2024 Solana Q2 Report

Solana remained one of the main centers of cryptocurrency activity in the second quarter, with its total economic value increasing by 53% month-on-month to $151 million.

By Peter Horton, Messari

Compiled by: Shaofaye123, Foresight News

TL;DR

• Pump.fun, a gamified token issuance platform, made $48 million in profit in the second quarter. Raydium was the main beneficiary of pump.fun, with its daily average trading volume increasing by 77% month-on-month to $867 million and its TVL increasing by 46% month-on-month to $991 million.
• Dialect and the Solana Foundation launched Solana Actions and Blockchain Links (Blinks), allowing users to preview and execute transactions directly in various digital environments, starting from X (formerly Twitter).
• Institutions are betting on Solana’s payment use case. PayPal expanded PYUSD to Solana, leveraging token extensions such as confidential transfers, and Stripe also announced that it will support payments on Solana.
• The Solana ecosystem team released scaling solutions that allow users to maintain L1. Including ZK compression for Light Protocol, Helius, and MagicBlock's MagicBlock Engine.
• Spam transactions generated by Memecoin activity and Ore mining caused network congestion in early Q2. After the update, the use of Stake-Weighted Quality of Service alleviated this problem, while also introducing new structural requirements for SOL.

introduction

Solana (SOL) is an integrated open source blockchain that aims to synchronize global information at the speed of light. Solana prioritizes ultra-fast transactions and high capacity, but sacrifices some verifiability. It achieves this goal through features such as the Proof of History (PoH) timestamp mechanism, the block protocol Turbine, and parallel processing. Since the mainnet launch in March 2020, several network upgrades have improved network performance and scalability, including QUIC, stake-weighted quality of service (QoS), and a local fee market.

The development and growth of the network and ecosystem is supported by the non-profit Solana Foundation, Solana Labs, and many third-party organizations including Anza, Colosseum, Helius, and Superteam. Solana Labs has raised over $335 million in private and public token sales. The Solana ecosystem has a growing number of projects covering multiple areas including DeFi, Consumer, DePIN, and Payments.

Key indicators

Ecosystem Overview

DeFi

Solana’s DeFi TVL fell 9% quarter-on-quarter to $4.5 billion, ranking fourth among chains. However, DeFi TVL denominated in SOL still increased by 26% quarter-on-quarter, indicating that the decline in USD terms may be due to token price depreciation rather than capital outflow.

Borrowing

Kamino’s TVL fell 26% quarter-over-quarter to $942 million. This follows strong growth in TVL in March, driven by its announcement of a points snapshot. Kamino launched its token on April 30, with an airdrop of 7.5% of total supply. KMNO ended the quarter with a market cap of $33 million and 10% in circulation. In Q2, Kamino added support for more tokens, enabled borrowers to repay debts with collateralized assets, and released notifications powered by Dialect.

MarginFi's lending protocol fell sharply in the first half of 2024 after growing sharply in the second half of 2023. Its TVL fell 56% quarter-on-quarter to $341 million, mainly due to more than $200 million in fund withdrawals in 24 hours in April. The outflow of funds was a reaction to the Twitter drama and the resignation of MarginFi leader Edgar Pavlovsky citing internal disputes. MarginFi's points program has been running for a year without launching a token, and users have lost interest in it. Although MarginFi faced turmoil, it successfully processed all withdrawals during this period. In the second quarter, MarginFi also launched the Liquidity Layer and improved the user experience.

Decentralized Exchanges

Compared to the peak in March, DEX trading volume decreased slightly but still remained at a high level. Daily spot trading volume increased by 32% month-on-month to $1.6 billion, mainly affected by Memecoin trading. WIF, MEW, POPCAT and GME were the top ten tokens in terms of token pair trading volume in the second quarter.

In the second quarter, the Memecoin craze shifted to Pump.fun, a gaming token issuance platform with an average daily transaction fee of $525,000, making it one of the most widely discussed applications in the entire cryptocurrency. At the end of May, some celebrities began to issue their own tokens on Pump.fun, which brought about a celebrity coin craze and caused huge controversy. The popularity of Pump.fun gave rise to the emergence of Moonshot of DEX Screener, whales.meme of Whales Market, and MemeRoyale.

Pump.fun has brought significant benefits to Raydium. When the tokens issued on it reach a certain market value, all liquidity of the Pump.fun pricing curve will be transferred to Raydium. Raydium's average daily trading volume increased by 77% month-on-month to US$867 million, and its market share increased from 40% in the first quarter to 54%. Its DeFi TVL also increased by 46% month-on-month to US$991 million, becoming the DeFi protocol with the highest TVL on Solana. In the second quarter, Raydium also released the V3 UI and launched the AMM plan.

Jupiter remains Solana’s primary trading source, accounting for 51% of spot DEX trading volume in Q2. However, its market share declined throughout the quarter, falling to 37% in the final week, surpassed by Raydium’s 38% market share. Notable updates this quarter include:

• Metropolis: At the end of June, Jupiter released its V3 exchange protocol upgrade Metropolis. New features include instant routing for new tokens on Raydium, Meteora and Orca; dynamic slippage; smart filtering, etc.; and improved user experience.
• Token Economics Proposal: Jupiter founder meow shared a proposal to reduce the total supply of JUP by 30%, with both the team supply and future airdrops reduced by 30%.
• GUM: At the end of May, Jupiter announced its Giant Unified Market (GUM) plan to work with RWA token issuers, market makers, and investors to bring more types of assets onto the chain.
• Acquisition of Ultimate: In late April, Jupiter acquired mobile wallet Ultimate and its team to power its planned Jupiter Mobile app.

