Recently, with Goat, Pnut, Act, and other Memes consecutively launching on Binance, the Solana ecosystem is experiencing a new wave of excitement. According to Blockworks Research statistics, after October 19, 2024, Solana's on-chain daily fees have consistently exceeded Ethereum's for several days, and on October 24, revenue even surpassed $10 million. The popularity of the Meme sector has led various funds to continue entering the Solana ecosystem, making it the hottest ecosystem in the circle right now.
It must be said that Solana is indeed the hottest chain in this round of the bull market, with more than half of the star projects from the DePin craze originating from the Solana ecosystem, followed by waves of Meme trends, making it quite lively.
So, where does the high yield of the Solana ecosystem we see now mainly come from? How long can this hot state be sustained?
01
The fee situation on the Solana chain is similar to that of Ethereum. Solana's on-chain revenue also includes base transaction fees, MEV tips, etc. After the EIP1599 proposal, Ethereum burns all base fees, and MEV tips are directly rewarded to validating nodes. Solana also has a similar burning mechanism, where base fees are burned at a fixed rate (initially set at 50%), and the remainder is distributed to validators.
Therefore, when comparing the on-chain revenue of Ethereum and Solana, all destroyed base transaction fees are also included.
Specifically, Solana's on-chain revenue includes base fees, limited transaction fees, tips (Jito), and voting fees.
Looking at the trend of daily fees on the Solana chain, compared to the other two fees, the changes in base transaction fees and voting fees are not significant, but priority trading fees and tips have seen rapid growth since March of this year.
So, what are these two fees? The priority trading fee is easy to understand, as it is the fee users pay to speed up their transactions, generally added directly during trading. The tip (Jito) is an additional fee paid by users to validators, generally used for MEV-related transactions, with directed payments.
The rapid growth of both indicates an increase in the activity of the Solana network and a rise in DeFi activities, leading to greater network congestion. Users are more willing to increase priority trading fees to speed up transactions, while validators have more opportunities to capture MEV by optimizing transaction order.
So, what specific DeFi transactions are there on the Solana chain? Are they entirely driven by Memes?
Transactions on the Solana chain mainly include Meme (Pumpfun), Meme (Others), project Tokens, LST Tokens, stablecoins, and SOL transactions. Among these, project Tokens include all categories listed above, as well as DePin, SocialFi, and more.
In the past two months, the trading volume of all Memes has increased from 48% to 74%. Of course, the significant shrinkage in the proportion of other trading volumes does not mean a decrease in trading volume. During the market uptrend, the trading volumes of project Tokens, LSTs, stablecoins, and SOL on the Solana chain have all seen significant growth. However, the increase in Memes is indeed exaggerated, with a growth of 667% in the last two months. Therefore, other trading proportions have significantly decreased in comparison.
This also confirms the data above because of the rapid growth in Meme trading volume. Driven by the belief that 'time is money' in Meme trading, users are naturally more willing to pay priority trading fees. The more active the on-chain trading is, the more MEV opportunities arise.
02
Active Dapps on the Solana chain 1) DEX Currently, Meme trading is dominant on the Solana chain, so a number of DEXs are the most active Dapps. Among the many DEXs in the Solana ecosystem, Raydium stands out as the hottest. The data in the image below shows that thanks to the explosion of Memes, Raydium, which is deeply tied to Memes, has occupied 63.5% of the entire Solana ecosystem's trading volume. Meanwhile, Orca, which initially held an absolute advantage in the Solana ecosystem, has seen its market share squeezed from over 60% to about 15% due to the explosion in Meme trading volume.
PumpFun, as a Meme launch platform, also has a built-in Meme trading function, which accounted for nearly 5% of trading volume during this wave of Meme explosion, and there is a trend of gradual increase.
2) Aggregation DEX and trading bots In addition to direct trading on DEX, aggregation DEX and trading bots in the Solana ecosystem are also very active. The image below shows the market share of Solana ecosystem DEXs divided by trading source, with the latest data showing that Jupiter accounts for 33% of trading volume, while other protocols (including trading bots) account for 19%.
Jupiter, as the largest aggregation trading DEX in the Solana ecosystem, currently has a TVL of over $1.57 billion, setting a new high. Moreover, Jupiter has been very active recently.
First, on October 2, the proposal for '2.3 billion unclaimed JUP tokens to extend and fund ASR' was approved, extending the active staking rewards (ASR) for another year.
Subsequently, on October 8, a mobile application was launched, supporting various payment methods such as Apple Pay and credit cards, which is considered a new fiat on-ramp.
On October 17, the Solana MemeCoin terminal 'Ape Pro' was launched, aiming to achieve MEV protection and improve the issue of sandwich attacks in transactions. Under a series of actions, the price of Token JUP has also been very strong.
In addition to aggregation trading platforms, trading bots in the Solana ecosystem are also very active, contributing over 10% of trades. The top four in terms of revenue are Photon, Trojan, BONKbot, and Banana Gun. Photon achieved $29.85 million in revenue over the past thirty days, becoming the protocol second only to Solana's main chain revenue in the Solana ecosystem. Besides Solana's main chain and the Pump protocol, the other three top earning protocols in the Solana ecosystem are all trading bots, showcasing their ability to attract funds.
3) Other Dapps Although DEXs, aggregation DEXs, and trading bots around Memes are very popular during the entire Meme season, with the heat on the Solana chain, the price of SOL has also risen significantly, thereby driving staking, re-staking, borrowing, and leverage protocols in the ecosystem. Here are some currently popular Dapps. · Jito Jito is currently the DApp with the highest TVL in the Solana ecosystem, exceeding $3 billion, accounting for more than one-third of the entire Solana ecosystem's TVL. Jito supports users to deposit Solana or Solana's LST Tokens for re-staking. Compared to other staking protocols, Jito's biggest feature is its MEV suite, which extracts MEV income from transactions in the Solana ecosystem and distributes this income to stakers, thereby increasing their earnings.
Currently, Jito's re-staked deposits have reached a hard cap of $25 million, indicating that the second phase will raise the limit to meet more users' staking needs.
Kamino is a top-tier stablecoin and LST asset yield platform in the Solana ecosystem, integrating borrowing, liquidity provision, and leverage functions. Currently, the total TVL of the entire protocol has reached $2 billion.
Kamino supports one-click automatic compound concentrated liquidity strategies, making it easy for users to maximize returns by controlling borrowed funds. Additionally, Lend V2 is expected to be launched in the fourth quarter of this year, allowing permissionless creation of different borrowing markets to meet broader user needs and introducing automated single-asset borrowing vaults to aggregate liquidity across markets, aiming to become the foundational layer of finance on the Solana chain.
Marinade is also a liquidity staking protocol in the Solana ecosystem, currently with a TVL of $1.79 billion, ranking fifth after Raydium. However, although Marinade is also a liquidity staking protocol, its earnings are far less than Jito. Recently, Marinade has been pushing its Solana staking services aimed at institutional investors, and its TVL has increased by nearly 50% in the past month and a half.
The Meme craze has indeed driven the entire Solana ecosystem's heat, with the most direct manifestation being Solana's on-chain revenue and user activity.
However, the current Meme is only a product of a specific period in a bull market. Once entering a bear market, if the Meme trend does not continue, how the Solana ecosystem can maintain its leading advantage as a public chain needs to be considered. Just like the once-popular NFT market, after the feast, there is a lot of chaos. Can Solana leverage the heat of Meme to create a healthier ecological revenue structure?
