The State of the Solana Ecosystem Report

16 min readFeb 27, 2024

Introduction

Solana has emerged as one of the fastest-growing open-source blockchain platforms, renowned for its high throughput Proof of History (PoH), low latency, and scalability. Since its inception in March 2020, Solana has experienced remarkable growth, evidenced by various metrics such as network activity, transaction volume, and user adoption.

The nonprofit Solana Foundation, Solana Labs, and other partner groups like Helius, Superteam and Lamport Dao assist in the development and expansion of Solana ecosystems. Token sales, both private and public, have brought in almost $335 million for Solana Labs.

There are an increasing number of projects for a variety of users that drive network activity in different categories such as consumer, payments, privacy, DePIN, and DeFi inside the Solana ecosystem. We will be looking at the Solana ecosystem in the underlisted function areas in the last quarter and in recent months:

First, we will look at the network activity.
The Financial health of the ecosystem.
How secured is the Solana network.
We will do comprehensive analysis of the ecosystem.
Then, the ecosystem consumers.
We will take a look at certain DePIN projects on the network.
Payment solutions offered by the network.
Infrastructure developments and dApps on the network.
Finally, we take a look at the Solana community and growth.

Ecosystem map from messari.io — Source: Messari.io

1. Network Activity

Solana’s network activity has tremendously improved with a significant reduction in outages. Since February 2023 there has never been network downtime due to continued network upgrades and resilience as a result of QUIC adoption by RPC operators and validators on Mainnet-beta.

In the last quarter of 2023 network activity was largely driven by the foundation’s Breakpoint conference and related events such as the JTO’s airdrop and BONK listing in top exchanges. The native coin SOL experienced a major price recovery from 2022 lows, attaining closely to $120 in December last year. At the same time, the number of network addresses appreciates to 11.81 million for January of 2024. This equates to an 18% increase in the network addresses from what is recorded( about 10 million) in December the previous year.

Furthermore, the release of the Jupiter ($JUP) token, the network’s largest decentralized exchange aggregator and memecoins like $WEN token, brought new users to the ecosystem thereby increasing the number of active addresses on the network. Beyond these events, innovations such as token extensions and progress made on the networks firedancer and TinyDancer projects, attracts new developers building on the Solana blockchain.

An overview of the network explorer, shows that Solana processes over 90 million transactions per day on more than 500,000 active wallets while supporting lots of dApps.

2. Financial Analysis

With an annual inflation rate of 5.476% which decreases by 15% every year, $SOL maintained a market capitalization of 44 billion as of writing, an increase of 423% in the 4th quarter of last year.

Its market capitalization in the 4th quarter exceeded that of $ADA, $USDC, and $XRP, placing it 5th out of all coins. SOL’s market capitalization at the beginning of 2023 was 17th.

In SOL terms, revenue — a metric that accounts for all fees earned by the protocol — rose by 19% QoQ. The overall revenue for the quarter in USD more than tripled to $13.7 million due to the rise of SOL’s price. In the month of January 2024, the Solana blockchain’s transaction volume for SOL and SPL coins increased to $951.9 billion.

The increases reflect a 30% increase in the network’s economic growth from December’s volume of $735.8 billion, which at the time was a multi-month high.

The rise in transaction volume is significantly higher than those seen in previous years. More so, with the inflation programmed to continue reducing every year from 15% till it rests at 1.5% and with the upward trend in fees, the ecosystem unlocks real value to users and investors alike.

3. Ecosystem security

A robust, worldwide blockchain like Solana must continue to function regardless of what happens in a particular region of the world. More validators on a blockchain typically make it more robust.

With a robust Nakamoto coefficient of 31, the Solana blockchain has an edge over other blockchains. A user must have the assurance that their transmission will be documented when they carry out a contract on a blockchain.

A greater number of validators is crucial because, in theory, every addition to a blockchain is recorded on each validator in the chain. This helps to prevent disastrous occurrences like data center outages in any circumstances. Validators are the security enforcers.

Two types of Validators

First, consensus nodes: These nodes are vital to the network’s operation because they perform two crucial tasks: (1) they generate and suggest new blocks to the other nodes in the network, and (2) they cast votes to determine if the new blocks put forth by other nodes are valid.

Second, RPC nodes: Are the channels for dApps entry into the Solana infrastructure. They are referred to as Remote Procedure Call (RPC) nodes. Similar to consensus nodes, these nodes independently confirm every modification to the network and every new block. RPC node operators can provide API, indexing or other services that are suitable to users of the core Solana network. They don’t vote.

