Original title: The Unique Way the Solana Trading Ecosystem Is Making Bank
Original author: Tom Carreras
Original source: https://www.coindesk.com/
Translated by: Daisy, Mars Finance
Trading tools on Solana are extremely profitable, rivaling or even surpassing DeFi blue-chip projects like Maker, Aave, or Lido.
Solana’s on-chain transaction ecosystem is generating surprisingly high revenue.
This is due to its unique network architecture and the various possibilities it provides to traders.
As a standalone sector, Solana’s trading-related activities have become the third most profitable category in the cryptocurrency space, behind only stablecoins and Layer 1 chains.
There is a huge opportunity to make money providing infrastructure for the Solana on-chain marketplace.
This is the view put forward by David Duong, head of institutional research at cryptocurrency exchange Coinbase, and David Han, an institutional research analyst, in a report on Friday. They believe that if Solana's on-chain trading ecosystem is regarded as an independent financial sector, it is the third most profitable category in cryptocurrency, second only to stablecoins and Layer 1 chains.
“Solana’s transaction-related activity typically accounts for 75-90% of Solana’s transaction fees, which is much higher than Ethereum and other networks such as Base and Arbitrum,” Duong told CoinDesk. He added: “While Layer 2 solutions are also growing and innovating, they face different challenges in scalability and user fragmentation than Solana. Solana’s model, especially its fee mechanism and user activity patterns, is unique.”
This week, Coinbase appeared to confirm that view, announcing the launch of cbBTC, which allows for the trading, lending, and borrowing of Bitcoin (BTC) on Solana, an important functionality needed for decentralized finance (DeFi) to take off within that ecosystem.
In terms of data, according to DefiLlama, Tether's USDT and Circle's USDC stablecoins generated $93 million and $28 million in revenue respectively in the past seven days, while Ethereum, TRON and Solana networks generated $19 million, $11 million and $9.6 million in revenue respectively. At the same time, Solana-based protocols and trading robots followed closely behind. Trading robot platform Photon and memecoin power-promoting platform pump.fun both generated more than $6 million in revenue in the past seven days, exceeding the revenue of decentralized finance (DeFi) giants on Ethereum such as Maker, Lido or Aave.
This is mainly due to memecoins - joke cryptocurrencies with no practical use that are often extremely volatile. Pump.fun is a Solana-based protocol that allows users to easily create new tokens, making the network a hub for memecoin trading activity. Coinbase said that more than 3 million tokens have been launched on pump.fun since the protocol went live in January 2024.
This is where Telegram trading bots come into play, helping users buy and sell memecoin faster. Coinbase analysts wrote: "The revenue generated by Telegram trading bots is surprising, even exceeding that of pump.fun." The report pointed out that the most profitable bots, such as Photon, Bankbot, and Trojan, are all based entirely on Solana. This shows that there are a large number of traders on Solana who are less sensitive to execution fees, perhaps due to the high volatility (and lower liquidity) of its underlying assets.
“Our research also found that Solana’s fee spending typically peaks later in the day, during active hours on the West Coast of the United States, suggesting a specific group of active users there,” Duong told CoinDesk.
Tailor the on-chain ecosystem to user needs
Solana developers are aware that the network’s on-chain environment creates a unique dynamic — and some are trying to take advantage of it. For example, Zeta Markets, a decentralized exchange (DEX) that offers perpetual contracts, wants to allow its users to buy memecoin and trade on leverage without using multiple wallets.
“Traders are thinking, ‘Why would I trade on a decentralized exchange (CEX)? All my funds are already on Solana,’” Tristan Frizza, founder of Zeta Markets, told CoinDesk. “If you already have all your memecoin in a Phantom wallet, you might want to hedge it with a perpetual futures. On a DEX, it’s just a click away.”
Frizza said the ease of use is a huge draw, but it also means listing high-risk tokens that are not yet on any CEX. Not to mention the ability to use Solana tokens as collateral when holding positions, not just stablecoins. “No one wants to hold stablecoins in a bull market,” Frizza said, “They just want to put whatever assets they have in their wallet into their margin account.”
All of these characteristics are ultimately reflected in the data. The convenience of Solana DEX makes the trading volume of these protocols clearly different from Coinbase's trading volume - even Ethereum DEX trading volume is increasingly highly correlated with CEX.
“This suggests that trading activity on Solana is relatively decoupled from CEX activity and appears to be forming its own distinct ecosystem,” Coinbase’s report noted.
