Many Solana indicators have increased significantly month-on-month, including market capitalization (423%), DeFi TVL (303%), average daily DEX trading volume (961%), and average daily NFT trading volume (359%).
Written by Peter Horton
Compiled by: Frank, Foresight News
Key points:
- Many of Solana's metrics maintained sequential growth in Q4 2023, including market capitalization (423%), average number of daily fee payers (102%), DeFi TVL (303%), average daily DEX trading volume (961% ) and average daily NFT trading volume (359%).
- The Solana Foundation’s annual Breakpoint conference drives ecosystem growth, with many major announcements from teams including Jupiter’s perpetual trading product and token issuance, Frankendancer, Backpack Exchange and Render;
- The JTO airdrop and BONK listing on Coinbase further stimulated on-chain activity in December 2023;
- Catalysts for Q1 2024 and beyond include continued progress on the Jupiter airdrop, token scaling, and Firedancer and TinyDancer launches;
Getting started with Solana
Solana is a public open source blockchain designed to provide scalability and smart contract support without sacrificing decentralization and security. It does this through a timestamping mechanism called Proof of History (PoH). With PoH, the network can sort and batch transactions before processing them through the Proof of Stake (PoS) mechanism. Other design goals for Solana include sub-second settlement, low transaction costs, and support for all LLVM-compatible smart contract languages including Rust, C, C++, and Move.
Key indicators
financial analysis
SOL is one of the leaders in the rebound of the cryptocurrency market in the fourth quarter of 2023. As of the end of 2023, SOL's market value was US$43.8 billion, a month-on-month increase of 423% and a year-on-year increase of 1106%.
In the fourth quarter of 2023, SOL's market capitalization exceeded ADA, USDC and XRP, ranking fifth among all cryptocurrencies, while its market capitalization ranking at the beginning of 2023 was 17th.
Solana's quarterly revenue in SOL, which measures all fees charged by the protocol, increased 19% sequentially, while total quarterly revenue in U.S. dollars more than tripled to $13.7 million as SOL prices increased, and these fees Half of it is destroyed and the other half is allocated to block producers.
These token burns currently do not significantly reduce inflation, so the inflation rate at the end of Q4 2023 is 5.6% - the inflation rate strictly measures new tokens issued for validator rewards and does not take into account other tokens unlocked .
Inflation will continue to decrease at a rate of 15% per epoch until it stabilizes at 1.5%. As of this writing, 71.5% of the SOL eligible for staking has been pledged, meaning these holders have chosen not to have their holdings diluted. Please note that not all tokens held by Solana Labs or the Foundation, although not locked, are counted as circulating. With the increase in fees, the annualized actual yield of SOL stakers increased by 58% month-on-month to 1.7%.
One of the major SOL-related narratives in Q3 2023 is what will happen to Alameda/FTX’s SOL (now controlled by the FTX Estate), after Alameda and FTX purchased more than 57 million from the Solana Foundation and Solana Labs SOL, however these tokens are subject to various unlocking schedules, with the average unlocking date being Q4 2025.
Among them, FTX Estate has unstaking and transferred most of the unlocked SOL, and the upcoming unlocks can be viewed on Solana Compass and Gelato .
network analysis
Usage amount
Network activity, measured by non-voting transactions and payers, has risen along with SOL's price, with daily payer numbers hovering between 80,000 and 100,000 for much of 2023. The Solana Foundation's Breakpoint conference spurred the first phase of growth between late October and November 2023. Other events including the JTO airdrop and Coinbase’s listing of BONK have also contributed to the further growth of this data.
Overall, Solana's average daily paying users increased 102% quarter-on-quarter to 190,000 during the quarter, and its average daily non-voting transactions increased 65% quarter-on-quarter to 41 million.
New paying subscribers followed a similar growth trend, reaching a new yearly high, ignoring unusual activity in the second quarter. The average daily number of new paying users increased by 176% month-on-month and 88% year-on-year, reaching 32,000. The one-month retention rate of the new paying user group in November 2023 is Solana's highest figure in the entire year of 2023, reaching 25.6%.
Increased on-chain activity in December 2023 spurred more transactions, including priority inclusion of fees, so average transaction fees increased by 175% month-on-month to 0.000025 SOL ($0.002 USD). Daily priority rates reached a yearly high of nearly 69% on December 26, while average daily transaction fees peaked at 0.001 SOL on December 27, which was 4 times the average fee in Q4 2023 and was 11 times the average fee in the third quarter.
However, the median fee remains stable – the highest daily median fee is 0.00000623 SOL, which is less than 1.25 times the fixed base transaction fee of 0.000005 SOL (the median on most days). The difference between the relative growth in average and median transaction fees suggests that local fee markets are successfully preventing global fee spikes.
Of course, Solana's fee markets are not perfect, and discussions about improving them have intensified in Q4 2023, with the community discussing some inefficiencies and proposing controversial solutions, including the following.
- Problem: Inefficient resource pricing and allocation
- Potential Solution: Base Charge Determined by Computing Unit
Solana Compute Units (CUs) estimate the amount of computation required to verify a transaction, similar to Ethereum Gas units. Each transaction requires a certain number of CUs, with a maximum limit of 48 million CUs per block and a maximum limit of 12 million CUs per account.