Validator Count: Solana’s validator count has witnessed steady growth, with an increasing number of validators participating in network consensus. A large number of validators is vital for the health of the network as it increases the trust of users, as their transactions will be submitted. As of writing, the network boasts 2,133 active validators as of writing, hosted in different countries, contributing to the decentralization and security of the Solana blockchain.
Staked SOL Tokens: The amount of SOL tokens staked on the Solana network is indicative of the community’s commitment to securing the network and participating in its governance. The total stake SOL fell by 5% (about 19 million) as a result of the unstaking from FTX Estate in previous years. However, as a result of the SOL’s price massive recovery, in recent times, the number of Staked SOL surpassed $40 billion, demonstrating strong community confidence and support for the Solana ecosystem.

However, a recent outage on the mainnet occurred on February 6, 2024 and lasted for about 5 hours leading to network upgrade to the latest version . Block production on the beta Solana mainnet started up again at 14:57 UTC after validator operators restarted the cluster and successfully upgraded to v1.17.20. In an effort to strengthen the network, the Solana validator community has launched a number of new projects, such as community-led validator calls, Block 0 — a conference for validators — and new governance (or Validation) procedures.

4. Ecosystem Analysis

DeFi

DeFi in Solana has experienced an exponential increase with a whopping sum of 500% YoY to $1.5 billion in Total Value Locked (TVL). Notable DeFi projects on the ecosystem driving this growth include:

MarginFi: A lending protocol on the solana blockchain with the highest TVL on the network. MarginFi went from being the 6th in TVL to being the highest on the network. The protocol’s rapid growth was as a result of constant developments on the network including the redesign of its simple UX interface.

Solend: An algorithmic lending protocol on the Solana blockchain witnessed a tremendous growth in TVL up to $173 million due to its Android app development and points program

Kamino: Another lending protocol on the blockchain with a borrow/lend unique function for users saw a handsome growth in its protocol and clinched up to 139 million in TVL. More Swaps, more DeFi activity rises high due to its points program.

DeFi activity ripple positively impacted activities on the DEXs. DEX volume rose to over 1000% with QoQ transactions rising to the tune of over $300 million. Of this growth, Orca and Raydium TVL stood at 179 million and 149 million respectively.

BONK: As a Christmas present in 2022, Solana developers and communities received an airdrop of the memecoin BONK. BONK was listed on Coinbase in mid-December.The exchange’s first-day trading volume of $238 million ranked 12th in its history.

Jupiter: 57% of DEX spot activity was routed through the Jupiter swap aggregator on average. In the third quarter of last year, Jupiter was one of the most discussed DeFi protocols in all of crypto. Jupiter perps have averaged $53 million in daily trading activity since launch.

Drift: Another major player in Solana perps is Drift. In Q3, it was one of Solana’s fastest-growing DeFi protocols. Its average daily perps volume increased ~10x to $23 million in Q4, indicating that it was still growing. Drift revealed plans to raise $23.5 million in Series A funding during its presentation at Solana Breakpoint conference.

The rise in USDC supply in December of 2023 was a major factor in Solana’s stablecoin market capitalization of 63%, which increased by nearly $300 million on a quarterly basis. Circle’s Cross-Chain Transfer Protocol (CCTP) should take the lead to further growth in USDC liquidity and interoperability on Solana. USDC does not need to be wrapped in order to be transported across networks thanks to CCTP.

Furthermore, Paxos said toward the close of the quarter that it would extend its USDP stablecoin program, which is governed by the NYDFS, to Solana by mid-January. Doing this will make Solana become the second network, after Ethereum, to support USDP.

Liquid Staking: A user can employ liquid staking derivatives to represent their staked assets and participate in DeFi activities, which allows them to earn yield on their staking payouts. One of the most prominent stories in cryptocurrency today is liquid staking, which now controls DeFi with a total TVL of $21.6 billion.

For the Solana ecosystem, liquid staking methods will be essential in enabling an ecosystem built on yield-bearing SOL. Recently, incentive schemes have been successful in increasing the percentage of liquid stake in the overall SOL holding. Using the incentive strategy, Jito introduced a points system to its stakers.

