The Growth Dilemma of Established Public Chains: Why the Solana Ecosystem Growth Flywheel is Unreplicable?

Author: Xiyou, ChainCatcher

Recently, as the price of the SOL token continues to rise, tokens in the Layer 1 public chain sector have also experienced a broad increase. On December 12, Avalanche's AVAX token and Cosmos's ATOM both saw intraday gains of over 20%, with AVAX breaking through $40 and its market cap entering the top ten; Near's native token NEAR has increased by over 30% in the past 30 days; Fantom's token FTM has seen a 15% increase in the past 14 days, and so on.

Last week, the wealth effect brought by the airdrop of JTO from the liquid staking protocol Jito within the Solana ecosystem completely activated the long-overlooked on-chain ecological applications. At this point, people realized that the Solana ecosystem has strongly rebounded, and a number of new native applications are trying to emerge, including the trading aggregator Jupiter, the liquid staking platform Marinade Finance, and more. Today, the on-chain TVL of Solana has surpassed $1 billion (approximately $10.44 billion), with a 24-hour on-chain trading volume of $912 million, making it the second-largest Layer 1 network after Ethereum ($1.23 billion).

While the Solana ecosystem is progressing rapidly, it is noted that during the same period, Layer 1 challengers like Near, Fantom, and Avalanche have seen varying degrees of price increases, but the development of their on-chain ecosystems has not been satisfactory. Their ecological growth has not only stagnated but has also shown varying degrees of regression, having long been left behind by Solana.

Take on-chain trading volume as an example; during the same period, the Avalanche network's 24-hour trading volume was $198 million, about five times less than Solana, while Fantom's trading volume was only $12 million, and Near's network had only a few million dollars. The TVL of the latter two is also ten times lower than that of Solana.

This has left users puzzled as to why Layer 1 public chains like Near cannot replicate the ecological growth flywheel of Solana. What exactly has created the differences in ecological development among these Layer 1 networks?

Solana's Ecosystem Fully Recovers, While Near and Fantom's Ecosystem Development Stagnates, TVL Drops to Tens of Millions

As the airdrop wealth stories of Solana ecosystem applications continue one after another, with new applications emerging, and TVL and on-chain trading volume skyrocketing, the Layer 1 networks in the same race, Near and Fantom, have formed a stark contrast. Both have seen their TVL drop to the tens of millions level, with daily trading volumes even falling below ten million dollars.

As of December 15, Fantom's TVL was $84 million, with an on-chain daily trading volume of $14 million; Near's TVL was $59 million, with an on-chain daily trading volume of only $8.4 million; during the same period, Solana's on-chain TVL surpassed $1 billion, with an on-chain daily trading volume close to $920 million. The TVL and on-chain daily trading volume of the two are more than ten times lower than Solana, and there is no upward growth trend visible from the on-chain data.

Why is it that both are Layer 1 networks and have faced significant crises and difficulties, yet the Solana ecosystem has fully recovered while Fantom and Near remain stagnant?

It is well known that Solana was severely impacted by the collapse of FTX, and its development once stalled. FTX and Alameda, as crucial supporters of Solana and its ecosystem, not only invested in Solana but also in many projects built on Solana. Additionally, FTX was the largest holder of SOL, with over 71.8 million SOL tokens, accounting for about 13% of the total supply, valued at nearly $1.2 billion; the Solana Foundation also held millions of dollars worth of FTX shares and FTT tokens.

Therefore, when FTX collapsed, Solana suffered losses in three areas: first, the reduction in the scale of treasury assets; second, the withdrawal of funds from ecological applications and massive outflows of liquidity; and third, the SOL held by FTX was handed over to the liquidators, leading to market selling pressure on SOL.

The collapse of FTX left the Solana network in a predicament for nearly a year, with the SOL token plummeting to around $10, and the price oscillating around $20 for a long time, while the on-chain TVL dropped to about $200 million and remained in that range. During this period, Solana's on-chain applications not only suffered massive capital outflows but also experienced a series of hacking incidents, such as over 8,000 Phantom wallet assets being emptied, and the decentralized trading platform Mango being hacked with losses as high as $116 million.

However, recently, as the price of SOL has been climbing, the airdrop wealth stories of Solana ecosystem projects suggest that Solana seems to have fully recovered.

Since October, Solana ecosystem projects have been making public positive moves. According to ChainCatcher reports, first, the oracle project Pyth Network announced its PYTH token economic model, followed by airdropping 600 million PYTH tokens to over 75,000 wallets. On December 5, Pyth developer Pyth Data Association completed strategic financing with participation from Multicoin Capital, Wintermute Ventures, and others. In November, the official cross-chain bridge Wormhole within the Solana ecosystem completed a new round of financing of $225 million at a valuation of $2.5 billion, with investments from Coinbase Ventures, Multicoin Capital, Jump Trading, ParaFi, and others. Shortly after, the Solana ecosystem liquid staking protocol Jito announced the launch of its governance token JTO, with 10% (about 10 million tokens) airdropped to community users, and JTO was subsequently sought after by major exchanges like Binance and Coinbase for listing.

The continuous airdrops of ecological application tokens and the series of funding support from well-known crypto capital have completely stimulated the enthusiasm of community users and their loyalty to the Solana ecosystem. Many crypto community users have expressed that only on Solana is it most likely to achieve the transformation from rags to riches, as Solana's ecological applications are generous to users, rarely exploiting them, but genuinely providing airdrop rewards and benefiting users.

Fantom is Mired in Chaos Due to Multichain's Collapse, Near Faces Management Chaos Amid Controversy with Wintermute

In contrast to Solana's growing prosperity, the on-chain ecosystems represented by Fantom and Near are much quieter. Fantom's ecosystem is in chaos due to the collapse of Multichain, while Near is facing criticism for management chaos and lack of credibility amid the controversy over the USN redemption with Wintermute.

Fantom's ecosystem fell into disarray after the arrest of the Multichain founder in July this year, resulting in a funding loss gap of up to $200 million. The on-chain ecosystem subsequently experienced a major collapse, with the stablecoins issued within the ecosystem significantly de-pegged. The largest DEX, SpiritSwap, stated that the Multichain incident led to project funding depletion, and without a new team taking over, it would cease operations. The largest lending protocol, Geist Finance, announced a permanent shutdown; in October, part of the Fantom Foundation's wallets was reported to have been attacked, resulting in a loss of $657,000. This series of black swan events has reduced Fantom's on-chain TVL to less than $50 million, with the FTM token dropping to a low of $0.17.

Since the Multichain incident, Fantom's on-chain ecosystem has not improved. Although on October 25, Fantom announced the launch of the upgraded technology network Fantom Sonic version to enhance network scalability and performance, Fantom Sonic will replace the previous mainnet technology stack. On December 4, the Fantom Foundation announced the launch of the Sonic Labs startup accelerator program to incentivize developers to build projects on Fantom Sonic, providing technical support, marketing guidance, etc., with "DeFi father" Andre Cronje serving as a mentor.

Some users view this series of actions as a self-rescue effort by Fantom. Despite the official and foundation organizations releasing a series of positive news, it has not garnered much attention from users.

Currently, there are very few native applications left on Fantom, with even the largest DEX platform SpookySwap locking only $23 million in funds, while most other applications have TVLs in the millions. At present, Fantom's network TVL is $84 million, with an average daily on-chain trading volume of only a few million dollars, and the FTM token has rebounded to around $0.4.

Compared to the black swan events experienced by Solana and Fantom, the Near network has been luckier, having not faced similar unexpected shocks. However, its on-chain development has remained stagnant, including its EVM network Aurora, which has maintained a TVL between $10 million and $30 million, with 24-hour trading volumes only in the hundreds or thousands of dollars.

Although Near has not experienced catastrophic unexpected events, its management chaos has been criticized, and external controversies have persisted. On November 8, Wintermute founder Evgeny Gaevoy publicly criticized the Near Foundation and Aurora Labs for being untrustworthy, claiming they did not honor contracts and refused to fulfill promises regarding the sale of stablecoin USN worth $11.2 million from FTX assets. He also stated that Wintermute would not be true friends with the Near Foundation and Aurora Labs in the future.

The controversy between Wintermute and the Near Foundation and Aurora Labs can be summarized as follows: Aurora previously informed Wintermute that it could redeem any amount of USN for USDT without providing a source of funds. Under this assurance, Wintermute purchased USN stablecoins worth $11.2 million from FTX assets, but when Wintermute attempted to redeem USN for USDT, Near and Aurora refused.