Unlike Ethereum, Solana’s base fee is not determined by computing units, instead it is determined by the number of signatures, with most transactions having only one signature. Although CU is requested for every transaction, actual usage is only known after execution. This results in a general lack of incentives for computational optimization: transactions often require more CUs than are actually needed, and developers do not prioritize computational minimization when building programs.
One of the proposed solutions is to price transactions based on CU.
- Issue: Additional transactions outside the agreement
- Potential solution: allocate 100% of priority fees to validators
Half of each priority fee is burned, and the other half is sent to the leader, unlike Ethereum where 100% of the priority fee is sent to block producers, and burning half of each transaction fee facilitates interaction with validators. Non-agreement transactions (such as Jito auction).
The potential solution here is simple: give 100% of priority fees to validators, which was formally proposed not long ago in SIMD-0096 .
- Issue: Existing Spam Incentives
- Potential solutions: scheduler upgrade (V1.18) and economy upgrade (PRAW, write account EMA)
Although multiple upgrades have reduced spam transactions, they have not completely eliminated them. As on-chain activity increased in December 2023, most of the computation was devoted to failed transactions.
There is some debate over the best ways to further reduce spam, with some blaming it primarily on inefficiencies in the Solana scheduler (the block building mechanism), while others believe an economic upgrade is necessary.
scheduler
Solana's scheduler features the ability to use parallel threads for continuous block construction, so it lacks global transaction order, making priority fees less effective in determining order.
The lack of deterministic ordering based on priority fees results in partial dependence on FIFO and differences in threads where transactions occur (network jitter). This will encourage spam transactions to be packaged first.
It is therefore expected that in V1.18, an upgrade to the scheduler is planned, which will increase the dependence of transaction ordering on priority fees rather than randomness, thus reducing spam transactions.
Economic upgrade
Solana's parallel execution engine requires advance knowledge of user-declared dependencies. Transactions that declare dependencies on the same account cannot be executed in parallel. However, if the transaction does not end up accessing the specified account, it will not be penalized.
This can lead to transaction spam issues where the account specified by the transaction does not end up being used. Spam transactions make the experience worse for others who actually access the account's transactions, and it also worsens overall network performance: the more accounts specified, the greater the chance of a replay spike occurring.
To solve this problem, it has been suggested to introduce dynamic, per-account write locking charges (the greater the likelihood of replay spikes occurring.). From a macro perspective, the charging system will be an EIP-1559-style improvement targeted at the local charging market. There is further debate over whether the pricing curve should be set by each account owner or by global parameters.
Mango Markets developers proposed the former in " SIMD-0016: Planned Refundable Account Write Fees (PRAW) ". The PRAW proposal is over a year old and is still under active discussion. In a recent post, Anatoly proposed the latter, a per-account write lock fee that is adjusted based on an exponential moving average of CU used per block.
In both proposals, at least half of write lock fees would be returned to write accounts. In addition to reducing spam transactions, the proposals also address the issue of how much sovereignty applications on a shared blockchain should have. While there is some debate that the write lock garbage problem can be mitigated primarily through scheduler improvements, this does not address the underlying need to give applications more sovereignty.
Security and decentralization
The pledged SOL decreased by 19 million (5%) month-on-month, mainly due to FTX Estate unplacing approximately 20 million SOL. As the price of SOL increased, the total amount pledged in U.S. dollars increased 399% month-on-month to $41 billion, ranking second among all networks after Ethereum.
The unstaking of FTX Estate hurts Solana’s Satoshi coefficient because Alameda/FTX was previously staked to a wide range of validators. As of this writing, Solana’s Nakamoto coefficient is 22, the lowest in more than a year, but still higher than the median of other networks.
Solana's Satoshi coefficient benefits from the Solana Foundation Delegation Program, which is currently delegating 68 million SOL. In early December 2023, the Foundation proposed changes to the program to help participating validators gradually Achieve self-support.
The Satoshi Coefficient is the minimum number of nodes required to disrupt on-chain activity, and the metric can also be measured along other dimensions that are critical to validator network resiliency, including validator location, hosting provider, and client distribution.
The Solana network has a total of 2020 validators, distributed in 34 countries/regions, a year-on-year increase of 21%, with the United States leading the way with a 30% share. Solana’s geographic Satoshi coefficient is just below the 33.3% threshold, so the Solana Foundation noted in its October 2023 validator report that it plans to address the increase in the U.S. share over the past year.
At the end of 2023, Superfast’s Cape Town verification node will go online, which is also the network’s first node in Africa.
Solana validators are hosted in 309 unique data centers, a year-on-year increase of 10%, and Solana's current data center Nakamoto coefficient is 7.
As reported by the Validator Report, Solana's hosting provider Nakamoto has a factor of 3 and consists of TeraSwitch, AWS, and OVH.
Solana currently has two clients: the original Solana Labs client and Jito Labs' MEV-optimized fork. Currently, 48% of the shares are running Jito clients, a 51% month-on-month increase and a year-on-year increase of 534%. But it doesn't offer the same client diversity as a client written from scratch. To this end, there are two upcoming clients written from scratch: Firedancer and Sig.