Jito has been propelling the growth of Solana’s liquid staking. Launching the token JTO in early December and airdropping 10% of the whole supply to JitoSOL holders, Jito client validators, and Jito MEV searchers. $JTO was listed on Coinbase the day it launched and happened to be the exchange’s most traded token in volume.

Jito’s TVL increased 164% on a quarterly basis to 6.4 million SOL. Its market share increased to 38% from 85% QoQ, trailing only Marinade. Lido sunsetting its Solana instance after a governance vote helped Jito’s expansion. By the end of Q4, Lido’s market share had dropped from 24% at the end of Q3 to less than 2%. Jito’s MEV Solana customer experienced growth as well, as previously mentioned. With 48% of the stake operating the client, up 51% QoQ. With the rise in on-chain activities, MEV has also been increasing lately.

Marinade: Marinade native token has the ticker $MNDE. To drive activities and to remain competitive with tokenless protocols, it introduced the earn program. In addition to its liquid staking offering, Marinade introduced Marinade Native, a native staking solution, during the previous quarter of last year.

Stake may be routed to more than 100 top-performing validators using Marinade Native’s stake automation platform — all without incurring performance fees or adding smart contract risk. With TVL, Marinade Native has accumulated $416 million.

In addition, Marinade unveiled PSRs, or Protected Staking Rewards. Validators will not be able to obtain a Marinade stake under PSR unless they provide a SOL bond. The SOL bond will be used to compensate Marinade stakers for any losses incurred if a validator has downtime or other performance difficulties that impact their staking rewards.

Blaze: Since August, Blaze has maintained its BLZE airdrop program. Its TVL in SOL increased 344% in Q4 after expanding by 1,234% QoQ in Q3, culminating in a 12% market share.

LST liquidity will grow in importance as LSTs in Solana DeFi protocols expand, particularly if users leverage them against SOL. Midway through December 2023, a user sold about $8 million worth of Marinade’s mSOL, which caused the price to fall below SOL. A discussion over the optimum risk management and liquidation procedures arose amongst various lending protocols as a result of the temporary depeg.

Sanctum provides liquidity and stability to Solana’s DeFi and liquid staking ecosystems, fortifying the liquid-staking environment even more. Sanctum offers a liquidity pool that unifies LSTs, including mSOL. With the release of Sanctum 2.0 in early December, additional offerings like single-validator LSTs, an improved multi-LST liquidity pool, and a zero-fee flash lending scheme a robust Solana LST ecosystem can be attained.

5. Consumers

NFTs

Solana’s market share of NFT volume increased from 9% to 26% QoQ to $620 million market capitalization. There were considerable QoQ increases in SOL floor price for some prominent Solana NFT collections.

Tensorians’ floor market capitalization increased 517% QoQ to 0.8 million SOL ($80 million), while Mad Lads’ increased 142% QoQ to 1.3 million SOL ($135 million). By floor market capitalization, the two projects rank as Solana’s top collections right now.

Tensor’s volume market share overtook Magic Eden’s, but by the end of the last quarter, Magic Eden had taken back the majority. Tensor held a 1.2% market share at the beginning of the year.

In terms of overall trading volume for Q4 2023, Mad Lads (613,000 SOL), Tensorians (510,000 SOL), and Claynosaurz (171,000 SOL) are the top collections. All of these sets show how PFP NFT is evolving toward brand development and useful applications.

Creator platforms: The best example of a consumer application that can only be implemented using cNFTs is DRiP. DRiP collaborates with artists to provide free NFT art mints. It has a collection size that is greater than the industry’s typical 10,000. In Q4, DRiP generated more than 35 million cNFTs, while Dialect, Helium, and other projects generated an additional 4 million.

To support its in-app economy, DRiP introduced Droplets at the start of the quarter. When users acquired a collectible from the site, Droplets were automatically spent and dispersed to them based on different involvement levels.

Droplets 2.0 was introduced as part of DRiP’s system overhaul at the beginning of December 2023. Droplets are still available to users for free, but only if they spin to win using a six-hourly rotating mechanism. Droplets may now be bought by users using cash or tokens (powered by Sphere).

Finally, users can provide Droplets to creators directly in exchange for certain benefits. Droplets are paid to creators after being converted to USDC. In Q4, DRIP disbursed $143,000 to creators, of which $84,000 were paid in December alone.

Gaming: The much awaited game constructed on Solana is called Star Atlas. It debuted gameplay elements and a preview of its future 2.2 version at Breakpoint. SAGE Labs, a 2D open-world game, was released by Star Atlas at the end of the previous quarter. As all transactions took place on-chain, Star Atlas made up about 8% of all Solana transactions in Q4.