Although the Near Foundation later responded that Wintermute might have been attempting to arbitrage using the USN purchased from FTX, which could cause losses to ecological users, leading to the refusal of the request.

However, this incident has led to ongoing doubts about the NEAR Foundation and its stablecoin USN within the community. Many users have expressed that the NEAR Foundation is more untrustworthy than hackers, having swallowed tens of millions in one go; the stablecoin USN is not officially launched by Near, but the NEAR Foundation's establishment of a $40 million fund to support USN's redemption for USDT seems inextricably linked to Near, indicating management chaos. Many users even suspect that the NEAR Foundation no longer has the funds to support redemptions, leading to this desperate measure.

As of December 14, there has been no clear conclusion regarding the controversy between Wintermute and the Near Foundation, and the founder of Wintermute has not ceased his accusations. If the Near Foundation continues in this manner, he will resort to legal action.

Although these controversies seem unrelated to the development of the Near on-chain ecosystem, users are quite dissatisfied with the NEAR Foundation's lack of credibility and chaotic management. Recently, although the NEAR token has been rising with the broad increase in the public chain sector, the Near ecosystem remains in a state of stagnation, with almost no new applications emerging.

During the period of their controversy, Near released a series of positive news, announcing that Near Protocol co-founder Illia Polosukhin has been appointed as the first CEO of the Near Foundation, responsible for leading the Near ecosystem into the next stage of building an open network; it also announced that the Near Foundation has reached a strategic cooperation with Polygon Labs to jointly develop zero-knowledge (ZK) proof zkWASM; on November 9, the Near Foundation publicly stated the launch of a new project, Near DA, a data availability layer aimed at providing efficient data availability services for Ethereum and its L2 networks, entering the modular blockchain field.

From the current on-chain data response, this series of positive moves has not brought any turnaround to the development of the Near ecosystem. Currently, the Near chain mainly focuses on inscription speculation.

Whether due to external factors or internal management issues, the on-chain operational data shows that the on-chain ecosystem development of Fantom and Near, which were once on the same front, has been far surpassed by Solana and is no longer on the same level.

The Prosperity of On-Chain Ecosystems Benefits from an Active Developer Community; Why Do Developers Prefer Solana?

In fact, currently, apart from the continuous innovation of Solana's ecosystem applications, the ecological development of Layer 1 networks such as Fantom, Near, and established ones like Avalanche and Harmony (One), as well as new high-performance representatives like Aptos and Sui, is largely stagnant, lacking popular new projects and user engagement. The disparity behind this is primarily due to the activity level of developers, which determines the prosperity of on-chain applications.

According to data from the Developer developer website, in October, there were 268 active full-time developers on the Solana chain, with a total of 946 active developers, ranking fifth among various blockchain networks, with the top four being Ethereum, Polkadot, Cosmos, and Bitcoin.

During the same period, the number of active full-time developers on Avalanche, Near, Aptos, Fantom, and Harmony networks were 133, 103, 55, 32, and 22, respectively, with total developer numbers of 472, 441, 174, 119, and 85.

In fact, the collapse of FTX last year did not cause a mass exodus of Solana developers; the number of monthly active developers has consistently remained above 2,000, reaching a peak of 2,732 in March this year, with the number of code submissions also hitting a new high.

Developers are often seen as the most valuable asset in blockchain networks, and the blockchain industry is known for the saying "whoever has developers has the world." A prerequisite for a widely adopted L1 ecosystem is a strong developer community, and the level of developer activity is directly related to the growth of the ecosystem, which refers to the number of new and unique projects launched on various chains. Generally, the expectation is that the more active developers there are, the more projects there will be, and the higher the usage rate. If there are no developers creating products, users have nothing to use. The activity of developers also reflects the quality of the blockchain, native code, and virtual machine construction and development.

Currently, Solana's developer activity level is among the top networks, and its developer community's vitality has been praised by leaders in the crypto industry. Shortly after the FTX incident, Ethereum founder Vitalik Buterin tweeted that smart people told him Solana has a serious and intelligent developer community and hopes it has a bright future. Subsequently, Placeholder VC partner Chris Burniske replied, explaining that the Solana community has a group of hardcore and dedicated developers and tech enthusiasts, with many exciting builders, and that compared to Ethereum and Cosmos, Solana's on-chain innovation has greater independence and advantages.