Firedancer is being developed in C by Jump Crypto. At Breakpoint, Jump announced that a version of Firedancer named "Frankendancer" has been launched on the testnet. Frankendancer runs new C-based code to implement "transaction propagation" functions, such as sending transactions between validators and verifying signatures. It maintains the original Solana Labs client code for Runtime V2 (transaction processing) and consensus mechanism.
The team also discussed the mechanistic details of one of the first components required for Firedancer to reach 8 million TPS. Firedancer previously maintained over 1 million TPS in a test environment, while the Solana Labs client achieved around 55,000 TPS in a similar environment.
Outside of Firedancer, the Syndica team discussed the details of Sig, a fourth validator client that optimizes RPC reads to reduce slot latency — the time between two block completions. In other words, the goal of Sig is to reduce latency by making certain types of user requests flow more smoothly from users to validators. It also focuses on readability and simplicity, making it easier for developers to use.
As the launch of Firedancer approaches, discussion around its impact on customer diversity is heating up. Some believe Firedancer can bring client diversity or higher throughput in the short term, but not both.
Anatoly and others believe that if more than a third of the validators were running Firedancer as the primary client and the Solana Labs/Jito client as the secondary client, it would benefit client diversity without sacrificing Firedancer performance Advantage. Auxiliary clients can verify downloaded blocks, which is easier than running a full data dissemination node. If an error or failure occurs in the Firedancer client, the validator can fall back to the secondary client. Therefore, it will bring security benefits of customer diversity. But in order to increase activity, another high-performance client is needed.
The lightweight client TinyDancer is also under active development. TinyDancer will allow users to verify state without running a full node themselves, making the network more trustless. "SIMD 64: Consolidation of Transaction Receipts" brings the development of lightweight clients one step closer near the end of October 2023. SIMD 64 inserts a mechanism into the core protocol for verifying the status of confirmed transactions, eliminating the need to trust RPC.
While exploring ways to build Rollup on Solana, Sovereign Labs developed a proof-of-concept that enables a Simple Payment Verification (SPV) light client on Solana without any Solana consensus changes.
Performance, upgrades and roadmap
As of December 31, 2023, the Solana network was in the longest continuous state of no network outage, with a total duration of 309 days. This streak is the result of new technology features introduced over the past year, such as QUIC, stake-weighted QoS, and local fee markets, as well as improvements to the network upgrade process. While this doesn't mean Solana will never go down again, Developers deserve recognition for their successful work in improving widely criticized issues.
After successfully upgrading V1.16 at the end of the third quarter of 2023, Solana plans to launch the V1.17 upgrade on the mainnet in the first quarter of 2024, which will bring further ZK support, possibly including Poseidon system calls, as well as resiliency and performance improvements Updates, such as better estimation of computational units.
In addition to Firedancer and potential fee market changes, other upcoming features include token scaling, program runtime V2, and potential consensus/execution optimizations via multiple concurrent leaders and asynchronous execution.
Token expansion
Token extensions are part of the new SPL token standard and provide a set of configurable features for token issuers. Their design is primarily based on feedback from discussions with enterprises and financial institutions, but they also have use cases in more crypto-native DeFi and consumer applications, with more than a dozen extensions, notably:
- Confidential transfers: Confidential transfers generate most of the buzz related to token scaling. If a token creator enables this extension, the source address, destination address, and token of the transaction will remain public. However, the transfer amount is hidden from everyone except the source address, destination address, and optional third-party auditors that the tokens can add;
- Transfer fees: Token issuers can add protocol-mandated fees to each token transfer. Options include fixed fees, variable fees, and fee caps per transfer. This extension has been implemented with tokens such as Bonk Earn (BERN);
- Transfer hooks: Transfer hooks add more programmable logic to transfers in addition to transfer fees. They allow token issuers to add conditions for successful token transfers. Examples of the above logic could be whether the account holds KYC tokens (which in turn can be created via NFT extensions), is on a certain compliance-related list, has traded before 2023, etc.;
- Permanent Delegation: The Permanent Delegation extension provides token issuers with full authority over tokens, allowing them to destroy or transfer any number of tokens at will, even if the tokens are held by another account. This extension is best suited for tokens that represent off-chain assets or data for which the token issuer must comply with regulatory requirements. This extension may be used maliciously, but the infrastructure provider has added functionality to warn users if enabled.
- For more information about other extensions, see Solana's documentation and Helius' blog ;
The functionality supported by these extensions is largely possible on other networks, but currently requires developers to build their own infrastructure or obtain a licensed environment. Therefore, implementing them directly into the token program layer has several advantages:
- Infrastructure support: All major wallets, applications, and other infrastructure providers will support token scaling, and it will be more difficult for projects building their own solutions to achieve this level of ecosystem infrastructure support;
- Composability: Tokens and applications that would otherwise have to be isolated in a permissioned environment can coexist with existing permissionless token experiences on the Solana mainnet, without the need for users to cross-chain, nor the need for application and infrastructure providers to support another network;
The token extension already exists in Solana’s open source code, but the foundation and labs are awaiting final steps, such as security audits, before recommended for use. The token extension will likely officially launch in mid-January 2024, although the privacy transaction extension will require further upgrades in 1.17 and 1.18 to be fully enabled.
Some coins and applications have already experimented with token scaling. As mentioned above, BERN charges a 6.9% fee on each transfer, which will flow to BERN holders, destruction, developer funds, and BONK DAO. FluxBeam is a DEX that supports token scaling. It also features the Telegram bot service FluxBot and UI tools for creating and managing extensions. Another Hyperdrive project, The Vault, uses token extensions such as transfer hooks to create staking SOL derivatives, where staking rewards are separate from the derivative tokens.
Finally, major infrastructure providers, including Phantom, Solflare, Metaplex, and Helius, added support for token scaling in Q4 2023 in preparation for the official launch in January 2024.
Runtime V2
In short, Solana Program Runtime V2 is part of the Sealevel Virtual Machine (SVM) and allows Solana validators to execute programs (smart contracts). At Breakpoint, Solana Labs engineers demonstrated the program Runtime V2. The upgrade of Runtime V2 is mainly to improve cost and API accessibility through software optimization.
As the average cost of executing a program decreases, the design space of the program increases. Engineers can put more instructions into a single program call, thereby increasing program complexity. Increases in maximum program complexity bring greater freedom to application developers.
Multiple concurrent leaders and asynchronous execution
Solana developers and researchers have also been working on long-term plans to further increase throughput and reduce latency. Solana co-founder and Solana Labs CEO Anatoly Yakovenko recently shared some of the future projects he’s most excited about, including:
- Multiple concurrent leaders: Slot leaders are responsible for producing blocks within a time interval. Now, each slot has a leader. While Anatoly suggests that having multiple leaders per epoch will reduce average latency, MEV, and censorship risk, there are still some open questions, including how to allocate bandwidth among leaders and handle forks;
- Asynchronous execution: Asynchronous execution aims to simplify transaction processing by decoupling execution from consensus, with the current slot leader managing transaction execution and scheduling (building and propagating blocks). Instead, the session leader can focus solely on scheduling. Non-slot leader validators can also abandon immediate execution. The validator subcommittee will only reach consensus on fork choices. Removing executions from the critical consensus path can reduce blocking times, improve efficiency, and mitigate issues such as execution-related latency spikes. The validator will execute transactions asynchronously within a set time interval (such as epoch). Full nodes are still able to execute transactions in real time to serve end users. To learn more, see Anatoly's recent article. He believes that asynchronous execution is a rare design with "almost no trade-offs";
ecosystem analysis
DeFi
Solana DeFi TVL increased by 303% month-on-month and 505% year-on-year to reach US$1.5 billion. Among them, the TVL of the lending protocol MarginFi increased by 1404% month-on-month to US$337 million, jumping from sixth to first in TVL. When the points program launches on July 3, 2023, MarginFi's TVL is only $3.2 million. In Q4 2023, it launched multiple user experience upgrades, including PWA and simplified UI, and it also teased YBX, an upcoming stablecoin backed by LST.
The TVL of lending agreement Solend increased by 323% month-on-month to US$242 million, and its market share increased by 5% month-on-month. The first season of the points program launches in August 2023 and ends with a preview of season 2 in early December. Unlike MarginFi, Solend already had a native token, so its points program was and still is tied to the SLND token and other rewards, rather than potential airdrops. Solend has also launched a native Android application, which can be downloaded on the Solana DApp store.
Kamino joined the lending fray in Q4 2023, with its 2.0 upgrade including a new lending protocol. Since its launch in mid-November 2023, Kamino Lend has accumulated $139 million in TVL. In the days after Kamino announced plans to launch a points program for future airdrops, its TVL roughly doubled. Kamino 2.0 also brings one-click leverage tools for SOL staking yields (Cycle xSOL/SOL) and long/ short tokens against USDC. Its initial liquid vault product had a year-end TVL of $88 million (but is not included in Solana's figures to avoid double counting).
DeFi trading volume has also grown significantly, with the average daily spot DEX trading volume increasing by 1116% month-on-month to $359 million. Of the trading volume in Q4 2023, 45% used liquidity from Orca, followed by Raydium (29% market share). Orca and Raydium rank third and fifth in Solana TVL, with $190 million and $133 million respectively.
Although Phoenix accounts for an average of 0.8% of the DEX TVL market share on a daily basis, the DEX trading volume market share is over 9% - Phoenix is a fully on-chain limit order book DEX that is well received for its capital-efficient design .
BONK-SOL ranked fourth in token pair trading volume in the fourth quarter of 2023, behind the SOL/stablecoin and stablecoin/stablecoin trading pairs. The total trading volume of the token’s trading pairs in the fourth quarter of 2023 was close to $1.3 billion, an increase of 11,000% from the previous quarter. BONK is a mem airdropped to Solana developers as a 2022 Christmas gift. In mid-December 2023, Coinbase listed BONK, and the first-day trading volume reached US$238 million, which was the 12th highest figure in the history of the exchange.
On average, 57% of DEX spot trading volume was conducted through the Jupiter trading aggregator, and it was one of the most watched DeFi protocols among all cryptocurrencies in Q3 2023. Its announcement at Breakpoint sparked interest, followed by the launch of a new GMX-style perpetual trading product (launched shortly after Breakpoint), a new stablecoin backed by the SOL liquidity staking token ( Not yet launched) and airdrops. It plans to conduct the first of four rounds of airdrops (equivalent to 40% of the total supply) in January 2024, with the criteria for the airdrop finalized after multiple improvements based on community feedback.
