has been actively investing in the ecosystem.
Data shows that the second quarter did not translate into higher Total-Value-Locked (TVL). Solana TVL has been rather stagnant throughout 2023, in the range of $200M and $300M. Although data does not yet show it, the Solana DeFi ecosystem is expanding with the growth of projects like Marinade and mrgnfi which have consistently been developing incentives for DeFi adoption.
Solana has shown resilience over the first 6 months of 2023, averaging 300K daily active addresses. Solana is on par with Ethereum and Polygon’s active addresses, and slightly below Bitcoin’s average numbers. It is important to note that the FTX crash happened at the end of 2022, and data suggests that the Solana user base did not decrease as it was expected.
The stability in daily active addresses suggests that the Solana network and its user base are resilient.
One of the main narratives for Solana has been the decentralised trading, due to Solana’s low transaction fees and speed.
Year-over-Year, volume on decentralised exchanges is on average, four times higher in the first 6 months of the year when compared with the same period of 2022. The sharp increase is explained by the investment and development of DEXs and Perpetual Trading DEXs like Drift Protocol, Jupiter Aggregator and Zeta Markets, among many others.
The FTX collapse sparked the biggest week ever for Solana DEX Volume, followed by a full month of stagnation. Since then, the DEX narrative has been attracting users and consequently new capital.
Apart from December, Monthly volume did not slow down since the FTX collapse.
On Ethereum, the Liquid Staking market is big and has found its key players. Marinade Finance is the key liquid staking player on Solana, with its non-custodial liquid staking protocol, allowing users to stake their SOL tokens using automated staking strategies and receive “marinated SOL” tokens (mSOL). Users can then use the mSOL tokens to participate in several decentralized finance activities.
Marinade has a $125M TVL, making it the biggest DeFi app on Solana, with a 45% market share. Its token mSOL has 73,877 holders and a $120M market capitalization.
Data and sentiment show that one of Solana’s strongest narratives 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 quarter-high of $3,227.
The SOL Index is at its all-time high, with a total of 167 SOL.
In late June, Solana surpassed Ethereum in NFT Volume for the first time ever. In 24 hours, Solana did $25.5M in volume, against Ethereum’s $24.7M. The main cause for this achievement was the launch of SMBs
The fact that Solana has endured so much more in the last 365 days when compared with most other blockchains, gives an added meaning to this achievement.
NFT lending is a growing practice where individuals pledge their NFTs as collateral to obtain loans on platforms like Sharky. This form of lending allows investors or lenders to earn interest on their investments. NFT lending offers the potential for higher returns compared to staking and standard crypto-based lending. In NFT lending, borrowers secure their loans by locking their NFT assets as collateral.
NFT lending is possible through decentralized finance (DeFi) applications. DeFi platforms use smart contracts to govern the lending terms and rates for NFT loans. As NFT lending is a relatively new trend, it is expected to evolve further as more individuals and capital participate, and regulatory measures may come into play.
The Solana NFT Lending ecosystem is rapidly growing. In the last 30 days, Lending Volume corresponded to 50% of the Solana NFT Trading Volume.
The main lending platforms on Solana are Sharky, Citrus, Frakt and RainFi. Sharky holds a 76% dominance of the lending market, followed by Citrus with 16%, Frakt with 7% and RainFi with 1%.
Sharky, Solana's biggest NFT DeFi platform, surpassed Magic Eden and Tensor’s monthly volume. Sharky recorded over 1 million SOL volume, followed by Magic Eden’s 940K SOL and Tensor’s 850K SOL. Data shows the NFT market is maturing and growing beyond trading.
Web3 gaming, or blockchain gaming, offers several advantages over traditional gaming platforms like Steam.
In Web3 gaming, players have actual ownership of in-game assets and can trade or sell them outside the game. Assets are stored on a blockchain which is fully transparent and secure. In traditional gaming, players do not truly own their in-game items, and their value is confined within the game’s ecosystem. In Web3, players can use their assets across multiple games, due to the interoperability between different games and platforms - there are theoretically no limitations. This is particularly interesting as if one game shuts down, the assets don’t disappear and may still have value across several other games, unlike traditional gaming.
Blockchains are generally decentralized and not controlled by a single entity. Their decentralization nature reduces the power imbalance between players and game developers, promoting fairness and transparency in gameplay. In addition, web3 gaming gives power to the players by introducing the concept of play-to-earn, where players can earn real-world value by playing games and acquiring rare assets. The assets can be traded or sold, allowing players to monetize their gaming skills and time invested. In traditional gaming, gamers can earn income if they monetize themselves through streaming, video editing or by becoming professional gamers which less than 1% do so. Web3 gaming is for the 99%.
Star Atlas is an immersive RPG set in a vast and boundless universe. Powered by the Solana network, this game ventures into uncharted territories, introducing an innovative play-to-earn experience.
As a player, you choose your path and join one of the three prominent in-game factions in Star Atlas.
Star Atlas has a marketplace where players can buy and sell resources and services, both within and outside the game. Players acquire items that can be configured for ship missions, and land ownership within the metaverse to establish mining operations.
The goal of Star Atlas is not only to create an immersive gaming experience but also to create a thriving economy on top of blockchain technology.
Star Atlas has consistently accounted for 5% or more of the daily transactions on the Solana blockchain. This accomplishment is even more impressive considering the current bear market in the crypto industry, with limited new participants entering the scene. Star Atlas has cultivated a strong and dedicated community, possibly positioning itself for substantial growth during the next bullish market cycle. The established core community holds immense value and represents a significant asset for the game's future expansion and success.
Artificial Intelligence systems can store and share data on the blockchain, as it provides better data security and privacy. Blockchain creates the necessary environment for transparency and accountability, which makes AI outputs more trustworthy. In addition, blockchain can incentivize data sharing and collaboration through tokenization and reward mechanisms, as it already exists for other use cases.
Although Artificial Intelligence has the potential to be one of the main drivers of blockchain adoption, it is important to remember that most blockchains are either too expensive, do not have a resilient infrastructure to support strong demand and activity, or both.
Languages like Python and R are more widely used in the AI community due to the number of available tools, libraries and mature ecosystems. On the other hand, Rust’s high performance and interoperability may make it more suitable for intensive tasks. In addition, Rust’s ecosystem is growing fast.
Considering the existing blockchains, Solana is the biggest network built with Rust. In addition, Solana is the fastest blockchain in the crypto ecosystem, making it an attractive environment for high-intensity use cases to be developed. Interestingly enough, the DePIN narrative is thriving on Solana, as projects like Helium and Render migrate their ecosystems to Solana due to its speed, low costs and composability.
Solana is scalable, has low transaction fees and has fast confirmation times. It is the most powerful blockchain, while also being the cheapest. Solana has a fast-growing developer ecosystem, developing use cases which are Only Possible on Solana. In addition, it is one of the most active and resilient ecosystems in crypto, having survived the FTX crash and the bear market so far.
The Solana Foundation is laying the ground for Artificial Intelligence development. Recently, @solanalabs introduced a ChatGPT Plugin for enhanced user interaction. Users can check wallet balances, transfer tokens and purchase NFTs through the Plugin.
The Solana Foundation created an AI Grants Program of $10M, to encourage experimentation at the intersection of blockchain development on Solana with Artificial Intelligence. The program received over 50 applications in the first week. In addition, a three-month-long accelerator program for university students was created, focusing on blockchain and AI experimentation.
Hivemapper, a DePIN project built on Solana, launched AI Trainers, which converts real-world imagery into digital maps, resulting in 5.7M AI training reviews and consensus on half a million objects.
As the AI Narrative strengthens, developers increase their efforts to find the ideal ecosystem to build on. In May, Render (RNDR) moved its Burn-and-Mint mechanism from Polygon to Solana, as a result of a governance vote. Render is the biggest gainer of 2023 in % gains so far, largely due to the AI narrative.
RNDR is a blockchain-based project developed by OTOY that aims to transform cloud rendering and distributed computing, through the creation of a decentralized network of rendering nodes.
The global shortage of GPUs due to increased demand for graphic rendering solutions is exacerbated by supply chain complications. In this context, Render emerges as a decentralized computing solution, providing a cheaper and faster alternative to traditional rendering methods. By utilizing distributed computing power, Render democratizes high-quality rendering and becomes particularly valuable in the context of the growing Metaverse vision. Due to these reasons, many argue that Render is the most important AI token.
Helium, the leading decentralized IoT connectivity provider, has completed its much-anticipated migration to the Solana blockchain. The transition promises to harness the power of Solana's lightning-fast and low-cost infrastructure to deliver improved performance, scalability, and security to the Helium ecosystem.
The Solana Foundation leads the way by making Solana the first significant smart-contract blockchain to have its emissions tracked in real time.
The emissions monitoring system was created in partnership with Trycarbonara, a carbon data platform, and integrates software directly into Solana nodes, offering the most detailed and precise measurement of the blockchain's carbon footprint so far. This measurement fluctuates according to each validator's throughput, their online and offline status, and changes in the validator.
Grayscale has launched a Solana trust under the symbol $GSOL.
Since November 2021, the Trust has offered a private placement to accredited investors. As of April 14, 2023, 304,427 outstanding GSOL Shares exist. After a mandatory one-year holding period under Rule 144 of the Securities Act of 1933, Shares created through private placement become eligible for public market sale.
Investors with access to U.S. securities can freely trade GSOL Shares through their investment accounts, just like other securities. Grayscale's introduction of $GSOL brings multiple advantages to the Solana ecosystem. The network gains enhanced visibility, credibility, and appeal to a wider range of investors, including institutional ones. Moreover, it is reasonable to expect that market liquidity will improve, potentially resulting in better performance and decreased volatility.
Drip, a Solana-based project aiming to provide digital gifts from renowned creators for free, was a key player in launching the biggest NFT PFP Collection on Solana, with a total of 350,000 NFTs airdropped to its users.
'The Faceless' collection's success in the Solana ecosystem offers key insights. The collection's secondary sales market, characterized by almost 100K purchases by thousands of unique buyers, highlights its appeal to both seasoned Solana users and newcomers.
The DePIN narrative is gaining momentum as Helium, Hivemapper, Render, and other projects consolidate their ground on Solana. The Solana ecosystem remains strongly committed to the NFT-DeFi narrative, which has proven to be a significant driving force, as it drives on average 40% of the daily NFT ecosystem volume. Overall, the Solana ecosystem continues to push the boundaries of innovation and its community has become one of the most resilient in the crypto ecosystem.