原文：SOL- The Emperor’s New Clothes
Author: Flip Research
Compiled by: Zombit
My forums have been awash with bullish talk about $SOL lately, mixed in with some meme coin MLM schemes. I am starting to believe that the memecoin super cycle is real and Solana will replace Ethereum as the major L1. But then I started digging into the data, and the results were concerning, to say the least... In this article, I present my findings, and why Solana may be a house of cards.
First let’s look at the bullish argument succinctly laid out by @alphawifhat:
I've seen @BanklessHQ's recent episode on $SOL at 83% discount to $ETH, was completely shocked how mispriced Solana vs ETH was, even Solana is my biggest position Based on Q2's performance, Solana had50% of ETH+L2's users27% of ETH+L2's fees36% of DEX volumes190% of… https://t.co/BqKnaKTvJT pic.twitter.com/6JWbEmUJWH
- Nachi (@alphawifhat) July 24, 2024
There are four unique arguments for comparison with Ethereum and its second layer network:
High percentage of user base
Fees increase accordingly
DEX has high trading volume
The proportion of stablecoin trading volume has increased significantly
User group comparison
The following is a comparison of the ETH mainnet and SOL (only comparing the mainnet, because most of the fees after Dencun come from the mainnet, source: @tokenterminal):
ETH user base + number of transactions
SOL user base + number of transactions
On paper, SOL’s numbers look good, with over 1.3 million daily active users (DAU), compared to 376,300 for ETH. However, when we added the number of trades into the mix, I noticed something strange. For example, on July 26, ETH’s transaction volume was 1.1 million, while DAU was 3.763 million, with an average daily transaction volume per user of approximately 2.92.
However, SOL’s transaction volume is 282.2 million, while DAU is 1.3 million, with an average of 217 transactions per user per day. I think this may be due to lower fees, the ability to trade more, compound positions more frequently, increased arbitrage bot activity, etc. So I compared it to another popular chain, Arbitrum. However, Arb only had 4.46 transactions/user on the same day. Comparison with other networks yielded similar results:
Given that there are more users than ETH, I checked against Google Trends data, which should be relatively neutral to the number of users:
The results show that ETH is either on par with SOL or ahead of SOL. Considering the difference in DAU, coupled with all the hype surrounding the SOL meme coin trend, this is not what I expected. So what happened?
DEX Trading Volume Analysis
To understand the difference in deal count, it might be helpful to look at Raydium's LP. Even at first glance, some problems are obvious:
At first, I thought this was just a laundered trade in a low-liquidity honeypot liquidity pool to attract sporadic memecoin enthusiasts, but after taking a closer look at the chart, it was much worse than I thought:
Every pool with low liquidity is a project that has crashed in the past 24 hours. Taking MBGA as an example, in the past 24 hours there have been 46,000 transactions with a volume of $10.8 million, 2845 unique wallets buying and selling, and over $28,000 in fees on Raydium. (It’s worth noting that a legitimate liquidity pool of similar size, $MEW, only generated 11,200 transactions)
Looking at the wallets involved, the vast majority appear to be bots on the same network, making thousands of transactions. They independently generate fake trading volumes, randomly using different amounts of SOL and random number of transactions until the project crashes, before moving on to the next project.
In the past 24 hours, there were over 50 runaway projects with over $2.5 million in trading volume across all LP pools on Raydium, generating a total of over $200 million in trading volume and over $500,000 in fees. Orca and Meteora seem to have far fewer altcoins, and I struggled to find any altcoins with significant trading volume on Uniswap (ETH). Clearly, there is a serious fraud problem in the Solana ecosystem, with multiple impacts:
Considering the unusually high transaction-to-user ratio, as well as the large number of laundered transactions and project crashes on the chain, it’s clear that most transactions are inorganic. On Blast, a major Ethereum second-layer network, the highest daily transaction-to-user ratio is 15.0x (fees are also low here, plus users are participating in Blast S2 mining). As a rough comparison, if we assume that the true SOL transaction-to-user ratio is similar to Blast, that would mean that over 93% of Solana transactions (and corresponding fees) are inorganic.
The only reason these scams exist is because it is profitable to do so. Therefore, users lose an amount at least equal to the fees incurred + transaction costs, which can amount to millions of dollars per day.
