Can Jito help boost Solana's TVL to continue growing?
Forbes interviewed several industry professionals about their views on the future development of Solana.Source: Forbes
Author: Victoria Chynoweth
The total value locked (TVL) across the Solana network has recently experienced a surge in growth. According to DeFillama data, Solana's TVL nearly doubled from $671 million to $1.21 billion since the first week of December 2023.
Solana has suddenly regained market attention, largely thanks to Jito's recent airdrop. On December 8, Jito officially launched the airdrop of its governance token JTO, and the generous scale of the airdrop has made it a hot topic within the entire Solana community.
Next, let’s take a look at what Jito is and explore the future of Solana.
What is Jito?
While Solana has always been praised for its performance and fees, it has historically faced many security issues.
Jito CEO Lucas Bruder stated on the Bankless podcast, "There are a lot of spam transactions on the Solana network, and arbitrage trades always fail."
Lucas anticipated this situation early on, which is why Jito Labs began working on solutions back in 2021.
Jito Labs started developing a new infrastructure to effectively extract the maximum extractable value (MEV) on the Solana blockchain. Thus, the Jito Solana client was born, and Jito Labs also created a Jito blockchain engine, which Lucas described as a "block builder."
Lucas explained, "This can be likened to beaverbuild on Ethereum."
However, Jito's goal is not only to extract MEV but also to efficiently allocate value to stakers.
Jito allows network validators to decide how much value to allocate to stakers, thereby becoming contributors to the Jito Network. The Jito Network is a new liquid staking protocol that issues liquid staking derivative tokens called JITOSOL.
Unlike earlier liquid staking protocols, the Jito Network is built on a client (similar to Prism and Nimbus on Ethereum). Jito itself is a client of the Solana blockchain and may play a crucial role in Solana's future.
Is the rise of SOL sustainable?
Jito's airdrop has propelled Solana's recent strong performance in the secondary market. In addition to the significant increase in TVL, SOL has soared over 800% in 2023, far outpacing its Layer 1 competitors.
Compared to Ethereum (ETH), which has the highest TVL, SOL's price growth is even more pronounced; while ETH has maintained its upward trend, it has only increased by 94% over the year.
However, focusing solely on TVL is not always a good idea.
Tushar Jain, a partner at Multicoin Capital, stated on Blockworks' Lightspeed podcast, "TVL gives you a false sense of precision about a manipulable metric."
Mert, CEO of Helius, also agreed with Jain's viewpoint: "I think TVL is a flawed metric… but as more people start using Solana, TVL will naturally increase."
However, some professionals hold a more positive view on the surge in TVL. When asked whether the recent spike in Solana's TVL is a temporary phenomenon or the beginning of long-term growth, Austin Arnold, co-founder of Altcoin Daily, responded, "In terms of decentralized application (DApp) development, Solana has one of the most active ecosystems in the crypto space. People see it as a faster or cheaper version of Ethereum, and Solana also offers a better user experience. The more actual DApp development activity on the blockchain, the larger the TVL will be, and the bigger the Solana ecosystem will become."
Some current signs indicate that as Solana's TVL grows, meme coins built on Solana are also attracting more attention, and there has been an increase in projects conducting airdrops on Solana.
Is the arrival of airdrop hunters beneficial for Solana?
While we can be optimistic about Solana's growth, we should not overlook that the cryptocurrency market is filled with airdrop hunters. As Solana develops, more and more airdrop hunters are being attracted; is this really beneficial for Solana? According to Mert, it seems possible.
Mert stated, "Although it's not perfect, ultimately some of these users will choose to stay, and they can help Solana attract more users… Additionally, this helps with network stress testing."
No one can deny Solana's recent growth, and as this trend continues, more people are starting to consider one question—will it surpass Ethereum?
Can Solana surpass Ethereum?
Solana is faster and cheaper than Ethereum, so as Solana gains momentum, it is natural for people to start thinking about the chances of Solana surpassing Ethereum.
While there are many very optimistic hypotheses in the market, the experts we invited have a more realistic view on this matter.
Considering Solana's advantages such as low latency and low fees, Mert pointed out, "I think Solana can replace Ethereum in certain use cases for smart contracts, especially in scenarios that require low latency and low fees, but I believe both will continue to coexist."
Austin Arnold from Altcoin Daily shares a similar view but provides a more comprehensive analysis.
"I believe we are currently in the first phase of cryptocurrency adoption, and the real winners have yet to emerge. Ethereum is currently in the lead because it has better network effects, is more decentralized, and has stronger censorship resistance. However, Solana is faster, cheaper, and offers a better user experience. The market will make choices based on its competitive landscape, and the key will be which blockchain can improve its shortcomings faster."
What does the future hold for Solana?
Jito's airdrop has clearly had a positive impact on Solana's ecosystem, and the rapid rise in Solana's TVL is commendable. However, it is important to note that there is still significant uncertainty in the cryptocurrency market.
Additionally, we need to further observe the long-term positive impact that JITOSOL can bring to the Solana ecosystem; in other words, we cannot overlook the improvements to Solana's fundamentals brought about by Jito's arrival.
Mert believes that in the next five years, Solana can drive advancements in decentralized computing and become the preferred blockchain for developers to build applications.
Austin Arnold added, "I believe Solana will still be among the top five DApp ecosystems in the next five years, development will continue to improve, and the number of users on the network will continue to grow. As cryptocurrency becomes more mainstream, the overall network effects will become greater."
Solana's rise in 2023 may be attributed to the arrival of Jito and the improved environment of the crypto market. However, as the market's attention shifts back to Solana, how will its future develop? Will Jito help Solana catch up to Ethereum? The answers to these questions will unfold as Solana progresses in 2024.