Additionally, Lamport DAO, the Solana Foundation, and Magicblock co-hosted the second Solana Speedrun in the middle of December. The hackathon with a gaming theme offered prizes worth up to $10,000.

6. DePIN (Decentralized Physical Infrastructure)

With Solana hosting Helium, Hivemapper, Render, Teleport, and GenesysGo, among other DePIN apps. Solana is turning into a central location for these apps.

Helium: Its transition from its own blockchain to Solana signified a resurrection for Solana’s DePIN ecosystem, making it perhaps one of the first significant and largest DePIN enterprises. The native Helium token, or HNT, is in charge of the network and is essential to its operation since it may be burned to get “Data Credits,” which are needed to send data.

Additionally, network tokens (such IOT and mobile) can be exchanged for HNT by hotspot hosts. The Solana Saga smartphone, which comes with a free 30-day Helium Mobile membership, has been selling well. This, combined with the launch of Helium Mobile’s $20/month unlimited data, text, and speak plan in the US, has resulted in a notable increase in newly onboarded hotspots for the Helium Network.

Hivemaper: A global mapping network that uses dashcams on vehicles to gather real-time, high-resolution (4K) street-level imagery without requiring permission. The $HONEY token controls it. Together, the 50k+ network contributors — who include delivery drivers, rideshare drivers, and enthusiasts — have mapped more than 125 million kilometers. Dashcams from Hivemapper range in price from $300 to $650, and contributors receive $HONEY tokens in exchange for uploading video and metadata to the network.

Therefore, giving contributors a piece of the value created by the need for mapping data, this strategy encourages people to grow the network. Hivemapper introduced Scout, an open-source user interface toolkit last year. Scout allows users to use Hivemapper dashcam footage to track street locations in real-time. What was the result? With less than 5% of the entire token supply, the Hivemapper community mapped over 10% of the world’s roadways in 2023 alone.

IoTeX Integration: Platform for sensor networks on Solana was integrated with W3bstream SDKs on IoTeX. W3bstream uses zk-proofs to link Internet of Things (IoT) devices with use case-specific sensors (like Hivemapper dashcams) to on-chain contracts.
Render: Render was originally developed on Ethereum, however it recently moved to Solana, which the community felt was a big improvement. Render is a network of GPUs made available by one of the earliest computing networks to 3D artists for graphical rendering in games or films.
As a “GPU Aggregator,” Io.net is constructing a network to leverage processing capacity for machine learning applications by connecting a network of GPUs from data centers, cryptocurrency miners, and well-known projects like Render.

In contrast to conventional GPU aggregators that only offer access to single instances and do not support clustering, io.net is leading the way in establishing clusters made up of thousands of GPUs.

Through the network’s Octane software suite, 3D artists can delegate their rendering jobs to the GPU network. Furthermore, Render has added AI/ML and spatial computing to its list of services, which is a very positive development.

Nosana: Nosana is a marketplace that links users seeking to create AI products with a network of GPUs that are sourced by users. The exclusive AI Interface developed by Nosana is available to developers building AI apps. This interface offers significant cost benefits because it is integrated with Llama 2 and Stable Diffusion workloads.

Testnet data from Nosana suggests that developers might save up to 85% on costs when compared to traditional cloud infrastructure providers. Nosana’s primary grid, which will include extensive development toolkits for further experimentation within the Nosana network, is scheduled for deployment in Q2 2024.

People who own unused consumer GPUs can join the Nosana network as nodes. The $NOS coin functions as a transactional means of exchange inside the Nosana ecosystem, enabling users to pay for services with $NOS and serving as staking collateral for node operators.

Teleport: With a $9 million fundraising round, Teleport is similar to Uber but with token incentives. Due to the lack of any useful tools for communication, Uber has become a source of frustration for both drivers and passengers. After determining the minimum density needed to start services in a new city. Teleport provides incentives for drivers and riders to sign up ahead of time.
GenesysGo: ShdwDrive, a rival of Filecoin, uses powerful traditional and mobile computing to lower the price of enterprise-grade data center storage; they refer to this technology as “D.A.G.G.E.R.” The ecosystem’s native currency, $SHDW, is used to pay for services. Additional network mechanisms, such staking, halving, slashing, and recycling, are planned for the roadmap.

