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Solana Q1 report: $89.2 million in financing, daily spot DEX trading volume increased to $1.5 billion

Messari

24-04-09 17:20

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Original title: State of Solana Q1 2024

Original author: Peter Horton, Messari

Original translation: Felix, PANews (this article has been abridged)

Key insights:

· Solana network daily spot DEX volume increased 319% month-on-month to $1.5 billion. Solana has become a gathering place for retail and Memecoin traders.

· Projects built primarily on Solana raised $89.2 million in the first quarter, $2.5 million more than the total raised in all of 2023.

· Launched token extensions, which provide a set of configurable features for token issuers. So far, stablecoin issuers, including Paxos and GMO Trust, as well as crypto-native projects such as Photo Finish LIVE and Wen have adopted token extensions.

· With the launch of developer store Anza and growth organization Colosseum, the Solana ecosystem has made significant progress in further decentralization.

· The Solana network suffered its first outage in nearly a year due to an error in the legacy loader, but the network remains stable. Upcoming scheduler and network upgrades will reduce spam and improve user experience.

Financial Analysis

SOL market capitalization continues to lead the market. Its market capitalization ranks fifth among all tokens, second only to BTC, ETH, USDT and BNB. After reaching a peak of $77 billion in the previous cycle, SOL market capitalization continues to reach historical highs. As of the first quarter of 24, the market capitalization was $86.4 billion, a month-on-month increase of 97%. However, SOL is still about 25% away from its all-time high of nearly $260.

Revenue in SOL terms increased 200% month-over-month. As the SOL price rose, total quarterly revenue in USD terms increased 597% month-over-month to $98.8 million. Solana had an all-time high in single-day revenue on March 18, at about $4.9 million.

Half of these fees are burned, while the other half is distributed to block producers. Burning tokens reduces Solana’s annualized quarterly inflation rate from 5.5% to 5.2% in the first quarter. The SOL issuance rate will decrease by 15% per year to 1.5%.

Network Analysis

Adoption

Network activity, as measured by non-voting and paid transactions, continued to rise in Q1. Daily average paying users grew 214% month-over-month to 597,000, peaking at over 2 million on March 17. The growth in addresses was primarily driven by Memecoin transactions. Daily average non-voting transactions grew 71% month-over-month to 70 million. However, 62% of non-voting transactions failed, up 10% month-over-month. Most of the failed transactions came from arbitrage bots or user transactions on DEXs.

New paying users also showed a similar growth trend, reaching a high of about 1.2 million on March 17. Average daily new paying users increased by 266% month-on-month to 115,000. The retention rate of new paying users is also high. The one-month retention rate of new paying user groups in December 2023, January 2024, and February 2024 is above 30%, while the average retention rate from January 2023 to November 2023 is 18%.

Security and Decentralization

SOL staking rate fell for the second consecutive quarter, down 7% month-on-month. The main reason for the decline was that FTX Estate canceled staking when the tokens were unlocked. However, as the price of SOL rose, the total staking amount in US dollars increased by 71% month-on-month to $70 billion, ranking second among all networks, second only to Ethereum.

Performance, Upgrades, and Roadmap

On February 6, the Solana network suffered its first outage in nearly a year, which lasted for about 5 hours. The cause was a bug in the old version of the loader. This bug was previously discovered on Solana’s devnet, but its fix has not yet been implemented.

But the Solana network remains stable. Although the increase in network usage has led to congestion issues and worsened the user experience. Identified issues and potential solutions include: launching a transaction scheduler, upgrading the network, etc.

The most eye-catching thing this quarter is token extensions. Token extensions are part of the new SPL token standard and provide a set of configurable functions for token issuers. The functions supported by these extensions are largely available on other networks, but currently require developers to build their own infrastructure or permissioned environments.

Ecosystem Analysis

DeFi

Solana DeFi TVL increased by 232% month-on-month to US$4.9 billion, ranking fourth among all networks. Lending and yielding protocol Kamino jumped from fourth-largest Solana protocol to the top of the TVL list. Its lending protocol ended the quarter with nearly $1.3 billion in TVL, up 811% month-over-month.