So why do developers prefer Solana? This is largely because Solana provides high-quality technology, supporting infrastructure, and a friendly development environment that other chains cannot offer.

In September this year, Rune, the founder of MakeDao, when exploring the creation of a new application chain NewChain based on the Solana codebase, stated that the main reason for favoring Solana is its high code quality, flexible ecosystem, and thriving developer community. Although Cosmos also has a large number of high-quality developers, its efficiency is lower and maintenance costs are higher compared to Solana.

Solana understands this well and has always placed developers at its core. When asked about "Who are Solana's target users? Has it changed?" during the latest AMA with Solana founder Anatoly Yakovenko, he replied, "It's the developers; Solana is an operating system. My parents should never care about what kind of operating system they use, but they should like the applications built on it. Therefore, our goal is to maximize the efficiency of developers' work."

It is reported that Solana's code only requires two engineers to run its applications, while the dydx application chain normally requires at least over 30 engineers and researchers to operate.

Solana is committed to creating a friendly development environment for developers with mature technology, continuously optimizing and improving network conditions, and striving to minimize the barriers for developers. It is said that programmers can develop a DApp on Solana in just a few minutes, and with some developer platforms, they can create custom DApp source code, including smart contracts, Web UI, and server-side APIs, with just a few clicks.

For instance, this year, Solana has been working hard to address the risks of network outages, and since February 25, it has maintained an online status after a series of upgrades and improvements. In November, Solana launched the next-generation node validation client Firedancer testnet, which not only improves network speed, reliability, and validator diversity but reportedly can achieve 1 million TPS during internal testing, sufficient to meet the needs of high-frequency trading applications, making Solana another blockchain with multiple fully independent validator clients outside of Ethereum.

Earlier in July, Solana's EVM-compatible solution Neon went live on the mainnet, and two days later, the Solang compiler was released, enabling developers to write Solana programs in Solidity. This compatibility can reduce the development, deployment, and migration costs for developers.

In April this year, a state compression technology for storing data was introduced for NFT project developers, significantly reducing the cost of minting NFTs, with the cost of minting 1 million NFTs being only $921. This not only reduces costs but also expands the space for innovation, allowing NFTs to be used for more use cases.

In addition to continuously improving technology, providing stable network performance, and a complete supporting infrastructure, Solana also collaborates with the developer community to explore new markets, host hackathon events, and provide technical and financial support to reach more developers and expand its influence.

Lily Liu, chair of the Solana Foundation, stated in an interview in July that investments in the Chinese-speaking region and the Asia-Pacific region began to increase in February and March this year, and a separate growth strategy focused on developers was formulated for the Indian market. On November 4, the Solana Foundation also launched a dedicated ecological funding plan for the Chinese-speaking region, totaling $1 million, to support the development of the Solana ecosystem in that area.

To further attract and incentivize developers, Solana regularly holds various developer events and competitions. This year, two large-scale hackathon events have been held. In February, the Solana Grizzlython hackathon had a prize pool of up to $5 million, attracting over 10,000 participants who submitted 813 final projects to the judges; in November, the Solana Hyperdrive hackathon with a prize pool of $1 million had over 7,000 participants who submitted 907 final projects to the judges.

The hackathon events of Solana have already become a model in the crypto industry. Lily Liu stated that Solana hackathons not only provide rewards but also create an opportunity to gather developers together for innovation and competition, which not only helps with innovation but also aids in community building. The hackathon events are divided into two parts: one half for development and project training, and the other half for community activation and developer collaboration. This helps encourage creative collisions among independent developers and provides them with a beneficial environment to explore interesting ideas together, promoting broader community interaction and cooperation.

Additionally, in terms of financial support, Solana has not been idle. In April this year, the Solana Foundation introduced Convertible Grants as a new financing method to support projects within the Solana ecosystem. The mechanism of convertible grants is that these grants will only convert into investments when the project reaches certain milestones. In May, the Solana Foundation launched a $10 million donation fund to explore ways to combine the Solana blockchain with artificial intelligence.

It is evident that Solana's ecological strategy is to first strengthen technology, consolidate infrastructure, and create a good reputation in the industry through excellent data performance, successfully attracting the first wave of developers. Afterward, it hosts online hackathon competitions to discover and reward quality projects, attracting developers to stay within the ecosystem, forming a positive growth flywheel.

