Author: Franklin Bi, Partner at Pantera Capital; Cosmo Jiang, Portfolio Manager at Liquid Strategies; Eric Wallach, Investment Analyst; Translation: Jinse Finance xiaozou
1. Blockchain oligopoly
How many blockchains are there? It’s a question we hear often, but a better question should be: How many blockchains must exist? In other words, how many blockchains are needed to realize the full potential of blockchain technology? To answer this question, we should look to the roots of the blockchain ecosystem: developers.
The “customers” of blockchain are developers. The applications and protocols built by developers drive the demand for on-chain bandwidth (i.e., block space). Developer preferences and cultural factors will greatly influence the development path of cryptocurrencies.
Historically, developer-facing technologies have tended to cluster around a few dominant players—usually two or three oligopolies, each using different approaches to satisfy different developer preferences. We see this with operating systems (Windows, macOS, Linux), game consoles (Sony, Microsoft, Nintendo), and mobile platforms (Apple, Android). As a technology cycle matures, perhaps 70-90% of the market will converge around the largest players. Eventually, the market will approach equilibrium unless a new breakthrough upsets the equilibrium and resets the landscape.
A similar pattern is emerging in the blockchain ecosystem.
2. Solana’s Rise
Ethereum has historically dominated blockchain developer activity, with approximately 70-80% of blockchain developers building on Ethereum or chains compatible with the Ethereum Virtual Machine (EVM). But Ethereum’s dominance appears to be giving way to a multipolar model.
Solana has gained significant market share over the past year. This shift is reminiscent of how Microsoft dominated the early desktop computer market, but Apple later broke through with its vertically integrated approach. Solana is now a major contender for the future of blockchain.
Solana’s monolithic architecture has a product roadmap focused on optimizing each of its components, similar to Apple’s approach to vertically integrating hardware and software in macOS. This approach has several benefits:
Seamless user experience: Without the need to bridge between multiple chains, Solana provides a smooth, intuitive experience for developers and end users.
Faster innovation: Solana’s streamlined architecture supports more efficient product upgrades and faster iteration cycles.
Enhanced security: By minimizing dependencies and points of failure, Solana’s single-chain design can provide better security and stability, just as Apple’s tight control over its ecosystem can lead to better security and stability.
3. Solana Use Cases
Solana's architectural advantages support a range of use cases and user experiences that may be more challenging to implement on modular blockchains such as Ethereum and Cosmos. These characteristics are particularly valuable for use cases such as content distribution, DePIN (decentralized physical infrastructure network), and CLOB (central limit order book).
One notable example of an application leveraging Solana’s capabilities is DRiP, a platform for earning free collectibles from creators, which can be music, art, videos, and more. To date, DRiP has sent 168.95 million collectibles to 227 wallets. Much of its success is due to its ability to send millions of NFTs to collectors around the world for free — something that is only possible on Solana. The platform’s seamless and instant user experience is enabled by Solana’s high-performance blockchain, which allows for fast, low-cost transactions, and is also supported by the compressed NFT standard built by Metaplex, which reduces the cost of minting NFTs to less than a cent.
Another application that showcases Solana’s strengths is Hivemapper, a decentralized mapping network that creates highly accurate, up-to-date detailed maps using data collected from dashcams, drones, and other sensors. The project uses Solana’s high-speed, low-cost transactions to process the massive amounts of data generated by network contributors and rewards them with tokens for their participation. Solana’s scalability and efficiency make it possible for Hivemapper to create a decentralized alternative to traditional mapping services, with the potential to disrupt industries such as transportation, logistics, and urban planning.
Solana’s high-performance blockchain can also create capital-efficient financial markets. For example, Phoenix is a Solana-based decentralized exchange built on an on-chain CLOB (central limit order book). This approach leverages Solana’s 4,000 transactions per second processing capacity, 400 millisecond block times, and low fees to bring a trading experience similar to Nasdaq or CME. Similarly, MarginFi is a Solana-based lending protocol that manages collateral with greater speed and predictability, enabling collateralized borrowing of long-tail, volatile assets. Solana’s speed and low fees are key to MarginFi’s ultra-efficient liquidations, helping to minimize the impact of bad debts on other market participants—particularly useful during Wall Street’s last financial crisis.
These are just a few examples of how Solana’s monolithic architecture enables high-quality applications. As more developers realize the many advantages of building on Solana, we will see more and more innovative projects using Solana’s high-performance blockchain.
4. Strong fundamental growth
The situation for Solana is changing in real time, and key fundamentals such as user growth and transaction fees are accelerating at a rapid pace. Solana has become a major destination for retail users and meme coin traders, replacing Ethereum's NFT dominance in the previous cycle.
Solana’s unique active addresses have soared from 14,000 in October 2020 to 202,000 in October 2023 (a local low) and are now at nearly 1.34 million, showing an incredible growth in user activity on the platform. At the same time, priority fees on the network have exploded, soaring from less than $100,000 per month in mid-2023 to an all-time high of over $60 million in March 2024, highlighting the strong demand for Solana block space.
One of the clearest signs of Solana’s surging retail adoption is the explosion of new tokens in its ecosystem. Starting in January 2024, a massive influx of new tokens has been added to Solana, far outpacing other chains like BNB, Ethereum, and Polygon. By May 2024, Solana accounted for 85% of all new tokens on DEXs, up from 50% a year earlier. The growth of Solana-based tokens reflects Solana’s retail adoption strength, driven by meme coin activity.
Solana’s main wallet, Phantom, has dominated the iOS App Store rankings, further validating the massive influx of retail users for Solana. From late May to early June, Phantom was ranked#1in the Finance category. Even more astonishingly, it topped the charts for free apps in all categories, beating out very popular social media, entertainment, and gaming apps. For a crypto wallet to become the most downloaded app in the entire US App Store is an amazing feat, and it shows that Solana has received massive mainstream adoption. This influx of retail users is closely tied to the meme coin trading boom on Solana DEX.
Speaking of DEXs, Solana’s share of decentralized trading has soared from almost zero at the beginning of 2021 to over 24% in May 2024. The rate of growth is astonishing, with Solana accounting for over 60% of incremental DEX trading in May 2024 alone. This shows the incredible momentum behind the Solana DEX ecosystem and highlights how its high-performance architecture is enabling it to quickly take market share from competitors.
Crucially, Solana’s soaring user activity and DEX trading volume are translating into real economic value for SOL token holders. The total value generated by Solana transactions, measured in transaction fees and MEV, has grown to a level comparable to that of Ethereum. This highlights that Solana’s growing adoption is creating a powerful flywheel effect - more usage drives more fees, which in turn attracts more stakers, making the network more decentralized and secure.
Taken together, Solana's expanding retail user base, record-breaking token issuance, DEX growth dominance, and surging staking rewards make for an amazing fundamental story. Solana's architectural advantages enable it to capture a huge share of new demand flowing into the blockchain space, accelerating its rise as a competitor to Ethereum. With the fundamentals firing on all cylinders, Solana appears poised to continue its upward trajectory.
5 Conclusion
Solana’s monolithic design and relentless focus on optimization provide unique advantages in user experience, developer agility, and security. These advantages position Solana to thrive and capture market share from a fiercely competitive ecosystem as the blockchain industry matures.
While the road ahead is not smooth, Solana's fundamentals are moving at full speed. Retail adoption is soaring, developers are flocking to build breakthrough applications on Solana, and value capture is accelerating. As the Solana ecosystem continues to grow and mature, Solana's architectural advantages and vibrant community both indicate a bright future.