Once it becomes unprofitable to deploy these scams (i.e. when actual users get tired of losing money), you would expect most trading volumes and fee revenue to drop.
Therefore, it appears that users, organic fees, and DEX trading volume are all significantly overstated.
I'm not the only one to come to these conclusions, @gphummer recently posted something similar:
Lots of bragging from so-called "researchers" that SOL has flipped ETH in DEX volume. Let's dive into this. The numbers are incredibly suspicious and suggestive of washtrading/astroturfing, which isn't surprising for a chain that initially grew popular with SBF's help. https://t.co/1dLTVBaySD
— gphummer.eth (@gphummer) July 24, 2024
MEV on Solana
The M EV (Maximum Extractable Value) on Solana is in a unique position. Unlike Ethereum, Solana does not have a built-in memory pool; instead, actors like @jito_sol created (now deprecated) infrastructure outside of the protocol to emulate memory pool functionality, allowing for MEV opportunities such as the former Position transactions, flanking attacks, etc. Helius Labs has compiled a thorough report detailing the MEV situation here:
The problem on Solana is that the vast majority of tokens traded are extremely volatile, illiquid meme coins, and traders often set slippage of more than 10% to ensure successful execution of trades. This provides an attractive attack surface for MEV to extract value:
Over the past 1-2 months, arsc, the infamous sandwich bot on Solana, has pocketed over $30 million !Their profits are largely sitting in the following two wallets: pic.twitter.com/N1JavgScC7
— Ben (@HypoNyms) June 15, 2024
If we look at blockspace profitability, it’s clear that most of the value now comes from MEV tips:
Solana generated $5.5M in total fees yesterday, the highest amount over the last three months 58% of the value came from MEV tips and 37% from priority transaction feesMost of the activity is from spot DEX trading pic.twitter.com/QxEfCuVmbQ
— Dan Smith (@smyyguy) July 29, 2024
While this is a "real" value in the strictest sense, MEV will only be implemented if it is profitable, i.e. as long as retail investors continue to chase the rise and fall of the memecoin (and make a net loss). Once memecoins start to cool down, MEV fee income will collapse as well.
I see a lot of SOL bullish theories talking about how money will eventually flow into infrastructure such as $JUP, $JTO, etc. This is very possible, but it's worth noting that they are less volatile, more liquid and simply don't offer the same MEV opportunities.
In this case, well-versed actors have an incentive to build the best infrastructure to take advantage of the situation. As I investigated further, several sources mentioned rumors of these players investing in control of mempool space and then reselling access to third parties. However, I am unable to verify this information.
However, there does appear to be some clear perverse incentives here - by channeling memecoin activity into SOL as much as possible, this allows certain savvy individuals to continue to profit from the MEV (Maximum Extractable Value), insider trading of the aforementioned memecoins , and profit from SOL price appreciation.
Stablecoin
There is another strange phenomenon regarding stablecoin transaction volume and total value locked (TVL). The trading volume is significantly higher than ETH, but when we look at @DefiLlama’s stablecoin data, ETH’s stablecoin TVL is $80 billion, while SOL is only $3.2 billion.
I believe that stablecoin (and broader) TVL is a less easily manipulated metric than volume/fees on low-fee platforms and shows how committed market participants are actually.