DeFi volumes also continued to grow, with average daily spot DEX volume up 319% month-over-month to $1.5 billion. The growth in DEX volume was driven primarily by Memecoin trading. SLERF and BOME ranked seventh in volume. Other Memecoins in the top 15 by volume included BONK and WEN.

Telegram bots have become a popular trading venue for retail traders, with the average daily active addresses of the Solana Telegram bot up 573% month-over-month to 45,000. About 5% of total quarterly volume came from Telegram bots, up more than 2x month-over-month. BONKbot is the most traded of the Solana Telegram bots, with an average daily trading volume of $37 million. The bot charges a 1% fee to purchase BONK and distribute it to parties, including burning (10% of the fee).

In mid-March, BONKbot launched the Valhalla upgrade. Trojan on Solana went live in late January, with an average daily trading volume of nearly $14 million, and released the Bolt Pro feature in March. Other Telegram trading bots include FluxBot, SolTradingBot, and Banana Gun.

Over 59% of spot DEX volume is conducted through the Jupiter trading aggregator. Jupiter released its native token, JUP, in late January. Since launch, Jupiter Perps has averaged $328 million in daily trading volume. Another major player in Solana, Drift, has continued to maintain strong growth momentum. In Q4, Drift's average daily revenue increased by about 10 times, and in Q1 it increased by 6 times to $142 million. In late January, Drift launched its points program, which will end in March, followed by the token launch. In mid-March, Drift launched its pre-launch market product, which offers rewards for yet-to-be-launched tokens, starting with Wormhole's W.

Following a 21% increase last quarter, Solana’s stablecoin market cap grew 55% QoQ to $2.8 billion, ranking fifth among all networks. This growth was driven entirely by USDC, whose Solana market cap grew 111% QoQ to $2 billion. Solana now holds the second-most USDC, behind only Ethereum.

Liquidity Staking

Solana’s liquidity staking rate grew 27% QoQ to 5.5%. Liquidity staking protocol Jito has been leading the way in terms of growth. Jito’s TVL grew 47% QoQ to 9.4 million SOL, replacing Marinade for the top spot in TVL. At the end of the quarter, Jito's liquidity staking market share was close to 50%. Marinade Liquid's TVL fell 9% month-on-month to 6.4 million SOL. Blaze's TVL grew 38% month-on-month.

NFT

Daily average NFT trading volume grew 57% month-on-month to $7.6 million. After breaking through more than $331 million in total trading volume in December 2023, growth reversed in January and February, but grew again in March 2024.

In the NFT market, Tensor's market share increased by 9% month-on-month to 71%. Magic Eden's market share continued to decline, down 18% month-on-month to 25%.

DePIN

Solana is becoming a hub for DePIN applications, including hosting Helium, Hivemapper, Render, Teleport, and GenesysGo. Notable events in the first quarter include: Helium Wi-Fi and Telefonica cooperation, Io.net financing and launch plans, etc.

Funding

After a long bear market, Solana ecosystem financing is recovering. 16 projects built primarily on Solana announced several rounds of financing in the first quarter, with a total of US$89.2 million in financing. Combined with Q4 2023, 25 projects raised $146.3 million, while in the previous two quarters, seven projects raised $9.6 million.

Summary

Solana continues to grow in 2024 after a strong 2023. Solana has become a major hub for retail and Memecoin traders. Its daily spot DEX volume grew 319% quarter-over-quarter to $1.5 billion. Solana has also made great strides in its ability to support institutions, launching token extensions that provide a set of configurable features for token issuers.

However, the increase in network activity has led to congestion issues, which are being addressed in upcoming network, scheduler, and fee market upgrades.

Investment in the Solana project is heating up after a protracted bear market. Projects built primarily on Solana raised $89.2 million in the first quarter, $2.5 million more than the total raised in all of 2023. The Solana ecosystem is also becoming more decentralized. Former Solana Labs engineers and executives announced the launch of developer shop Anza, and the former Solana Foundation head of growth launched growth organization Colosseum.