Jupiter’s perpetual trading product has averaged $53 million in daily trading volume since its launch. Another major player, Drift, was one of Solana’s fastest-growing DeFi protocols in the third quarter of 2023. And it continued to grow in the fourth quarter of 2023, with average daily trading volume increasing approximately 10 times to $23 million. During a Breakpoint presentation, Drift announced a $23.5 million Series A round of funding.
After being relatively flat for most of 2023, Solana's stablecoin market capitalization increased by more than $300 million month-on-month, mainly due to the increase in USDC supply in December 2023. USDC liquidity and interoperability on Solana should continue to grow through Circle’s Cross-Chain Transfer Protocol (CCTP).
CCTP allows USDC to be transmitted across networks without encapsulating USDC. It was launched on Solana's development network in early November 2023, and the mainnet is expected to be launched in the first half of 2024. Circle also launched EURC, a euro-backed stablecoin on Solana in mid-December 2023. Towards the end of Q4 2023, Paxos announced plans to expand its NYDFS-regulated USDP stablecoin program to Solana in mid-January 2024, making Solana the second network to support USDP after Ethereum.
Other noteworthy DeFi related events include Parcl V3 and points, Cube Exchange $9 million in funding and Litepaper release, OpenBook V2, Zeta points, Hashflow expansion to Solana, Ondo expansion to Solana, Rain.fi update, SDX release, Starport litepaper release , Meteora Stimulus Package, Cypher's IDO, Fluidity launches Flash.Trade and LiquidProp beta releases, and more.
Liquidity Staking
With 72% of the eligible SOL supply already staked, the liquid staking protocol is critical to enabling an ecosystem built on profitable SOL. The incentive program has recently succeeded in increasing the total SOL pledged volume for liquidity staking - this growth rate increased by 49% month-on-month, but is still relatively low at 4.3%.
Jito has been promoting the growth of Solana liquidity staking. After launching the points system in mid-September 2023, Jito launched its token JTO in early December, airdropping 10% of the total supply to JitoSOL holders and Jito clients. Verifier and Jito MEV searcher.
With fewer than 10,000 eligible wallets and allocations skewed toward smaller addresses, the minimum airdrop amount is close to $10,000 based on JTO’s price at the end of Q4 2023. JTO was listed for trading on Coinbase on the day of its launch and was the exchange’s most traded newly listed token since APE in March 2022 (before being quickly surpassed by BONK). The Jito Foundation also released its charter, which proposed the governance framework of JTO DAO, etc.
Jito's TVL (calculated in SOL) increased by 164% month-on-month to 6.4 million SOL, and its market share increased by 85% month-on-month to 38%, second only to Marinade. Jito's growth benefited from Lido's closure of its Solana service - Lido's market share was 24% at the end of the third quarter of 2023, falling below 2% by the end of the fourth quarter.
As mentioned above, Jito's MEV Solana client has also seen growth, with the client's market share at 48% and 51% month-on-month growth, with MEV also picking up recently as on-chain activity increases.
At Breakpoint, Jito launched StakeNet, an open source protocol for decentralized Solana staking pool operations. Currently, all Solana staking pools are managed by centralized actors who store historical validator data from on-chain snapshots and off-chain sources in their own off-chain servers, which they then use their own delegation logic and parameters to re- Balance stakes between validators and add or remove validators from the set.
StakeNet puts all of this on-chain, introducing a network of guardians who run validator history and management programs. The verification history program stores up to three years of encrypted verification data for each Solana validator on-chain. The steward program manages the delegation logic and validator scoring to operate the stake pool. Everything is on-chain, and delegation logic and parameters can be adjusted through on-chain governance. When it goes live, Jito will adopt StakeNet and hopefully other staking pools will too.
Although market share fell by 12%, Marinade's TVL in SOL still increased by 26% quarter-on-quarter. Marinade already has the native token MNDE, but in the third quarter of 2023 it launched a rewards program to align with the updated tokenless protocol compete for growth. In Q3 2023, Marinade also launched Marinade Native, a native staking product to complement Marinade’s liquidity staking service.
Marinade Native is a stake automation platform that routes stakes to more than 100 best-performing validators without paying performance fees or introducing any smart contract risks. Marinade Native’s TVL has reached $416 million.
Towards the end of 2023, Marinade launched Protected Staking Rewards(PSR). According to the PSR, validators need to pay SOL to be eligible for Marinade staking. Staking SOL will be used to cover any losses to Marinade stakers if validators experience downtime or experience other performance issues that impact their staking rewards.
Blaze continues its ongoing BLZE airdrop, which began in August 2023, with its TVL on SOL growing by 344% in Q4, with a market share of 12%, following a 1234% QoQ increase in Q3 2023.
MarginFi launched its own liquid staking protocol at the end of the third quarter of 2023. LST allocated equity to three validators run by the MarginFi team. Its liquid staking TVL in SOL increased by 1886% month-on-month, ranking among the top liquid staking protocols. Five. As mentioned above, the MarginFi team is already preparing to launch a liquid collateralized stablecoin powered by SOL.