Solana provides developers not only with technical and resource support but also with an environment for growth and learning. The culture of "new Solana developers engaging 1v1 with senior developers" has become an unwritten rule in the Solana community. Solana founder Toly once mentioned in an interview that this is a very good product development process because developers receive a lot of questions or feedback and can make immediate changes. We need to know what developers want, where the documentation is lacking, and where developers are getting stuck. The communication process can change the product roadmap and plans, which is beneficial for better project building.

From this perspective, Solana's ecological strategy is to first strengthen technology, consolidate infrastructure, and create a good reputation in the industry through excellent data performance, successfully attracting developers. Afterward, it hosts online hackathon competitions to discover and reward quality projects, attracting developers to stay within the ecosystem, thus forming a positive growth flywheel among developers, the ecosystem, and users.

Why Can't Layer 1 Networks Like Near Replicate Solana's Ecological Growth Flywheel?

The achievements of Solana are inseparable from its attractive technological foundation, which not only supports ecological development but also benefits from application products refined by developers from various fields. So why can't Layer 1 public chains represented by Near replicate Solana's ecological growth flywheel?

This is mainly because many current Layer 1 networks lack even the most basic supporting infrastructure. If developers want to deploy applications, they not only need to focus on developing their applications but also need to develop related supporting infrastructure, which undoubtedly increases the development workload. For instance, regarding user and capital entry, there is currently not even a reliable cross-chain bridge on Fantom to support the entry of funds from other chains; the Near ecosystem lacks a user-friendly wallet, making it very complex for users accustomed to EVM wallet interactions.

A similar issue was raised by Manta when asked "Why did you leave the Polkadot ecosystem?" They stated that there is not even a mature cross-chain bridge from the Polkadot native chain to EVM, nor is there a user-friendly native wallet. Their team not only needs to develop ZK-related products but also has to develop the underlying infrastructure that Polkadot should provide, such as spending four months developing a wallet while working on Polkadot.

Regarding "how to determine which blockchain network is the best solution," Solana developer tool provider Helius stated that as a developer or project CEO, when choosing which infrastructure to adopt or integrate, the first consideration should be how to spend the least necessary time maintaining the blockchain infrastructure for the application, and that time should be spent iterating on their product to create the best user experience.

The dimensions developers consider mainly include: 1. The activity level of on-chain users; 2. On-chain interaction usage and execution time; for transaction and gaming products, a low-cost environment is needed, and they must understand the technical trade-offs and limitations such as shorter block times and larger block sizes; 3. The liquidity situation of on-chain funds, such as whether there is sufficient liquidity support when issuing tokens; 4. Community activity, for example, NFTs need artists, and trading products need traders; 5. Grants and post-risk funding support; new ecosystems may have more grant support for projects, while mature ecosystems may have more risk fund investment support; 6. The technical complexity and overhead of management; 7. The programmability and sovereignty of chain rules; some chains do not support native tokens as gas fees; 8. The prosperity of the on-chain ecosystem and the composability of applications from other ecosystems, such as DeFi applications that can combine to provide yields.

In summary, the dimensions developers mainly consider include the performance and technical stability of the chain, the entry barriers, operational costs, and whether resources and funding support can be provided.

If we compare the above developer needs, the vast majority of current Layer 1 networks cannot even meet the most basic technical stability and entry barriers for developers, while continuously chasing the prosperity of on-chain ecosystems.

In this regard, crypto user Li explained that for users, it seems they do not care whether the technology is decentralized; as long as it is user-friendly, cheap, and there is a wealth effect on-chain, there will be an ecosystem. However, for developers, when building an application, the first consideration is whether the underlying infrastructure meets basic requirements and whether the supporting infrastructure is sound.

Developers, in a sense, are like real estate developers in a certain area, needing to consider popularity (users) and surrounding facilities. Similarly, there exists a "Matthew effect" in blockchain networks; the more active the developer community, the more mature and complete the corresponding network's basic supporting infrastructure will be, making it easier and smoother for developers to build applications, leading to a more prosperous ecosystem, which in turn attracts more developers to build, forming a positive virtuous cycle.

Whether it is Solana or Layer 2 representatives like Polygon and Optimism, the reason they can attract more and more developers is that they continuously break through and innovate in technology, and their underlying network's basic supporting infrastructure has a complete set of docking standards and processes, along with their own strategies for operating the developer community and ecosystem development, ensuring the sustainability of their ecosystem's growth.