The current cycle of 2024 has witnessed Solana's dominance, with the main narrative of this cycle—meme coins—originating from Solana. In terms of price appreciation, Solana is also the best-performing Layer 1 blockchain, having risen about 680% year to date.
Although meme coins are deeply intertwined with Solana, since the resurgence in 2023, Solana as an ecosystem has regained attention, thriving with protocols like Drift (Perp-DEX), Jito (liquidity staking), and Jupiter (DEX aggregator), all of which have reached billion-dollar valuations, while Solana's active addresses and daily trading volume have surpassed all other chains.
At the core of this thriving ecosystem is Raydium, the leading decentralized exchange on Solana. The old saying goes, 'Sell shovels in a gold rush,' perfectly describes Raydium's position. Meme coins attract a lot of attention, while Raydium quietly drives liquidity and trading behind the scenes, supporting this activity. Thanks to the continuous influx of meme coin trading and broader DeFi activities, Raydium has solidified its position as a key infrastructure within the Solana ecosystem.
Brief introduction to Raydium
Raydium is an automated market maker (AMM) and liquidity provider built on the Solana blockchain, leveraging the central order book of the Serum decentralized exchange (DEX) for fast trading, shared liquidity, yield opportunities, and launching new projects. Note: Serum is the world's first fully on-chain cryptocurrency ecosystem capable of completely trustless cross-chain trading. Serum was founded by the Project Serum team and has strategic partnerships with other top cryptocurrency traders and DeFi experts.
Raydium offers several key advantages:
Faster and cheaper: Raydium leverages the efficiency of the Solana blockchain, achieving trading speeds several orders of magnitude faster than Ethereum and gas fees that are just a fraction of the cost.
Central order book across the ecosystem: Raydium provides on-chain liquidity for a central limit order book, meaning Raydium allows access to third-party order flow and liquidity on the order book.
Trading interface: Suitable for traders who want to view TradingView charts, set limit orders, and have more control over their trades.
DEX ecosystem on Solana
TVL on Solana
Now that we have analyzed how Raydium operates, we will next evaluate Raydium's position in the Solana DEX ecosystem. It goes without saying that Solana has risen to the forefront among L1 chains in the 2024 cycle—looking at Ethereum, Solana is the third highest in TVL, following Tron (second) and Ethereum (first).
Examining the relationship between meme coins and Raydium
Raydium's popularity is also due to the resurgence of meme coins on Solana, particularly the meme coin launch platform launched by Pump.Fun, which has generated over $100 million in fees since its establishment at the beginning of this year.
There is a direct connection between the meme coins of Pump.Fun and Raydium—when the tokens issued on Pump.fun reach a market cap of $69,000, Pump.fun automatically deposits liquidity worth $12,000 into Raydium. Continuing to emphasize liquidity, this means that Raydium is actually the most liquid platform for trading meme coins.
Like a virtuous cycle, pump.fun establishes a connection with Raydium > meme coins are issued here > people trade here > it gains liquidity > more meme coins are issued here > it gains more liquidity, this cycle repeats continuously.
Comparison of Raydium with popular DEXs
We compare Raydium with the most popular DEXs on SOL, mainly including Orca, Meteora, and Lifinity—these four DEXs collectively account for 90% of the total DEX trading volume on Solana, and we also include Jupiter as an aggregator for comparison. Although Meteora does not have a token, we still include it for comparison purposes.
We can see that Raydium has the lowest market cap/fees ratio and fully diluted market cap/fees ratio among all DEXs. Raydium also has the most daily active users, with the TVL of other DEXs being over 80% lower than Raydium—except for Jupiter, which we consider an aggregator rather than a DEX.
In Figure 14, we compare Raydium with other more traditional on-chain DEXs—it is evident that Raydium's annualized DEX trading volume is more than twice that of Aerodrome, yet it has a lower market cap/earnings ratio.
Raydium's tokenomics
Note: The team and seed round (accounting for 25.9% of the total) are fully locked for the first 12 months after the token generation event (TGE) and will unlock daily from the 13th to the 36th month, with the unlocking ending on February 21, 2024.
Advantages of Raydium
Overall, Raydium has a significant advantage among all DEXs on Solana and is optimally positioned against the backdrop of Solana's continued growth. Raydium's growth story over the past year is remarkable, and with the increasing dominance of meme coins in the crypto market, especially the recent meme coin frenzy surrounding AI (e.g., GOAT), its growth momentum shows no signs of stopping.
As Solana's primary liquidity provider and automated market maker (AMM), Raydium has a strategic advantage in capturing market share from emerging trends. Moreover, Raydium's commitment to innovation and ecosystem development is reflected in its frequent upgrades, strong incentives for liquidity providers, and active engagement with the community. These factors indicate that Raydium is not only prepared to adapt to the changing DeFi landscape but also to lead this trend.
Ultimately, Raydium serves as critical infrastructure in a rapidly evolving blockchain ecosystem and seems poised for good growth in the future if it continues on its current trajectory.