Sanctum further strengthens the liquidity staking ecosystem, providing liquidity and stability to Solana’s liquidity staking and DeFi ecosystem. Sanctum launched 2.0 in early December 2023, bringing new products such as single-validator LST, upgraded multi-LST liquidity pool, and zero-fee flash loan program.
As LST grows in the Solana DeFi protocol, LST liquidity will become increasingly important, especially as users leverage them against SOL. This dynamic became apparent in mid-December 2023, when a user sold approximately $8 million worth of Marinade mSOL, causing its price to drop below SOL. Although Sanctum provides a unified LST liquidity pool, mSOL is still in the process of integration. The temporary unanchoring also sparked debate among several lending agreements over best risk management and liquidation practices.
consumer applications
NFT
Solana network's average daily NFT trading volume increased by 356% month-on-month to $4.8 million. Excluding Bitcoin, Solana's market share in NFT transaction volume increased from 9% to 26% month-on-month.
Although Magic Eden regained the majority share by the end of the fourth quarter of 2023, NFT market Tensor's market share grew to over 80% in early December compared to Magic Eden - while its market share at the beginning of 2023 was only is 1.2%.
The series with the highest total transaction volume in the fourth quarter of 2023 include Mad Lads (613,000 SOL), Tensorians (510,000 SOL), and Claynosaurz (171,000 SOL). These NFT series all represent the transformation of PFP NFTs into brand building and practical applications.
- Mads Lads is launched by the team behind the Backpack wallet and exchange, which was announced during Breakpoint and will open for registration in November 2023. Pyth, Dymension, Wormhole and Monad have announced or previewed airdrops to Mad Lads holders, and holders also hope to receive Backpack Exchange airdrops;
- Tensorians is Tensor’s native project and provides benefits to holders, such as expected Tensor airdrop points and benefits from partner projects;
- Claynosaurz has been experimenting with intellectual property, creating content and launching merchandise, similar to Pudgy Penguins on Ethereum;
The SOL-denominated floor prices of many well-known Solana NFT series have increased significantly month-on-month. Mad Lads’ on-site market capitalization increased 142% month-on-month to 1.3 million SOL ($135 million), while Tensorians increased 517% month-on-month to 800,000 SOL. ($80 million) – These two projects are currently Solana’s top projects by market value on a floor-to-ceiling basis.
Social and Creator Platform
Compressed NFTs (cNFTs) were the first successful use case for state compression, launching in early Q2 2023. State compression provides a cost-effective method of on-chain data storage by hashing data into a Merkle tree and publishing its root hash on-chain. Depending on the level of composability, the cost to mint and store 1 million cNFTs ranges from 5.3 to 63.7 SOL, or 24,000 SOL without compression.
cNFT enables new use cases across consumer, DePIN and other areas, with DRiP being the most important example of a consumer application that can only be enabled with cNFT. DRiP cooperates with artists to provide NFT art coins for free, and the collection size is much larger than the normal 10,000. DRiP minted more than 35 million cNFTs in the fourth quarter of 2023, with an additional 4 million minted by Dialect, Helium, and other projects.
In early Q4 2023, DRiP launched Droplets to power its in-app economy. Initially Droplets are distributed to users based on varying levels of engagement and are automatically spent when users receive collectibles from the platform.
In early December 2023, DRiP improved the system and launched Droplets 2.0. Users can still receive Droplets for free, but only through the spin winning mechanism that refreshes every six hours. Users can now also purchase Droplets using tokens or fiat currency (powered by Sphere), and finally users can gift Droplets directly to creators for potential benefits.
Droplets are converted to USDC and paid to creators, with DRIP disbursing $143,000 to creators in the fourth quarter of 2023 and $84,000 in December 2023 alone.
Other notable events include:
- Access Financing: Creator monetization platform Access Protocol announced it has received $1.2 million in seed round financing;
- Nina Protocol V2: Digital native music platform Nina launched V2 in mid-November, allowing artists to register using an email address and sell or distribute music for free. Nina uses Arweave and Solana to store music releases and facilitate transactions, with artists receiving 100% of sales;
- Boba Guys Passport: Bubble tea chain Boba Guys launches Solana-based loyalty program, minting cNFTs with the help of NFT tool company Crossmint, and has minted 8,124 cNFTs so far;
- SolLinked Masquerade: SolLinked has added the "Masquerade" function. Masquerade is a chat room where users can prove their on-chain assets in a privacy-protecting way through Elusiv;
- Solarplex’s “In-Post Minting”: Web3 social media platform Solarplex has added an “In-Post Minting” feature, which allows users to easily create NFTs and embed them into posts, and anyone who likes the post will automatically collect NFTs;
gamble
The game has quieted down as Solana's specific main narrative, but there's still a lot of discussion and a few updates here at Breakpoint.
