Today’s Recommendation | Unique Ways to Profit from Solana’s Trading Ecosystem

The trading tools on Solana are highly profitable, even comparable to blue-chip DeFi projects like Maker, Aave or Lido, and even surpassing them. - Solana's on-chain trading ecosystem is generating surprisingly high revenues. - This is due to its unique network architecture and the various possibilities it offers to traders. - As a standalone domain, Solana's trading-related activities have become the third most profitable category in the cryptocurrency space, after stablecoins and Layer 1 chains. There is a huge money-making opportunity in providing infrastructure for Solana's on-chain market. This is the view put forward by David Duong, head of institutional research, and David Han, institutional research analyst at cryptocurrency exchange Coinbase, in a report on Friday. They believe that if Solana's on-chain trading ecosystem is viewed as a standalone financial domain, it is the third most profitable category in cryptocurrency, after stablecoins and Layer 1 chains. Duong told CoinDesk: "Solana's trading-related activities typically account for 75-90% of Solana's transaction fees, far exceeding Ethereum and other networks like Base and Arbitrum." He added: "While Layer 2 solutions are also growing and innovating, they face different challenges in scalability and user decentralization compared to Solana. Solana's model, especially its fee mechanism and user activity patterns, is unique." This week, Coinbase's move seems to validate this view, announcing the launch of cbBTC, which allows trading, lending and borrowing of Bitcoin (BTC) on Solana, an important functionality for decentralized finance (DeFi) to take off in this ecosystem. In terms of data, according to defillama, Tether's USDT and Circle's USDC stablecoins generated $93 million and $28 million in revenue respectively in the past 7 days, while the Ethereum, TRON and Solana networks generated $19 million, $11 million and $9.6 million respectively. Meanwhile, Solana-based protocols and trading bots are closely following. The trading bot platform Photon and the memecoin-powered platform pump.fun both generated over $6 million in revenue in the past 7 days, exceeding the revenue of DeFi giants like Maker, Lido or Aave on Ethereum. This is mainly due to memecoins - these are joke cryptocurrencies with no utility, often highly volatile. pump.fun is a Solana-based protocol where users can easily create new tokens, making the network a hub for memecoin trading activity. Coinbase stated that since the protocol's launch in January 2024, over 3 million tokens have been launched on pump.fun. This is where Telegram trading bots come into play, helping users buy and sell memecoins faster. Coinbase analysts wrote: "The revenue generated by Telegram trading bots is surprisingly high, even exceeding that of pump.fun." The report notes that the most profitable bots, such as Photon, Bankbot and Trojan, are all Solana-based. This suggests that there is a large group of traders on Solana who are less sensitive to execution fees, possibly due to the high volatility (and lower liquidity) of the underlying assets. Duong told CoinDesk: "Our research also found that Solana's fee spending typically peaks in the late afternoon on the US West Coast, suggesting a specific active user base in that region." Tailoring the on-chain ecosystem to user demand Solana's developers are aware of the unique dynamics created by the on-chain environment of the network, and some are trying to fully leverage this. For example, Zeta Markets is a decentralized exchange (DEX) offering perpetual contracts, hoping its users can buy memecoins and trade with leverage without having to use multiple wallets. "Traders will think, 'Why do I need to go to a centralized exchange (CEX) to trade? All my funds are already on the Solana chain,'" Zeta Markets founder Tristan Frizza told CoinDesk. "If you already hold all your memecoins in your Phantom wallet, then you might want to hedge them through perpetual futures. On a DEX, that's just a click away." Frizza said the convenience is a huge draw, but it also means listing high-risk tokens that haven't yet appeared on any CEX. Not to mention using Solana tokens as collateral for positions, not just stablecoins. "In a bull market, no one wants to hold stablecoins," Frizza said, "they just want to put any asset in their wallet into their margin account." All these features are ultimately reflected in the data. The convenience of Solana DEXs means the trading volume of these protocols is clearly differentiated from Coinbase - even Ethereum DEX trading volume is becoming increasingly correlated with CEXs. Coinbase's report notes: "This suggests that Solana's trading activity is relatively decoupled from CEX activity, seemingly forming its own distinct ecosystem."