The average daily trading volume of Jupiter perpetual contracts is $370 million, a 13% increase from the previous month. Other major decentralized perpetual contract exchanges include:

• Drift: Drift’s average daily trading volume fell 11% month-over-month to $127 million. In mid-May, the Drift Foundation released the DRIFT token, airdropping 12% of the total supply. The token manages the Drift DAO, which consists of the Realms DAO, which is responsible for electing the security committee and managing protocol development, and the Futarchy DAO, which is responsible for reward distribution. As of the end of this quarter, DRIFT’s market cap was $76 million, and the token circulation reached 17%.
• Zeta: Zeta’s average daily trading volume increased 212% month-over-month to $82 million. In mid-May, the company announced a $5 million funding round led by Electric Capital and plans to build a Layer 2 for decentralized derivatives trading on Solana. At the end of the quarter, Zeta launched its own token and airdropped 10% of the total supply. As of the end of the quarter, ZEX had a market cap of $18 million and 16% of its tokens were in circulation.
• FlashTrade: After launching fully in the previous quarter, FlashTrade gained momentum at the end of the second quarter, with average daily trading volumes reaching $104 million in March.

Stablecoins

Solana’s stablecoin market capitalization grew 8% month-over-month to $3.1 billion, ranking sixth among chains.

At the end of May, PayPal expanded its PayPal USD (PYUSD) stablecoin to Solana. The stablecoin, issued by Paxos, received approval from the New York State Department of Financial Services. In addition to low transaction costs and high throughput, PayPal cited scalability as a key reason for deploying on Solana.

PYUSD has a variety of extended features, especially confidential transfers. This feature keeps the amount of transferred tokens confidential to everyone except the transfer source, destination, and third-party auditors that the issuer can choose to add. Confidential transfers are not yet available on Solana because more system calls need to be activated. PayPal also highlighted memo fields and transfer hooks, which enable developers to add programmable logic to transfers.

At the end of the quarter, PYUSD had a circulating market value of $75 million on Solana, but the distribution of chips was relatively concentrated. Although the token has been officially launched, it is still waiting for integration in order to gain more adoption. Currently, centralized exchanges are integrating token expansion functions to support PYUSD. Just at the end of this quarter, several Solana dApps, including Jupiter and Kamino (and an incentive campaign), launched PYUSD.

Despite this, USDC remains the most dominant stablecoin on Solana, with Solana’s market cap up 5.5% month-over-month to $2.2 billion. Circle expanded its Web3 services to Solana in June, bringing programmable wallets and Gas Station features. These APIs enable developers to embed secure multi-chain wallets in their applications and sponsor transaction fees on behalf of users. The app will be rolled out in phases, with future versions supporting NFT transfers and programmatic interactions.

Other DeFi-related activities

• RWA: Parcl launches token, BAXUS raises $5 million, AgriDex raises $5 million, etherfuse launches MXNe, MetaWealth migrates to Solana, elmnt launches tokenized commodities, Drift and Ondo partner, Bridgesplit launches closed beta, VNX and Sygnum Bank partner, and Velo and Solana Foundation partner.
• BTC related: Zeus Network raised $8 million and issued tokens; Wormhole’s WBTC and 21BTC were launched; Zeus Network’s APOLLO alpha testnet was released.
• Restaking: Picasso launched, Composable's Mantis launched, and Solayer's restaking launched.
• Others: Ellipsis Labs raised $20 million, DFlow’s beta release, C3 launch, Adrena’s perps launch, Ranger Finance’s perps aggregator launch, Photon limit orders launch and stimmies, Lifinity Sandglass launch, Bullpen’s Telegram bot launch, RugCheck token validation launch, Prism V4 launch, and Coinhall’s Solana integration.

Liquidity Staking

Solana’s liquidity staking ratio increased 22% month-over-month to 6.4%. At 65% of the SOL supply, the liquidity staking ratio needs to continue to grow to support an ecosystem built on yield-generating SOL.

Since the launch of Sanctum last quarter, it has been rapidly adopted, with Sanctum LST accounting for nearly 14% of Solana LST market share, a 3,700% increase from the previous quarter. Stake Weighted Quality of Service (SWQoS) has accelerated the adoption of Sanctum. In order to alleviate network congestion in April, the Solana network upgrade further utilized SWQoS. SWQoS encourages applications and infrastructure providers to run validators and accumulate funds, thereby providing users with a better user experience.

As a result, several projects have launched their own validators, including Jupiter, Drift, DRiP, and Helius. Like the others, these four have launched a single validator, LST, to improve distribution and offer unique rewards. For example, DRiP distributes free Droplets to hausSOL holders, while dSOL can be used as collateral on Drift.

Solana does not currently support native functionality for validators to return block rewards (base and priority transaction fees) to delegators. This native functionality only applies to inflation rewards. Historically, this has not been a big deal as fees have accounted for around 1% of total validator rewards (excluding MEV). But since late March, this has risen to 5-10%, prompting validators to reallocate fees to compete on APY. To this end, many validators have chosen to use the single-validator LST due to its simpler fee redistribution mechanism.

LST is also experimenting with different methods to distribute rewards. For example, Cubik’s iceSOL distributes all rewards to the public goods fund on Cubik. wifSOL DCA all staking rewards into WIF and distributes WIF to delegators.

After adding more than 20 new LSTs in Q2, Sanctum has a total of 44 LSTs. Sanctum Infinity is a multi-LST liquidity pool that allows supported LSTs to leverage each other's liquidity. The largest Sanctum LST holdings by holdings include Jupiter's jupSOL (2.3 million SOL), Helius's hSOL (403,000 SOL), and Solana Compass's compassSOL (340,000 SOL).

In early April, Sanctum announced a $6.1 million round led by Dragonfly. Subsequently, Sanctum launched the points project Sanctum Wonderland, where participants can collect pets representing LST and upgrade their levels through community tasks. In early June, it launched CLOUD and announced that it will conduct airdrops and token sales through Jupiter's LFG and Meteora Alpha Vault in the future.

Jito's jitoSOL remains the leader of Solana LST. Its supply grew 22% month-over-month to nearly 1.1 million SOL, with a market share of 47%. Currently, the community is discussing a governance proposal to begin handing over the management of the Jito Stake Pool to StakeNet. StakeNet is a decentralized Solana staking pool manager that will bring greater transparency, stronger security, higher efficiency, and community governance to Jito.

Marinade's mSOL supply fell 13% month-on-month to 5.3 million SOL, with a market share of 23%. Its native staking product, Marinade Native, has 2.7 million SOL. In mid-June, Marinade launched SAM, a protocol that allows users to stake SOL to get mSOL. This feature will be launched in phases and is expected to be launched in the third quarter of 24.

Consumer

NFTs

NFT trading volume declined after becoming active again in late 2023 and early 2024. Average daily NFT trading volume fell 56% month-on-month to $3.4 million. This quarter, the NFT market trend reversed, with Magic Eden regaining the majority share of real trading volume, up from 25% to 59%. On the other hand, Tensor's market share fell from 71% to 35%.

In early April, the Tensor Foundation released the TNSR token, airdropping 14.8% of the total supply. After the token was released, its market share dropped to 31%. By the end of the quarter, TNSR had a market cap of $73 million and a 13% token circulation. Magic Eden continued to operate its incentive program before the token was released.

Mads Lads was the NFT with the highest total trading volume, reaching 230,000 SOL. Just at the end of the quarter, a single address bought 59 Mad Lads for approximately 5,600 SOL ($800,000). Other top collections by Q2 trading volume included: Solana Monkey Business (104,000 SOL), Tensorians (91,000 SOL), Froganas (74,000 SOL), and Famous Fox Federation (51,000 SOL).

Most Solana NFTs are minted through the Metaplex NFT standard. In early April, Metaplex launched a new NFT standard called Core. Core uses a single account design to optimize cost and performance, and a flexible plugin system for customization. The first external plugin launched is Oracle, which allows external data to dynamically influence asset behavior, enabling assets to react to real-world data.

At the end of May, Metaplex launched the MPL-404 hybrid token standard protocol, developed in partnership with Mutant Labs, which pioneered the SPL-404 standard. Dubbed "hybrid DeFi," this standard aims to bring more liquidity to NFTs while retaining their uniqueness.

Other NFT-related activity included SharkyFi’s SHARK launch, Exchange Art’s token launch, Artrade’s launch and Picasso sale, Garden Labs’ release of its owner-editable metadata program, 3.land’s open-source cNFT miner, and Claynosaurz’s selection as a finalist for the Collision Choice Awards.

Social platforms and creators

At the end of June, Dialect and the Solana Foundation launched Solana Actions and Blockchain Links.

Solana Actions is an application programming interface (API) that enables previewing, signing, and executing Solana transactions in a variety of digital environments via QR codes, buttons, widgets, and URLs.

Blinks converts Solana Actions into shareable, metadata-rich links, thereby simplifying distribution channels and user operation processes. Blinks can also be distributed in multiple formats such as links, QR codes, push notifications, messaging apps, etc. Currently, only partner links can be displayed directly on Twitter. Users also need to enable this feature in the settings of the browser extension wallet to use it.

Many top Solana projects have built Blink, including Jupiter, Tensor, Sphere, and TipLink. Blink builders can apply for small grants (up to $1,000) through Superteam Earn or larger grants (up to $400,000) directly from the Solana Foundation.

Like other applications, DRiP's user experience was affected by network congestion in early April. In mid-April, DRiP released an update to address this issue. Instead of distributing all collectibles to users by default, DRiP now only mints collectibles on-chain when users claim them. As a result, its average daily cNFT minting volume has dropped by 90%.

In mid-April, DRiP invited Todd McFarlane, the comic book artist of The Amazing Spider-Man and creator of Spawn, to join. At a DRiP auction, a 1:1 digital scan of the original Spawn 1 painting sold for over 110 SOL ($16,000). Other creators who joined DRiP in the second quarter included Rockstar Games artist Stephen Bliss, wallstreetbets, and singer Jason Derulo.

Other user-related activities include:

• Solana Labs' Bond: In mid-June, Solana Labs launched Bond, a customer loyalty platform and API. By enabling brands to easily launch NFTs and integrate blockchain-based payment rails, it aims to open up new revenue streams, provide product provenance and authenticity, enhance customer insights, and protect data privacy.
• Audius Update: Audius is a music streaming platform that aims to redistribute power to artists. In late June, it launched a real-time streaming payments feature that enables artists to instantly receive payments for tracks and albums via Coinbase or other Solana wallets. Soon after, it announced licensing agreements with all major performing rights organizations (PROs) in the United States.
• Others Cupcake’s beta launch, Only1 raises $1.3 million led by Newman Group, Solarplex acquired by Forward Research for the Arweave ecosystem, dReader’s Cubik Fund hands out $40,000 to comic creators, Access Protocol’s transferable subscription feature launches, Crowny’s app launches, GigHub launches, Nina’s iOS app launches, and Popset launches.

game

While some on-chain games are built entirely on the Solana mainnet, others have chosen scaling solutions for customizability and higher performance. In Q2, several projects announced plans to design Solana-based scaling frameworks for games:

MagicBlock: In mid-June, MagicBlock released the MagicBlock Engine, a framework that improves performance and virtual machine customizability without sacrificing composability. The engine deploys ephemeral rollups, which are temporary states that close the settlement state on Solana. All programs and accounts can still run on the mainnet, but will basically be mirrored to ephemeral rollups. The temporary state can use a customized SVM validator that has been optimized for speed and other configurations such as Gas. Users can still trade and hold assets on the Solana mainnet, and the entire life cycle of ephemeral rollups is abstracted. Although the MagicBlock engine is built for full on-chain games, the team noted that it has also attracted interest from non-game projects.

Sonic: In mid-June, Sonic announced a $12 million round led by Bitkraft and launched a testnet. Sonic is a layer 2 stack that allows game-specific rolling programs to share a sequencer network and settle on Solana. Sonic utilizes SVM and also supports EVM code through its HyperGrid interpreter.

In early May, Solana Labs partnered with Google Cloud to make its Web3 game development API GameShift available to Google Cloud game developers. After GameShift exited beta last quarter, it added several new features this quarter, including asset production, in-game token support, and developer wallets.

Other gaming-related developments in Q2 included: Star Atlas’ Surge launch, STEPN’s partnership with adidas, Blockasset’s partnership with UFC, Aurory’s Seekers of Tokane early access launch, Nyan Heroes token launch and esports partnership, Solana Speedrun 3 game jamming, Photo Finish LIVE’s Virtual Kentucky Derby and Pace Advantage partnership, Blessed Burgers’ burger game, Chomp’s open beta launch, BetDEX updates, Portals’ airdrop, Bladerite developer Seeds Labs’ $12 million raise, MON Protocol’s Solana integration, The Backwoods launch, SolForge Fusion launch, creators of the Solana Games ambassador program, Lowlife Forms preview, Valannia’s gameplay trailer, and Love Monster’s planned expansion.

DePin

Solana is becoming a hub for DePIN applications, hosting applications such as Helium, Hivemapper, Render, and Teleport. Notable Q2 events include:

• Helium Licensing Program: In mid-June, Helium Mobile announced a technology stack licensing program that allows third-party manufacturers to produce and sell hotspot devices. The program is designed to generate licensing fees, expand the Helium Mobile hotspot network, and reduce dependence on T-Mobile. After the end of this quarter, the Helium Foundation announced the expansion of the Helium network beyond wireless networks.
• Shaga Funding: Shaga, a P2P network for gaming PCs, announced a $1 million funding round led by Arca in late June. Shaga was the champion of the Solana Foundations' Q3'23 Hyperdrive Hackathon and is currently in closed beta.
• Io.net’s Token Launch and Controversy: In mid-June, decentralized GPU aggregator io.net launched its token, IO, along with a Binance Launchpool and community airdrop. At the end of the quarter, IO had a market cap of $325 million, with just over 10% of total supply in circulation. Earlier this quarter, the project was the subject of controversy over the number of GPUs displayed on its user interface. Just two days before the token launch, its CEO stepped down and was replaced by its former COO.
• Ambient financing: In May, Ambient announced a $2 million seed round led by Borderless Capital. Ambient also announced the acquisition of PlanetWatch, a decentralized environmental monitoring network. In the third quarter, Ambient plans to migrate the PlanetWatch token and network from Algorand to Solana, and launch a new mobile application and upgraded backend.
• Teleport in Austin: Decentralized sharing protocol Teleport went live in Austin, Texas at the end of May, following its launch in its first city (College Station, Texas) last quarter.
• Roam Migration: In early April, the decentralized WiFi network Roam announced its migration to Solana. The Roam app was subsequently launched on the Solana Mobile dApp store.

Payment

With low transaction costs, sub-second finality, and a network of thousands of nodes, Solana is poised to power mainstream payment flows - a view shared by Visa, which expanded its USD/CNY settlement pilot to Solana in Q3’23.

Notable Solana payment infrastructure and applications this quarter include:

• Stripe Crypto Payments: During its 2024 keynote, Stripe announced that it will relaunch support for cryptocurrency payments this summer. Stripe will initially support USDC payments on Solana, Ethereum, and Polygon.
• TipLink Update: During the 2024 keynote, TipLink announced two new products. The TipLink Wallet Adapter creates an in-browser wallet connected to a user’s Google Account, eliminating the need for traditional wallet browser extensions and seed phrase phrases. The Wallet Adapter has been integrated with multiple Solana applications, including Jupiter, DRiP, Tensor, Drift, Sphere, and Helio. TipLink also launched TipLink Pro, a set of tools that enable developers to distribute tokens through marketing campaigns.
• Sphere Updates: In May, Sphere launched the Offload Wallet, which enables users to instantly offramp by sending USDC to a wallet address tied to a bank account. It also launched SphereBot, which allows payments directly from Telegram. Finally, its on/offramp product exited private beta and opened to all users in June.
• Helio Shopify Payment Plugin Update: In April, Solana Labs shut down credit card payments for Solana Mobile Chapter 2 and now only uses the Solana Pay Shopify plugin for payments. Since the pre-sale of Chapter 2 began in January, the plugin has saved Solana Labs more than $1 million in fees compared to traditional payment methods. Payment platform Helio announced a series of new features for the plugin, which began management in December. The new features include:
• Multi-token payments, enabling buyers to spend in hundreds of tokens, which are automatically converted to the merchant’s preferred currency via Jupiter
• Supports other stablecoins besides USDC, including PYUSD, EURC, and USDY
• Improve the user interface to speed up transaction confirmation and automatic jump
• Loyalty programs including cNFT airdrops, Discord memberships, and discounts for NFT holders
• Coinflow Labs financing: At the end of May, payment infrastructure provider Coinflow Labs announced a $2.25 million financing led by CMT Digital. Coinflow Labs helps companies integrate blockchain-based payments, and its clients include Solana Labs and Audius.
• Other developments: Decaf launched on/offramp, Code launched on Google Play, Phantom integrated Meso for onramping, Brazilian digital bank Nubank supported Solana, and XPOS integrated Solana.

infrastructure

Key infrastructure-related events in the second quarter include:

• ZK Compression: Light Protocol and Helius launched the original extended ZK compression technology in late June. ZK compression functions similarly to compressed NFTs: it stores account data in an off-chain Merkle tree of ledger data and publishes its root on-chain. However, it works for any token or account, not just NFTs. In addition, it uses SNARKs to compress Merkle proofs, making verification more efficient. Helius co-founder Mert shared that the cost of airdropping states to 1 million addresses using ZK compression technology is $50, while it is $260,000 without ZK compression technology. In addition to enabling new application use cases, ZK compression can also provide an alternative to Solana states for certain types of state-demanding applications. One tradeoff, at least in the short term, is to rely on indexers to ensure ready access to compressed accounts and related data. In times of high traffic, this reliance may result in an inability to update the Merkle tree. However, this may not be a problem in the long run, as economic incentives and the implementation of open source indexers will lead to more indexer choices. ZK Compression is currently running on testnet.
• Squads Fundraising and Fuse Launch: In mid-June, Squads Labs announced a $10 million funding round led by Electric Capital and launched the public beta of Fuse. Fuse is a mobile-first smart wallet that replaces seed phrase and single key pairs with multi-factor authentication. Each wallet is a 2/3 smart wallet, consisting of a local device key (protected by Apple Face ID), 2FA key (encrypted and stored in iCloud or cold wallet), and recovery key (other wallet or email). It also features spending limits, key rotation, and account abstraction, which improves security and user experience. Fuse uses the same multi-signature protocol as Squads to ensure the security of more than $10 billion in value.
• Modular SVM: SVM is increasingly being used in L2, application chains, and other environments as an alternative to EVM. At the end of June, Anza released a new SVM crate that makes it easier to use SVM outside of the Solana mainnet. This section modularizes SVM, separating lower-level SVM components from the rest of the Agave validator runtime. Other SVM-related initiatives and projects announced in Q2 include: ABK Labs, a developer shop focused on SVM formed by former Solana Foundation employees, the testnet launch of the SVM Bitcoin L2Yona Network, the launch of MagicBlock and Sonic's Solana expansion solution, and the white paper for Solana SVM convolutional framework Lollipop released by Popsicle Network and MultiAdaptive.
• Bonsol Introduction: At the end of April, Anagram launched the open source verifiable computing system Bonsol. Bonsol uses the risc0 toolchain to enable developers to perform verifiable computations on private and public data and integrate the results into Solana programs.
• Arcium Introduction and Financing: In May this year, Arcium (formerly Elusiv) announced that it had received $5.5 million in financing led by Greenfield Capital and launched a private incentive test network. Arcium is a parallelized confidential computing network that enables developers to run encrypted calculations.

Other developments include:

• Wallets and Fintech Applications: Phantom acquires embedded wallet provider Bitski, Coinbase Wallet’s Solana DEX integration is powered by Jupiter, Kraken launches Kraken Wallet with Solana support, Portal’s Solana integration, Backpack Wallet updates, Moongate’s Apple ID login feature, Infinex’s Solana integration, Squads Labs’ partial acquisition of the Fibonacci Finance codebase, Safeheron’s Solana integration, SwissBorg’s Solana integration, xPortal’s Solana integration, and the launch of Orbit.
• Interoperability and Modularity: Wormhole’s token launch, LayerZero’s Solana integration, Mayan’s $3M seed round, deBridge’s points program and token introduction, Neon EVM upgrades, Entangle’s Solana integration, Jupiter integrating deBridge into its bridge widget, and Eclipse’s Neon Stack integration with the Neon EVM.
• Developer Tools: Anchor 0.30.0 release, Trident release, RugCheck API release, NovaNet testnet, Spiderswap public API release, LiteSVM tester release, Lighthouse Protocol documentation and integration with Blowfish, Flare release, Mollusk test harness release, and Triton Vixen release.
• Explorers & Data: SolanaFM’s 2.0 update, Rated’s Solana integration, Bubblemaps’ Solana integration, Top Ledger receives grant from Graph Foundation, Solscan’s new transfer tags, Reclaim Protocol’s Solana integration, SonarWatch’s validator launch, and an introduction to SlamNet.
• Artificial Intelligence: DainTrader launch, Wayfinder PRIME cache, and Gather AI incentivized beta,
• Governance & Identity: The launch of MetaDAO’s Future Governance-as-a-Service platform and adoption of Drift, Deans List, and FutureDAO, Wormhole receiving funding to bring Worldcoin’s World ID to Solana, quadratic voting capabilities from Bonfida and Civic, and token scaling integration for Civic Pass.
• Oracle: Switchboard received $7.5 million in financing, and Pyth’s Solana oracle was released.

increase

After a long bear market, financing in the Solana ecosystem is gradually recovering. In the second quarter, 47 major Solana-based projects announced financing, a two-year high. These projects raised a total of $113 million, a 19% decrease from the previous quarter. From the fourth quarter of 23 to the second quarter of 24, Solana projects raised a total of $309 million, compared with $39 million in the first three quarters.

Hackathons and Accelerators

After its debut in Q1, Colosseum held its first hackathon, Renaissance, from March 4 to April 8. More than 8,300 participants from 95 countries submitted 1,071 hackathon entries. The top winners in each track were:

• Overall winner ($50,000): Ore is a digital currency mined through a novel Proof of Work (PoW) mechanism. Ore launched in early April and became the most traded program on Solana. As miners competed to mine transactions on the network, they exacerbated Solana's network congestion issues, as detailed in the "Network Usage" section below. ORE mining has been suspended since mid-April to focus on the development of V2, which aims to implement a new, less gamed PoW algorithm and introduce new mechanisms to better align miner incentives with the project.
• First Prize, Consumer Apps ($30,000): Banger, a marketplace for buying and selling screenshots of tweets.
• First Prize in the Crypto Infrastructure Track ($30,000): High TPS Client, a modified Solana client created by the Rakurai team using scheduling and pipelining optimization techniques.
• First Prize, Gaming Track ($30,000): Meshmap, a crowdsourced 3D world map designed for augmented reality and mixed reality games and applications.
• DeFi and Payment Tracking 1st Prize ($30,000): Urani is an intent-based transaction suite designed to protect against MEV.
• DePIN Track 1st Prize ($30,000): Blockmesh, an open network where users can monetize excess bandwidth.
• DAOs and Communities Track 1st Prize ($30,000): DeTask, an AI product development platform.

Colosseum also operates an accelerator with a venture capital arm - participants must win one of its hackathons to be eligible. In mid-May, Colosseum announced the 10 winners of the first accelerator. These companies include Ore, Banger, High TPS Client, Meshmap, Urani, Blockmesh.

as well as:

• DBunker — Financial derivatives platform of the DePIN project.
• DeCharge – DePIN network for electric vehicle charging.
• Torque — A protocol for builders to deploy marketing strategies on-chain.
• Runepunk Legends - formerly known as Legends of the Sun, is an old-school battle arena game.

At the end of the quarter, Colosseum announced that it had raised a $60 million fund to continue supporting the early-stage Solana project.

Many projects and organizations, including DRiP, Wormhole, and several Superteam communities, have run campaigns on Renaissance, distributing over $140,000 in rewards.

The Solana Foundation is also sponsoring the Renaissance Continuation of Bonkathon, offering a total of $50,000 in prizes to builders who continue on the "Renaissance Continuation." Bonkathon is a hackathon sponsored by Bonk DAO and hosted by Phase Labs' Radiants on Align. It offers a total prize of $350,000, and the winners from 314 entries will be announced in mid-September.

Other hackathons and incubators in Q2 include: Solana Labs' ongoing incubator, the Kumekathon, the Solana Summit hackathon, Metaplex's Startup Program, FluxBeam's Token Extensions hackathon, the SpringX Solana Accelerator, the Crossroads Content Sprint, and Superteam Germany's Berlin 24 Hour hackathon.

Activity

Second quarter activities

• Solana Crossroads, a conference held by Step Finance in Istanbul with over 3,000 attendees.
• IslandDAO, a one-month co-working space in Greece.
• Solana Summit, a summit for Solana founders and developers held in Malaysia.
• Others: Hacker House Dubai and London, Superteam Malaysia's Startup Village, Supeteam UK's Startup Village, Solana Summer Kickoff events in 60+ cities, side events at NFTNYC and Consensus, and SolVan.

recent activities

• Breakpoint: The Solana Foundation’s annual Breakpoint conference will take place in Singapore in late September, and tickets are now on sale. The Solana Foundation has also announced five one-day sister conferences taking place during Breakpoint week: Block Zero, centered on the Solana validator community; MEV and DeFi Days; the State of the Network conference; Stakepoint, hosted by Marinade; and a conference hosted by DRiP. For those looking to attend more events during breakpoint, IslandDAO announced that it will host ThailandDAO, a month-long co-working space in Thailand after Breakpoint. There will also be a week-long event in Bali.
• mtnDAO: A month-long coworking space returns to Salt Lake in August.
• Others: Hacker House Hong Kong, Bengaluru Startup Village and Hacker House, Founders' Villa Season 2, and more community meetups.

Grant Program

• Cubik Grants Round 1: Cubik, a platform that facilitates quadratic funding for charities similar to Gitcoin, announced the winners of its first round of charitable grants in early April, with more than $100,000 in community donations from 3,500 donors.
• Cubik Comic Kickstart Round: Cubik is launching a funding round for comics creators alongside dReader, with $30,000 in matching funds.
• BuildwithMonkes Grant Program: With funding from the Solana Foundation and Metaplex, MonkeDAO has reopened applications for its grant program.
• Solana Arts Ambassador Program: The Solana Foundation has expanded its funding for the Solana Arts Ambassador Program and announced matching funding from the Bonk DAO to support creators on Solana.

Developer Program

Developer workshops and education programs in Q2 include Turbin3’s Q2 Developer Academy, XFounders’ Solana Bootcamp, Encode’s Coding Bootcamp, Ackee’s Solana School Season 5, RareSkills’ Solana 60-Day Course, Heavy Duty Builders’ Spanish Developer Bootcamp, Alyra’s French Developer Course, Comets of Web3’s Romanian Developer Program, and applications for the M Accelerator Program.

media

Two new Solana-focused newsletters were launched in Q2: Blockworks’ daily “Lightspeed” newsletter and Solfate’s bi-weekly Solfate Snapshot newsletter.

Network analysis

Instructions

Network activity, measured by non-vote transactions and fee payers, remained high throughout Q2 2024, following increases in Q4 2023 and Q1 2024. The average number of daily fee payers increased 51% quarter-over-quarter to 900,000, and the average number of new daily fee payers increased 114% quarter-over-quarter to 247,000. The average number of daily non-vote transactions remained flat at 70 million, the same as the previous quarter.

In late Q1 and into Q2, memecoin transactions and spam transactions from mining caused network congestion. Transactions were canceled at an increasing rate, and those that were processed took longer than usual. Since these canceled transactions are not visible on the chain, it is difficult to measure the number of total transaction requests and their landing rate. Therefore, the above data only includes processed transactions (successful and failed).

By mid-April, ORE suspended its mining plans and launched network upgrades, and the congestion problem gradually disappeared. The "Performance, Upgrades, and Roadmap" section below details the root causes of the congestion and solutions.

Increased network activity has driven gas prices up, but Solana is still cheaper than most other active ecosystems. Average gas prices increased 47% month-over-month to 0.00014 SOL ($0.022). Median gas prices increased 35% month-over-month to 0.00001 SOL ($0.0016).

Security and decentralization

SOL staking fell by 5% in Q4 2023 and another 7% in Q1 2024, primarily due to FTX Estate unstaking its tokens when they were unlocked.

At the end of the second quarter, SOL staking rebounded, up 5% month-on-month to 378 million SOL. This may be the result of SOL sold by FTX Estate being re-staking. Due to the depreciation of SOL prices, SOL staking in US dollars fell 27% quarter-on-quarter to $53 billion, second only to Ethereum.

Solana’s Nakamoto coefficient continued to hover in the 20s after falling in the second half of 2023. The reason for the decline was that FTX Estate cancelled its subscription. Although the Nakamoto coefficient for this quarter was 20, Solana’s end-of-quarter Nakamoto coefficient was still higher than the median of other networks.

The Nakamoto coefficient is the minimum number of nodes required to undermine validity. The metric also measures other aspects of the resilience of the validation network, including the distribution of stake by location, hosting provider, and client.

The Solana network’s 1,504 active validators are located in 41 countries, up 11% month-over-month and 32% year-over-year. Solana’s stake share in the U.S. was close to 33% at the end of last year, but has since fallen to 21%. Solana validators are hosted in 304 data centers, down 5% month-over-month.

However, its data center Nakamoto coefficient increased by 33% quarter-on-quarter to 8.

With the rise of DEX trading, more opportunities for MEV have emerged. Different players across the stack (validators, delegators, RPCs, and applications) are working to mitigate this problem. Notably, Jito Labs announced in early March that it would suspend the provision of mempools in its validator client, which is run by 80% of the network stake. Since then, private mempools have sprung up in an attempt to recapture this opportunity.

In June, the Solana Foundation announced the removal of a group of validators from its SFDP for participating in sandwich attacks through private mempools. The SFDP aims to train new validator operators and improve the decentralization of the network by matching external equity 1:1, up to 100,000 SOL, and covering the voting fees for the first year (100% in the first three months, 75% in the second three months, 50% in the third month, and 25% in the last three months). Validators must pass an application including KYC and not be a super minority stake (top ⅓) to be eligible to participate.

As of mid-June, SFDP provided 48 million stakes (13% of total stake) to more than 1,100 participating validators (71% of the total validators). Although these validators are no longer eligible for SFDP shares, they can still operate on the network and receive stakes from other delegators. This move re-delegated about 0.5% of the total network stake.

On the same day, the Jito Foundation proposed to blacklist validators participating in private pools, removing them from the membership pool of 11.5 million SOL. The proposal cited a survey that found that about 30 validators (10%) in its stake pool were involved in such activities. The proposal is under active discussion.

To provide more transparency into the issue, GhostLogs published a real-time dashboard tracking sandwiches. As the dashboard points out, validators that include sandwich transactions are not necessarily accomplices, as it could be a transaction forwarded to them by someone else.

Stakewiz has also added warnings on its validator dashboard for 51 validators that it believes are participating in private mempools.

Performance, Upgrades, and Roadmap

In late Q1 and into Q2, spam transactions from memecoin activity and mining led to network congestion issues. Anza released the V1.17.31 update in mid-April to alleviate the problem. One of the main changes is the use of stake-weighted quality of service (SWQoS). This feature allows validators to allocate most of their bandwidth to staked connections. "Virtual stakes" serve as a quality signal for leaders to help them decide which connections to listen to. SWQoS was implemented in 2022, but several changes were made in the V1.17.31 update, including classifying nodes with less than 15,000 staked SOL as "unstaked." While this solution has potential centralization issues and benefits RPC and exchanges, it also introduces new structural requirements for SOL tokens and adjusts the incentives for applications built on the chain.

After a phased rollout, V1.18 received supermajority support from validators in mid-June. The main new feature in V1.18 is the anticipated update to the Solana transaction scheduler, which is responsible for building blocks. The previous implementation had limitations that resulted in non-determinism in transaction ordering and inclusion. In other words, there was no guarantee that higher priority transactions would be ordered accordingly or have a higher probability of being included in a block. Instead, ordering and inclusion relied in part on differences and first-in-first-out, which incentivized the generation of spam. To address these issues, we introduced a central scheduling thread that receives incoming transactions and assigns them to one of four threads for processing. Since enabling the optional scheduler update, validators have reported higher block rewards compared to the cluster average.