- Star Atlas is a game built on Solana, and at Breakpoint it announced game features and a demo of the upcoming 2.2 version. Star Atlas launched a 2D open world game SAGE Labs at the end of the third quarter of 2023. In addition, Star Atlas accounted for about 8% of Solana's total transaction volume in the fourth quarter of 2023;
- Open source on-chain gaming framework Magicblock details its vision for Solana’s native game engine (you can learn how they work and why they’re important here );
- Other discussions at Breakpoint centered around the evolution of the gaming landscape and mechanic design, as well as discussions on strategies to maximize user acquisition;
In mid-December 2023, Magicblock co-hosted the second Solana Speedrun with Lamport DAO and the Solana Foundation, a game-themed hackathon offering prizes of up to $10,000.
DePIN
Solana is becoming a hub for DePIN applications, hosting DApps such as Helium, Hivemapper, Render, Teleport and GenesysGo.
Notable events include:
- Render migration: In early November 2023, the decentralized computing network Render successfully completed the migration of its core on-chain infrastructure (including native tokens) from Ethereum and Polygon to Solana. The Render Foundation stated that Solana provides new features for the protocol, such as Live streaming, dynamic NFTs, and composability with on-chain order books;
- Helium Mobile $20 phone plan: In early December 2023, Helium Mobile partnered with T-Mobile to launch a nationwide $20 monthly phone plan that provides unlimited data, talk and text. It also released indoor and outdoor Helium Mobile Hotspot, Allows users to help create wireless network coverage in exchange for MOBILE rewards;
- Hivemapper Update: Hivemapper, which aims to create a decentralized global map, has announced it will begin licensing map data on behalf of paying customers. Later in Q4 2023, Hivemapper released Scout, an open source UI toolkit for real-time monitoring of street locations using Hivemapper dashcam images. Potential use cases include monitoring construction work zones, gas station prices, and billboards. ;
- Teleport iOS app: Decentralized ride-sharing protocol Teleport is launching an iOS app at the end of October 2023 and will begin operating in cities with at least one local ride-sharing operator and enough drivers and passengers;
- Io.net public beta: Decentralized GPU aggregator io.net launched a public beta during Breakpoint, aggregating GPUs from Render, Filecoin and its own network to build a decentralized platform specifically for machine learning needs. Cloud and plans to launch its own token in the first quarter of 2024;
- IoTeX integration: Sensor network platform IoTeX integrates its W3bstream SDK with Solana. W3bstream uses zk-proofs to connect IoT devices equipped with specific use case sensors (such as Hivemapper driving recorders) to on-chain contracts;
- Nosana's AI Pivot: In mid-October 2023, the decentralized GPU network Nosana announced a shift from CI/CD use cases to AI inference. Its platform is currently in the internal testing stage, with more than 100 GPU nodes and 47,000 completed inferences;
pay
With low transaction costs, sub-second finality and a network of thousands of nodes, Solana is expected to help drive mainstream payment processes - Visa said it will expand its USDC settlement pilot to Solana in the fourth quarter of 2023, in addition to Visa's Aside from the announcement, another big win is the integration of Solana Pay into Shopify, with payments platform Helio announcing in December 2023 that it would take over operations of the Solana Pay Shopify plugin.
Other noteworthy events for Solana-native payments infrastructure companies and applications during the quarter include:
- Sphere early access: Solana Summer Camp Hackathon winner Sphere launched an early version of its payment solution in early December 2023. Its functions include withdrawals, on-chain subscriptions, universal checkout, etc. It has already provided payment processes for multiple Solana ecosystem projects Provides support including Squads, io.net, DRiP and Helium Mobile;
- Code open source: Payment application and protocol Code is now focused on building micropayment solutions and will open source its entire code base at the end of November 2023;
- Elusiv Payroll App: Following the launch of a private token swap, Elusiv has opened its private payroll app to sign-ups;
- TipLink provides support for IRL events: TipLink allows users to send or claim Solana assets using links or QR codes. On Breakpoint, more than 15 teams have used TipLink to distribute more than 5,000 claimed assets. TipLink also provides support for NFT distribution through the QR code of the "artist-in-residence" at Art Basel Miami Beach;
infrastructure
Notable infrastructure-related events in Q4 2023 include:
- Squads V4, Funding, and Fuse: With over $2.5 billion in assets secured in Squad’s multi-signature protocol, early Q4 2023, Squads launched V4, bringing a UX redesign and new features, including browsing Server extension wallet SquadsX. Shortly after, it announced a $5.7 million strategic financing led by Placeholder. At the Breakpoint conference, Squads Labs also announced the smart wallet Fuse, a PDA wallet powered by the Squads multi-signature protocol, expected to be launched in 2024. quarterly launch;
- Pyth Airdrop: Pyth is the primary price oracle for the Solana DeFi protocol. It conducted a retroactive airdrop in November 2023, with more than 86,000 addresses across 27 blockchain networks eligible. Instead of creating a claim contract on each blockchain, Pyth airdropped all tokens on Solana. Despite some issues due to lack of liquidity, the Solana network is performing relatively well;
- Solana Mobile Updates: The Solana Mobile team announced several updates at Breakpoint, including new generalization features so that any chain can integrate Solana mobile. The updates also introduce the ability for wallet apps to integrate directly into Safari via extensions, as well as a feature phone wallet that uses the new gaming SDK for Unity and Unreal Engine for easier integration. Previously, the sales of Solana Mobile's Saga mobile phone were disappointing, but as the price of BONK soared, it was quickly sold out. People realized that the BONK airdrop that Saga mobile phone users could receive was worth more than the cost of the mobile phone. Since then, several other projects have Airdropped to Saga mobile users;
- Phantom cross-chain exchange: Phantom launched a service that allows users to transfer and exchange tokens directly in the wallet through Solana, Ethereum and Polygon. The cross-chain is supported by Li.Fi and several other protocols, and the exchange function is provided by Jupiter and 0x. support;
- Wormhole financing: Cross-chain protocol Wormhole announced the completion of US$225 million in financing, with a valuation of US$2.5 billion. Wormhole is one of the leading protocols for cross-chain connection with Solana;
- Helius Updates: Developer tools company Helius has made a number of updates in Q4 2023, including launching trading websockets and a priority fee API, and supporting fungible tokens (SPL, Token extensions, cNFTs and inscription).