7. Payments

Visa extended its USDC settlement pilot to Solana last quarter. Solana enables mainstream payment flows with low transaction costs, sub-second finality, and a network of several thousand nodes. Apart from Visa’s announcement, Solana Pay’s integration with Shopify was another significant payment-related victory last year.

In December 2023, the payments platform Helio declared that it would be taking over the management of the Solana Pay Shopify plugin. Solana-native payments infrastructure providers and applications that have also produced some noteworthy occurrences, such as:

Sphere: The winner of the Solana Summer Camp Hackathon in December, Sphere made its payments solution available to early adopters. Offramping, on-chain subscriptions, universal checkout, and other functionalities are available with Sphere. Numerous Solana ecosystem DePIN projects, such as Io.net, DRiP, and Helium Mobile, already rely on it to support their payment processes.
Code: Protocol and App for Payments–Code, is now working on developing a micropayments solution, making its whole codebase publicly available.
Brave Rewards: Within recent months brave also extended payments to Solana wallets.
TipLink Powered IRL Events: Using a link or QR code, users can send or claim assets from Solana. More than 15 teams at Breakpoint distributed more than 5,000 claimed assets via TipLink. Solana ecosystem call of February 2024 NFT was distributed via Tiplink. Additionally, it enabled the distribution of NFT via QR codes during Art Basel Miami Beach’s “Artists in Residence.”

8. Infrastructure

Pyth: For Solana DeFi protocols, Pyth is the main price feed oracle. It announced a retroactive airdrop in November that was compatible with approximately 86,000 wallets on 27 different blockchains. Pyth airdropped all of the tokens on Solana rather than generating a claim contract on each blockchain. Despite a few problems brought on by the liquidity shrink, the Solana network functioned rather successfully.
Squads: The multisig technique used by Squads, secures assets valued at over $2.5 billion. Squads V4 was released at the start of the quarter, providing new features and a redesigned user interface, such as the browser extension wallet SquadsX. Furthermore, they launched their limit orders via Jupiter exchange in recent months.
Solana Mobile: At Breakpoint, the Solana Mobile team revealed a number of changes, including new generalizations that allow integration of Solana Mobile with any chain. The changes also brought with them the option for wallet apps to integrate directly into Safari using extensions, as well as the potential for new gaming SDKs that use Unity and Unreal Engine to incorporate mobile wallets more easily.
The Saga Phone by Solana Mobile saw low sales figures at first, but it soon sold out when customers discovered BONK airdrop that Saga phone owners could claim was worth more than the phone itself. It started and opened pre-orders for the second smartphone “Saga 2” in February 2024.
Filcoin Integration: To improve the usability and accessibility of its block history for infrastructure providers, explorers, indexers, and anybody else requiring historical access and reduce data discharges.
Token extensions: The new SPL token standard called token extensions gives token issuers access to a range of adjustable capabilities. Their design was primarily informed by input received from conversations with financial institutions and companies; nevertheless, they also have applications in consumer and more crypto-native DeFi applications.
Over a dozen extensions exist, most notable of which are: Confidential transfers, Transfer hooks, Permanent delegate and more. To prepare for the official launch in January 2024, prominent infrastructure providers including Phantom, Solflare, Metaplex, and Helius enabled support for token extensions in Q4 of last year.

Although these extensions offer functionalities that are essentially possible on other networks, they now need permissioned environments or developers creating the infrastructure themselves.

9. Community and Ecosystem Growth

Grants, hackathons, accelerators, and other programs organized by the Solana Foundation and independent groups like Superteam and Lamport DAO contribute to the establishment and advancement of the Solana ecosystem.

Jump Crypto is building an open-source validator client for Solana known as Firedancer. The project will improve the network resiliency, decentralization and efficiency. At the same time, ex-Solana Labs engineers have a developer shop known as Anza.

Finally, the annual meeting of the Solana foundation, Breakpoint, took place in Amsterdam from October 30 to September 3 last year. More than 100 presentations were given, and the attendance topped 3,000. Numerous teams took advantage of the occasion to make significant announcements. Breakpoint 2024 will take place in Singapore, from September 19 to September 21. Be there.

Appreciation:
This article was greatly inspired by Messari, The Block, Coingecko, Superteam, Lamport DAO and the Solana scribes.
Special thanks to Peter Horton and Yash Agarwal whose writings and research helped to develop this ecosystem report.

Sources: