Solana Q2 Report: DEX average trading volume increased 3 times year-on-year, with 300,000 daily active addresses

Original source: Step Finance

Compiled by: Odaily Planet Daily

Recently, the DeFi position manager and aggregator Step Finance released the “Solana Q2 Report 2023”.

The report shows that since the launch of the mainnet, Solana has expanded to over 3,400 validators, with more than 2,400 consensus nodes—significantly higher than the number of nodes on other POS blockchains. The staking distribution of Solana by country is as follows: 23.5% in the United States, 13.2% in the United Kingdom, and 11.9% in Ireland.

On the developer front, as of April 2023, Solana has 1,234 active developers; the number of active developers has decreased by 12% year-on-year, but this figure has increased by 339% compared to two years ago. The number of monthly active developers has declined this year, mainly due to a reduction in one-time developers and part-time developers.

In terms of on-chain transactions, Solana averaged 300,000 daily active addresses in the first six months of 2023. Solana's active addresses are comparable to those of Ethereum and Polygon, slightly lower than Bitcoin's average; in the second quarter, the total value locked (TVL) in the Solana ecosystem did not show significant growth; the average trading volume of DEX in the first six months of this year was four times that of the same period last year, largely due to investments and developments in DEX and perpetual trading DEX.

In the NFT sector, in late June, Solana's NFT trading volume surpassed Ethereum for the first time, with Solana's daily trading volume reaching a peak of $25.5 million, compared to Ethereum's $24.7 million. Additionally, the Solana NFT lending ecosystem is rapidly developing, with loan volumes in the past 30 days equivalent to 50% of Solana's NFT trading volume. Major lending platforms on Solana include Sharky, Citrus, Frakt, and RainFi. Sharky dominates the lending market with a 76% share, followed by Citrus (16%), Frakt (7%), and RainFi (1%).

The following is the original report, compiled by Odaily Planet Daily.

Introduction

In this report, we will introduce the key events and progress that have facilitated the growth of the Solana ecosystem, as well as various use cases of the Solana blockchain in 2023, covering areas such as finance, gaming, NFTs, and decentralized physical infrastructure networks. Data on active addresses, developer activity, on-chain transaction volume, and liquidity are key indicators we use to demonstrate the continuous growth and adoption of the Solana ecosystem.

This report will also highlight the most representative narratives and projects in the Solana ecosystem from the previous quarter, such as AI, DePIN, and gaming.

I. Macroeconomic Outlook

In the first half of the year, the global economy faced numerous challenges, particularly in emerging and developed markets. One of the most significant factors contributing to this unrest is the sharp rise in interest rates, leading to a substantial decline in market liquidity and significant pressure on businesses and consumers due to tightening funds. Additionally, the effects of interest rate hikes have now fully manifested.

Several banks in Europe and the United States are on the brink of collapse or suffering significant financial losses. This development has heightened concerns about the stability of the global financial system and its potential impact on the broader economy.

Due to the Federal Reserve's significant interest rate hikes, inflation rates have been on a sharp decline, while unemployment rates remain surprisingly low.

U.S. SEC Labels Solana as a Security

In early June, the U.S. Securities and Exchange Commission (SEC) stirred up a storm in the crypto world by announcing a renewed lawsuit against crypto trading giant Binance. Additionally, the SEC's assertion that certain altcoins, including Solana, Polygon, and Cardano, are classified as securities has drawn attention from the crypto community.

The list of tokens suspected of being securities also includes Binance's own BNB, stablecoin BUSD, and several other large-cap tokens. The immediate impact of the SEC's enforcement action was a significant drop in the prices of these tokens. For example, Solana plummeted over 6% within an hour of the announcement, and tokens like Algorand, Polygon, and Polkadot also saw substantial declines. Less than 24 hours after suing Binance, the SEC filed a lawsuit against Coinbase, which also stated that Solana and other altcoins are securities.

BlackRock Plans to Launch Spot Bitcoin ETF

In June of this year, global asset management giant BlackRock applied to establish a Bitcoin exchange-traded fund (ETF), which would allow investors to invest in spot BTC, as this asset class is under strict regulatory scrutiny.

According to a filing with the SEC, BlackRock's iShares Bitcoin Trust will use Coinbase Custody as its custodian. So far, U.S. regulators have rejected over 30 applications and have yet to approve any spot Bitcoin ETF applications. However, investors and analysts remain particularly optimistic, as past data shows that 575 out of BlackRock's 576 ETF applications have been approved.

Solana Price Trends

Over the past three months, the price of Solana tokens (SOL) has experienced a period of high volatility. At the end of last year, SOL fell to $8.90, marking a low not seen since February 2021; subsequently, in the following two months, the price of SOL skyrocketed to a high of $27. Since then, due to the collapse of two U.S. banks supporting cryptocurrencies and the failures of other regional banks and more European banks, market uncertainty has increased, stabilizing SOL's price in the $19-$21 range.

After several months of consolidation, the price of SOL began to collapse following the SEC's lawsuits against Coinbase and Binance, dropping to around $12. However, recently, SOL has almost fully recovered from the SEC's attack, as Solana has gained more support, and new narratives seem to have a positive impact on the price.

Is FTX Still a Cloud Over Solana's Growth?

It has been nearly a year since the collapse of the second-largest crypto exchange, FTX. Although many members of the crypto community, KOLs, and analysts have abandoned Solana due to the FTX incident, the Solana community remains steadfast. The Solana ecosystem continues to move forward, with over 1,000 developers at the forefront of blockchain innovation.

II. Decentralized Development on Solana

The Solana Foundation has released a report highlighting the latest developments in the ecosystem, focusing on decentralization and validator data.

Since the launch of the mainnet in March 2020, it has expanded to over 3,400 validators, with more than 2,400 consensus nodes—significantly higher than the number of nodes on other POS blockchains. The foundation is now focusing on the quality of nodes, not just their quantity.

Solana's Nakamoto coefficient is 33, which has remained unchanged since August 2022, meaning that at least 31 validators are required to collude to censor the network. The coefficient steadily increased from the launch of the network in March 2020 until September 2022, after which it stabilized. (Note: The Nakamoto coefficient is an accurate measure of a project's level of decentralization.)

The Solana Foundation is exploring ways to attract more high-quality validators, which could lead to an increase in the Nakamoto coefficient, as users are incentivized to stake with larger validator pools.

(Various chains' Nakamoto coefficients; note that Ethereum's Nakamoto coefficient is 20, not 2, as the statistics are incorrect.)

The staking distribution of Solana by country is as follows: 23.5% in the United States, 13.2% in the United Kingdom, 11.9% in Ireland, 8.6% in Lithuania, 7.6% in Japan, 6.0% in Canada, 5.8% in Singapore, 5.1% in Poland, 4.2% in the Netherlands, 3.2% in Germany, 1.9% in France, and 2.2% in Russia, with the remaining 4% coming from other countries. As shown below:

Solana is not only decentralized but also more decentralized than most blockchains (such as Avalanche, Cardano, NEAR, and Aptos). The distribution of active stake hosting is one of the most balanced distributions, further demonstrating Solana's resilience and decentralization.

Developer Activity

According to the latest data from the Electric Capital developer report, as of April 2023, Solana has 1,234 active developers; the number of active developers has decreased by 12% year-on-year, but this figure has increased by 339% compared to two years ago.

Measuring developer activity on the blockchain is a key task. Notably, there is currently no standardized method for accurately calculating this metric.

The number of monthly active developers has declined this year, mainly due to a reduction in one-time developers and part-time developers. One-time developers are defined as those who contribute code once within a rolling three-month period, while part-time developers are those who contribute code for less than 10 days each month.

Although the data shows a decline in the number of full-time developers in the Solana ecosystem, the decrease is not significant, while one-time and part-time developers have seen a substantial decline compared to the end of 2022. This sharp drop can be attributed to the bankruptcy of FTX and the bear market. Not only did many Solana-based projects have their treasuries on the FTX exchange, but FTX could be considered the largest investor in Solana projects.

Recently, the Solana Foundation has established multiple grants and has been actively investing in the ecosystem.

Solana DeFi Ecosystem

TVL Growth

Data shows that the total value locked (TVL) in the Solana ecosystem did not show significant growth in the second quarter. Solana's TVL has been almost stagnant throughout 2023, hovering between $200 million and $300 million. However, with the growth of projects like Marinade and mrgnfi, the Solana DeFi ecosystem is continuously expanding, as these projects have been providing incentives for DeFi adoption.

Active Addresses

Solana has shown resilience in the first six months of 2023, averaging 300,000 daily active addresses. Solana's active addresses are comparable to those of Ethereum and Polygon, slightly lower than Bitcoin's average. It is worth noting that the collapse of FTX occurred at the end of 2022, and the data above indicates that Solana's user base has not decreased as expected.

The stability of daily active addresses indicates that the Solana network and its user base are resilient.

DEX Trading Volume

One of Solana's main narratives is decentralized trading, as Solana has low transaction fees and fast speeds. The average trading volume of DEX in the first six months of this year was four times that of the same period last year. The significant growth is attributed to investments and developments in DEX and perpetual trading DEX, such as Drift Protocol, Jupiter Aggregator, and Zeta Markets.

The collapse of FTX triggered the largest weekly trading volume ever for Solana DEX, followed by a complete stagnation for an entire month. Since then, the DEX narrative has continued to attract users, thereby drawing in new capital.

Since the collapse of FTX, monthly trading volumes have not slowed down, except for December.

Liquid Staking

On Ethereum, the liquid staking market is large and has found key participants. Marinade Finance is the main liquid staking participant on Solana, and its non-custodial liquid staking protocol allows users to stake their SOL tokens using automated staking strategies and receive "marinated SOL" tokens (mSOL); users can then use mSOL tokens to participate in various DeFi activities.

Marinade's TVL is $125 million, making it the largest DeFi application on Solana, holding a 45% market share. Its token mSOL has 73,877 holders and a market cap of $120 million.

Solana NFT Ecosystem

Data and sentiment indicate that one of Solana's most powerful narratives is NFTs. The growth of NFTs on Solana has led to rapid innovation, driven by the ecosystem's need to explore new use cases and forge new paths.

One key narrative is NFT DeFi, which merges DeFi principles with the gamification of NFTs. Solana's NFT ecosystem has undergone a unique transformation. Teams have developed successful products before launching NFT series, which contrasts with what occurred in the previous bull market cycle.

It is clear that the Solana NFT community has matured, with most members unwilling to mint collections that demand too much and offer too little support. Instead, they are willing to pay a premium for projects that are already established.

Solana NFT Index

The SolanaFloor NFT index consists of a carefully selected basket of blue-chip collections based on multiple weighted criteria: trading volume, social trends, age, and other statistics. The SolanaFloor chart represents the index in SOL (green) and USD (purple).

This index is a valuable tool for any long-term investor, trader, or researcher in NFTs. While technical analysis may be inaccurate for most NFT projects that have existed for less than four months, the chart provides a sufficiently long time frame (year-to-date) for effective analysis.

The chart below shows that the USD index reached a quarterly high of $3,227; the SOL index is at an all-time high, totaling 167 SOL.

Solana's NFT trading volume surpassed Ethereum for the first time

In late June, Solana's NFT trading volume surpassed Ethereum for the first time. Within 24 hours, Solana's trading volume reached $25.5 million, while Ethereum's trading volume was $24.7 million, a significant achievement primarily due to the launch of SMBs.

Compared to most other blockchains, Solana has endured more trials over the past 365 days, adding extra significance to this achievement.

NFT Lending

NFT lending is an increasingly popular play, where individuals use their NFTs as collateral to obtain loans on platforms like Sharky. This form of lending allows investors or lenders to earn interest on their investments. Compared to staking and standard crypto-based loans, NFT loans have the potential for higher returns. In NFT lending, borrowers secure loans by locking their NFT assets as collateral.

NFT lending can be realized through DeFi applications. DeFi platforms use smart contracts to manage the loan terms and interest rates for NFT loans. As NFT lending is a relatively new trend, it is expected to further develop as more individuals and capital participate, along with potential regulatory measures.