In addition to the improvements to the Agave client, the network will also benefit from a client that will be written from scratch. It is worth noting that Jump Crypto is developing Firedancer in C. Its first iteration, Frankendancer, was launched on the testnet in the fourth quarter of 23, and a $1 million bug bounty program will be launched in mid-July. Frankendancer uses Firedancer's code to implement networking functions, while still using the original Labs client code to implement the runtime and consensus mechanism.

Firedancer engineers noted that Frankendancer solved the network issues Solana was facing and shared their findings with Anza to improve the Agave client. In mid-May, Syndica announced that it had completed the rewrite of gossip and accounts-db for its upcoming Sig client.

While Solana core developers have historically focused primarily on performance and scalability, some teams have begun to address the issue of verifiability. Community validator operator Overclock has begun rolling out a full-node client, Mithril, that aims to lower the hardware requirements needed to verify blocks. Currently, it hopes to have 16 GB of memory, which is low enough for verification at home.

The Tinydancer team has also been working on developing a light client for Solana. In mid-May, it launched a simplified payment verification (SPV) client on the Solana testnet.

financial analysis

As the entire market cools, SOL's market cap fell 25% month-on-month to $68 billion. Its market cap still ranks fifth among all tokens, behind only BTC, ETH, USDT, and BNB. In terms of SOL, Solana's total economic value (a measure of all transaction fees and validators' MEV) increased 41% month-on-month to 967,000 ($151 million). Of this, 56% came from transaction fees and the rest from MEV.

Currently, 50% of Solana Gas is burned, and the other half is distributed to block producers. The burned tokens reduced Solana’s annualized quarterly inflation rate from 5.2% to 4.9% in Q2.

However, at the end of May, SIMD-0096 was passed, proposing to allocate 100% of priority fees to validators, while continuing to burn 50% of base fees. The rationale for this is to prevent side transactions with validators that go beyond the protocol. Priority fees have accounted for the vast majority of transaction fees since trading activity picked up in late 2023. Therefore, after the implementation of SIMD-0096 (currently awaiting testnet activation), the amount of SOL burned will drop significantly.

As mentioned above, validators currently have no native functionality to share transaction fees (base and priority fees) with delegators. By default, most validators only share inflation rewards and MEV tips. SIMD-0123 was proposed in May to enable native transaction fee sharing functionality.

SOL had several notable off-protocol events in Q2, including the sale of FTX Estate tokens and the filing of the SOL ETF.

The FTX Estate has been selling 41 million locked SOLs acquired from the Solana Foundation and Solana Labs. In early April, The FTX Estate reportedly sold 30 million SOLs at $64 per token. In late April, another 1.8 million SOLs were reportedly sold at prices between $95 and $110. By the end of May, The FTX Estate reportedly sold its last batch of tokens, with a buyer reportedly paying around $102 per token.

Reported buyers of the tokens sold include Pantera Capital, Figure Markets, Galaxy Trading, and Neptune Digital. The tokens sold have the same unlocking schedule as the tokens originally purchased by Alameda and FTX. The average unlocking date for the tokens is Q4’25, with March’25 being the month with the most unlocked tokens to date (at least 7.5 million tokens).

Upcoming unlocks can be viewed on Solana Compass and Gelato.

After expectations for an ETH ETF to launch in late May evaporated (Polymarket hit $0.06 in early May), the SEC seemed to go the other way, approving eight ETH ETFs on May 23. After that, speculation began about which token might get an ETF next, with many pinning their hopes on SOL. In late June, VanEck surprised the market by filing an application for a SOL ETF, followed by 21Shares. Some were skeptical that a SOL ETF would be approved anytime soon, since there is no SOL CME futures market and the SEC called SOL a security in its June 2023 complaint against Binance and Coinbase. However, Matthew Sigel, head of digital research at VanEck, believes that surveillance-sharing agreements with spot cryptocurrency exchanges could replace the need for a futures market. He also said the application was a bet on a change in leadership in Washington, D.C. The odds of the SOL ETF being approved in 2024 are currently trading at $0.09 on Polymarket.

Summarize

Solana remained one of the main hubs of cryptocurrency activity in Q2, with its total economic value (transaction fees and MEV) growing 53% quarter-over-quarter to $151 million, driven by DEX trading.

Pump.fun, a gaming token issuance platform that collected $48 million in fees in the second quarter, is one of the most widely discussed applications in the entire cryptocurrency space.

Increased activity led to network congestion in late Q1 and into Q2. This was mitigated in mid-April with an update to Stake-Weighted Quality of Service, and in mid-June, an upgrade to Solana’s transaction scheduler further increased its transaction processing capacity. Several ecosystem teams also released solutions to help Solana scale while keeping users on L1, including Light Protocol’s ZK compression, Helius, and MagicBlock’s MagicBlock Engine.

Solana, as the preferred network for individual users, is gradually gaining favor with institutions, especially in payment use cases. PayPal has extended PYUSD to Solana, leveraging token extensions (such as confidential transfers), and Stripe has also announced that it will support payments on Solana.

At the end of the quarter, Dialect and the Solana Foundation launched Solana Actions and Blockchain Links (Blinks), which aims to change the way users interact with blockchain. The solution enables users to preview and execute transactions directly in various network environments, starting with Twitter.