The dynamics of stablecoin trading volumes highlight this - @WazzCrypto previously noted that when the CFTC announced its investigation into Jump, trading volumes suddenly dropped:
Literally flattened chart on Solana stablecoin volumes since Jump got probed by the CFTCIt's a big mistery what has caused this… https://t.co/7JCp3HGjb6 pic.twitter.com/PDCh7bJM6G
— Wazz (@WazzCrypto) July 28, 2024
Extract value from retail investors
Project collapse and MEV aside, the outlook for the retail market remains bleak. Many celebrities have chosen Solana as their go-to chain, but the results have been less than ideal:
Final Post:Jason Derulo's coin was labelled as DERULO instead of JASON, however the data did use the correct coin.Thanks for the catch, and the name has been updated below. pic.twitter.com/2AMdeUykyj
— Slorg (@SlorgoftheSlugs) July 26, 2024
Andrew Tate’s DADDY is the best-performing celebrity token, returning -73%. Things haven't improved in the lower-skilled realm of boxing either:
When it came to $WIF Ansem said verbatim the main runner should be whichever one the ecosystem as a whole chose. A clear one was chosen on $NEIRO, was already above 50m. This nasty maggot then proceeds to back one at 2m talking about the OG one matters when in reality he just… pic.twitter.com/OhztblGhhu
— Penn Kazeto (@0x_Imperius) July 28, 2024
A casual search on X also reveals evidence of rampant insider trading and developer dumping on buyers:
The dev of $Neiro has made 15,508 $SOL($2.85M) with only 3 $SOL($552), a gain of 5,169x!He spent 3 $SOL($552) to buy 97.5M $Neiro when deploying $Neiro.Then he sold 68M $Neiro for 15,511 $SOL($2.85M) through multiple wallets, with a realized profit of 15,508 $SOL($2.85M).… pic.twitter.com/0PBP6gpJ0e
— Lookonchain (@lookonchain) July 28, 2024
But Flip, my board is full of people making millions trading meme coins on Solana. How does this relate to what you're saying?
I simply don’t believe that the tweets of KOLs (opinion leaders) on X are representative of the wider user base. In the current craze, it would be easy for them to take a position, market their token, profit from their followers, and then repeat the process. There's definitely survivorship bias here - the voices of winners are much louder than those of losers, which creates a distorted sense of reality.
To put things in perspective, the retail industry is losing millions of dollars every day due to scammers, developers, insiders, MEVs, KOLs, and that’s not even taking into account that most of what they trade on Solana is just memes with no real backing. currency. It’s hard to argue with the fact that most meme coins will eventually fail like $boden.
Additional considerations
The market is volatile, and when sentiment shifts, factors once ignored by buyers will become salient:
The chain has poor stability and is interrupted many times.
High transaction failure rate.
Hard to read block explorer.
The threshold for developers is high, and the Rust language is far less user-friendly than Solidity.
Poor interoperability with EVM. I think it's much healthier to have multiple interoperable chains competing for our attention than being stuck on a relatively centralized single chain.
The likelihood of ETFs is low, either from a regulatory perspective or a demand perspective. The following highlights that in Solana’s current state, institutional demand will be low. @malekanoms also highlighted some points that I think are relevant from a traditional finance perspective:
ETH is the High Quality Liquid Asset (HQLA) of cryptoIn anticipation of the ETH ETF launch, I’ve written a mini paper explaining what an HQLA is, why we need a natively digital one, and why ETH is the most likely candidate. My analysis compares it to BTC and SOL. Here’s the…
— Omid Malekan (@malekanoms) July 22, 2024
High emissions, 67,000 SOL per day (approximately $12.4 million)
41 million SOL ($7.6 billion) from the FTX Legacy Sale remains locked. 7.5 million SOL ($1.4 billion) will be unlocked in March 2025, followed by 609,000 SOL (approximately $11.3 million) each month until 2028. The purchase price for most tokens appears to be around $64 each.
in conclusion
As usual, the ones profiting from the Solana meme coin craze are those selling shovels and pickaxes, while speculators often suffer without knowing it.
In my opinion, the oft-cited SOL metric is grossly overstated. Additionally, most organic users are rapidly losing money to bad actors on-chain. We are currently in a frenzy phase where retail inflows are still outstripping outflows to these savvy players, which makes it look pretty good on the surface. Many of these indicators will collapse quickly once users get tired of constant losses.
As mentioned above, SOL also faces a number of fundamental headwinds, which will become apparent when sentiment turns. Any price increase will add to inflationary pressures/unlocking.
Ultimately, I believe SOL is overvalued from a fundamental perspective, and while existing sentiment and momentum may drive prices higher in the short term, the long-term outlook is more uncertain.
Disclaimer: Although I have owned SOL at various times in the past, I do not currently hold a large SOL position. Many of the opinions I mentioned above are my own speculative opinions and are not facts. My assumptions and conclusions may be wrong. Always do your own research - this is not investment advice.
But I currently have no real position in SOL. Many of the points I made above are my own speculation and not fact. My assumptions and conclusions may be wrong. Always exercise caution - this is not financial advice.
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