Surge in Loan Volume

The Solana NFT lending ecosystem is rapidly developing. In the past 30 days, loan volumes have been equivalent to 50% of Solana's NFT trading volume. Major lending platforms on Solana include Sharky, Citrus, Frakt, and RainFi. Sharky dominates the lending market with a 76% share, followed by Citrus (16%), Frakt (7%), and RainFi (1%).

As the largest NFT lending platform on Solana, Sharky's monthly trading volume has surpassed that of Magic Eden and Tensor—Sharky's monthly trading volume exceeds 1 million SOL, followed by Magic Eden's 940,000 SOL and Tensor's 850,000 SOL. Data shows that the NFT market is maturing and continuously evolving beyond trading.

III. Increasing Narratives for Solana

Gaming

Compared to traditional gaming platforms like Steam, Web 3 gaming/blockchain gaming has several advantages.

In Web 3 games, players have actual ownership of in-game assets and can trade or sell them outside of the game. Assets are stored on a completely transparent and secure blockchain. In traditional games, players do not truly own their in-game items, and their value is limited to the game's ecosystem. In Web 3, due to interoperability between different games and platforms, players can use their assets across multiple games—there are theoretically no restrictions. This is interesting because even if a game shuts down, the assets do not disappear and may still hold value in several other games, which is a significant difference from traditional gaming.

Blockchains are typically decentralized and not controlled by a single entity. Their decentralized nature reduces the power imbalance between players and game developers, promoting fairness and transparency in gameplay. Additionally, Web 3 games empower players by introducing the concept of "play-to-earn," allowing players to earn real-world value by playing games and acquiring rare assets. These assets can be traded or sold, enabling players to monetize their gaming skills and time invested. In traditional games, less than 1% of players can earn money through streaming, video editing, or becoming professional players. Web 3 games target 99% of users.

Star Atlas - A Game on Solana

Star Atlas is an immersive role-playing game set in a vast universe. Supported by the Solana network, this game ventures into uncharted territory, introducing an innovative play-to-earn experience.

As a player, you can choose your path and join one of three renowned factions in Star Atlas.

Star Atlas features a marketplace where players can buy and sell resources and services both in and out of the game. Players can acquire items for ship missions and land ownership for mining operations in the virtual world. Star Atlas aims not only to create an immersive gaming experience but also to build a thriving economy on blockchain technology.

Star Atlas accounts for over 5% of daily trading volume across the entire Solana blockchain. Considering the current bear market in the cryptocurrency industry, the number of new participants entering is limited, making this achievement even more remarkable. Star Atlas has cultivated a strong and focused community that may see significant growth in the next bull market cycle. The established core community holds immense value and is a crucial asset for the future expansion and success of the game.

Artificial Intelligence

Artificial intelligence systems can store and share data on the blockchain, as it provides better data security and privacy. Blockchain creates the necessary environment for transparency and accountability, making the outputs of AI more trustworthy. Additionally, blockchain can incentivize data sharing and collaboration through tokenization and reward mechanisms, just as it has in other use cases.

While AI has the potential to be one of the main drivers of blockchain adoption, most blockchains are either too expensive or lack the flexible infrastructure to support strong demand and activity, or both.

Due to a wealth of available tools, libraries, and mature ecosystems, languages like Python and R are more widely used in the AI community. On the other hand, Rust's high performance and interoperability may make it more suitable for intensive tasks. Furthermore, Rust's ecosystem is rapidly evolving.

Among existing blockchains, Solana is the largest network built using the Rust language. Additionally, Solana is the fastest blockchain in the cryptocurrency ecosystem, making it highly attractive for high-intensity use cases. Interestingly, due to Solana's speed, low cost, and good composability, projects like Helium and Render have migrated their ecosystems to Solana, and the DePIN narrative is thriving on Solana.

Solana is Laying the Foundation for AI

Solana features scalability, low transaction fees, and fast confirmation times. It is the most powerful blockchain while also being the cheapest. Solana has a rapidly growing developer ecosystem, and developing use cases is only possible on Solana. Moreover, it is one of the most active and resilient ecosystems in the cryptocurrency space, having weathered the FTX collapse and the bear market so far.