- Backpack Exchange and Wallet Updates: The Backpack Wallet team launched the centralized exchange Backpack Exchange in mid-November 2023. The exchange's wallet is located on Solana, enhancing transparency. Backpack also added an NFT collection locking feature, launched mobile wallets on the Apple and Google Play stores, and open sourced the Backpack Wallet extension application;
- Underdog Embedded Wallet: Underdog Protocol is an API for NFT-related needs. In late November 2023, it launched an embedded wallet tool, which allows users to claim and manage NFTs using social login without first creating a Web3 wallet;
- Other developments: Light’s ZK Anchor, Armada release, SolanaFM releases Quantum, “create-solana-dapp” tool update, Google Cloud BigQuery support, Ironforge’s RPC Gateway, Vybe token page, MPCVault integration, Trezor support, Space Operator public beta version, SNIPER upgrade and Eclipse testnet launch, etc.;
ecological growth
Grants, hackathons, accelerators, and other initiatives co-sponsored by the Solana Foundation and independent organizations such as Lamport DAO and Superteam further advance the ecosystem.
Notable events this quarter include:
Breakpoint: The Solana Foundation held its annual conference in Amsterdam from October 30 to September 3, 2023, with over 3000 attendees and 100+ presentations. Many teams used the opportunity to make big announcements (see this report for details), and Breakpoint 2024 will be held in Singapore from September 19 to September 21, 2024.
Hyperdrive Hackathon: Solana Foundation’s online Hyperdrive Hackathon ends in mid-October 2023, with the winner announced at Breakpoint, with the AI-powered Telegram chatbot Fluxbot taking home the overall winner’s prize ($50,000). Other track winners ($30,000 per project) include:
- Mobile consumer tracking: SolLinked, a paid-access, people-as-a-service that starts with email;
- Crypto Infrastructure Track: epPlex, a protocol for minting self-destructing NFTs;
- AI Track: Wysdom, a Notion-like platform for collaborative Web3 development and research;
- Gaming and entertainment track: Solciv, a full-chain strategy game inspired by Civilization;
- Financials and Payout Directions: Starport (formerly Alexandria), a consolidated limit order book where orders can be filled with multiple assets while avoiding transaction fees from multiple jumps;
- Physical Infrastructure Network Track: Shaga, a P2P network for gaming computers;
- DAOs and network status tracking: Pubkey Link, an open source Discord verification bot service;
In total, more than 7,000 participants submitted 907 projects, a record number for the Solana Foundation Hackathon.
- Solana Labs Incubator: Solana Labs has launched an incubator for existing Solana projects or Web2 and Web3 projects considering Solana, which provides support for development, fundraising, marketing, and more;
- Hong Kong Hacker House: The 2023 Solana Hacker House trip ended with the Solana x Circle Hong Kong Hacker House in mid-November 2023. 13 teams participated in the VC Pitch and Demo Day, which brought the event to a successful conclusion;
- RetroPGF Round 1: OpenBlock Labs partnered with the Solana Foundation to launch the Solana Retroactive Public Goods Grant (RetroPGF), with a prize of $250,000. The largest winners include OpenBook, Cubik, and SOLfees;
- MtnDAO V5 Announcement: It is announced that the fifth one-month Hacker House mtndao will be held in Salt Lake City in February 2024;
- Solana Crossroads Announcement: Solana Allstars, Step Finance’s ambassador program, announces its second annual Solana Crossroads conference in Istanbul in May 2024;
Summarize
Solana ended the year on a rebound with strong numbers in Q4 2023, with growth also driven by the Solana Foundation's annual Breakpoint conference, including Jupiter perpetual trading products and token issuance, Frankendancer, Backpack Exchange and Render migrations, and more Many major announcements and releases from the team, JTO’s airdrop and BONK’s listing on Coinbase further stimulated on-chain activity in December 2023.
All in all, this quarter Solana’s market value increased by 423% month-on-month, average daily payers increased by 102% month-on-month, DeFi TVL increased by 303% month-on-month, average daily DEX transaction volume increased by 961% month-on-month, average daily NFT transaction volume increased by 359% month-on-month, and the market value of stablecoins increased A month-on-month increase of 21%.
Upcoming catalysts in Q1 2024 will include the Jupiter airdrop, token scaling, and continued progress on the launch of Firedancer and TinyDancer.