ChatGPT Plugin

The Solana Foundation is laying the groundwork for the development of AI. Recently, @solanalabs launched a ChatGPT plugin to enhance user interaction. Users can check wallet balances, transfer funds, and purchase NFTs through the plugin.

AI Grant Program

The Solana Foundation has created a $10 million AI grant program to encourage the development of blockchain and AI crossovers on Solana. The program received over 50 applications in its first week. Additionally, a three-month accelerator program has been established for university students, focusing on blockchain and AI experiments.

Hivemapper is a DePIN project based on Solana that has launched AI Trainers, converting real-world images into digital maps, resulting in 5.7 million AI training reviews and consensus on 500,000 objects.

Render Moves Key Technology from Polygon to Solana

As the AI narrative strengthens, developers are increasingly seeking the ideal ecosystem to build upon. In May, as a result of governance voting, Render (RNDR) moved its Burn-and-Mint mechanism from Polygon to Solana. So far, Render is the biggest gainer in 2023, primarily due to developments in AI.

RNDR is a blockchain-based project developed by OTOY, aimed at transforming cloud rendering and distributed computing by creating a decentralized network of rendering nodes.

Due to increased demand for graphic rendering solutions leading to a global GPU shortage, the complexity of the supply chain has exacerbated the situation. In this context, Render has emerged as a decentralized computing solution, providing a cheaper and faster alternative to traditional rendering methods. By leveraging distributed computing power, Render democratizes high-quality rendering and becomes particularly valuable in the context of the growing Metaverse vision. For these reasons, many consider Render to be the most important AI token.

IV. Ecosystem News

Helium Completes Migration to Solana

Helium, a leading decentralized IoT connectivity provider, has completed its migration to the Solana blockchain. This transformation is expected to leverage Solana's lightning-fast and low-cost infrastructure to provide higher performance, scalability, and security for the Helium ecosystem.

Solana Releases Dashboard to Track Real-Time Emissions

The Solana Foundation is leading the way, making Solana the first smart contract blockchain to track carbon emissions in real-time.

The emissions monitoring system was created in collaboration with the carbon data platform Trycarbonara and integrates the software directly into Solana nodes, providing the most detailed and accurate measurement of the blockchain's carbon footprint to date. This measurement fluctuates based on each validator's throughput, its online and offline status, and changes in validators.

Grayscale Launches Solana Trust GSOL

Grayscale has launched the Solana Trust, coded as GSOL.

Since November 2021, this trust has offered private placements to qualified investors. As of April 14, 2023, a total of 304,427 GSOL shares have been issued. Under Section 144 of the Securities Act of 1933, shares issued through private placements will be eligible for sale on the public market after a one-year mandatory holding period.

Like other securities, investors eligible to purchase U.S. securities can freely trade GSOL shares through their investment accounts. The launch of GSOL by Grayscale brings multiple advantages to the Solana ecosystem. The visibility and credibility of the Solana network have been enhanced, attracting a broader range of investors, including institutional investors. Additionally, it is reasonable to expect that market liquidity will improve, potentially leading to better performance and reduced volatility.

The Largest NFT PFP Series in the Crypto Market Launches on Solana

Drip is a Solana-based project aimed at providing digital gifts from renowned creators for free, and it is a key participant in launching the largest NFT PFP series on Solana, a total of 350,000 NFTs were airdropped to users.

The "Faceless" series has achieved success in the Solana ecosystem. The secondary sales market for this series features thousands of unique buyers who made nearly 100,000 purchases, highlighting its appeal to both experienced Solana users and newcomers.

Conclusion

As Helium, Hivemapper, Render, and other projects solidify their positions on Solana, the momentum for DePIN development is growing stronger. The Solana ecosystem remains firmly committed to the NFT-DeFi narrative, which has proven to be a significant driver, accounting for 40% of daily trading volume in the NFT ecosystem. Overall, the Solana ecosystem continues to push the boundaries of innovation, and its community has become one of the most resilient communities in the cryptocurrency ecosystem.