Solana Q1 Report: Memecoin Surge Drives New User Growth, Funding Amount Increases to $89.2 Million

Original Title: “State of Solana Q1 2024”

Author: Peter Horton

Compiled by: Felix, PANews (This article has been edited)

Key Insights:

• The average daily spot DEX trading volume on the Solana network increased by 319% quarter-over-quarter to $1.5 billion. Solana has become a hub for retail and Memecoin traders.
• Projects primarily built on Solana raised $89.2 million in the first quarter, $2.5 million more than the total raised in all of 2023.
• Token extensions were launched, providing a set of configurable features for token issuers. So far, stablecoin issuers, including Paxos and GMO Trust, as well as crypto-native projects like Photo Finish LIVE and Wen, have adopted the token extensions.
• With the launch of the developer store Anza and the growth organization Colosseum, the Solana ecosystem has made significant progress in further decentralization.
• Due to a bug in the legacy loader, the Solana network experienced its first outage in nearly a year, but the network remained stable. Upcoming scheduler and network upgrades will reduce spam and improve user experience.

Financial Analysis

The market capitalization of SOL continues to lead the market. Its market cap ranks fifth among all tokens, behind BTC, ETH, USDT, and BNB. After peaking at $77 billion in the last cycle, SOL's market cap has continued to reach historical highs. As of Q1 2024, the market cap is $86.4 billion, a quarter-over-quarter increase of 97%. However, SOL is still about 25% away from its historical high of nearly $260.

Revenue in SOL terms increased by 200% quarter-over-quarter. With the rise in SOL prices, total quarterly revenue in USD increased by 597%, reaching $98.8 million. Solana achieved a historical daily revenue high of approximately $4.9 million on March 18.

Half of these fees are burned, while the other half is allocated to block producers. The burning of tokens reduced Solana's annualized quarterly inflation rate from 5.5% to 5.2%. The issuance rate of SOL will decline at a rate of 15% per year until it reaches 1.5%.

Network Analysis

Adoption

Network activity measured by non-voting transactions and paid transactions continued to rise in the first quarter. The average daily paid users increased by 214% quarter-over-quarter, reaching 597,000, peaking at over 2 million on March 17. The growth in the number of addresses was primarily driven by Memecoin trading. The average daily non-voting transaction volume increased by 71% quarter-over-quarter, reaching 70 million transactions. However, 62% of non-voting transactions failed, a quarter-over-quarter increase of 10%. Failed transactions mostly came from arbitrage bots or user trades on DEXs.

New paid users also showed a similar growth trend, peaking at around 1.2 million on March 17. The average daily new paid users increased by 266% to 115,000. The retention rate for new paid users was also high. The one-month retention rate for new paid user cohorts from December 2023, January 2024, and February 2024 was over 30%, while the average retention rate from January 2023 to November 2023 was 18%.

Security and Decentralization

The SOL staking rate fell for the second consecutive quarter, decreasing by 7% quarter-over-quarter. The decline was primarily due to the FTX Estate canceling staking during token unlocks. However, with the rise in SOL prices, the total staked amount in USD increased by 71% quarter-over-quarter to $70 billion, ranking second among all networks, only behind Ethereum.

Performance, Upgrades, and Roadmap

On February 6, the Solana network experienced its first outage in nearly a year, lasting about 5 hours, due to a bug in the old loader. This bug had previously been discovered on Solana's devnet, but its fix had not yet been implemented.

Nevertheless, the Solana network remained stable. Although the increase in network usage led to congestion issues, worsening user experience. Identified issues and potential solutions include the launch of a transaction scheduler, network upgrades, etc.

The most notable development this quarter was the token extensions. Token extensions are part of the new SPL token standard, providing a set of configurable features for token issuers. The functionalities supported by these extensions can essentially be implemented on other networks, but currently require developers to build the infrastructure or permissioned environment themselves.

Ecosystem Analysis

DeFi

Solana's DeFi TVL increased by 232% quarter-over-quarter to $4.9 billion, ranking fourth among all networks. The lending and yield protocol Kamino surged from the fourth largest protocol on Solana to the top of the TVL leaderboard. Its lending protocol achieved nearly $1.3 billion in TVL by the end of the quarter, an 811% quarter-over-quarter increase.

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

Telegram bots have become a popular trading venue for retail investors, with the average daily active addresses for Solana Telegram bots increasing by 573% quarter-over-quarter to 45,000. About 5% of the total quarterly trading volume came from Telegram bots, more than doubling quarter-over-quarter. BONKbot is the largest in trading volume among Solana Telegram bots, with an average daily trading volume of $37 million. The bot charges a 1% fee, used to purchase BONK and distribute to various parties, including burns (10% of the fees).

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

Over 59% of spot DEX trading volume was conducted through the Jupiter trading aggregator. Jupiter launched its native token JUP at the end of January. Since its launch, Jupiter Perps has had an average daily trading volume of $328 million. Another major player in Solana, Drift, has maintained strong growth momentum. In Q4, Drift's average daily revenue increased about tenfold, and in Q1, it grew sixfold to $142 million. At the end of January, Drift launched a points program, which will end in March, followed by a token launch. In mid-March, Drift launched its pre-issue market product, starting with rewards for tokens that have not yet been issued.

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

Liquid Staking

Solana's liquid staking rate increased by 27% quarter-over-quarter to 5.5%. The liquid staking protocol Jito has consistently led in growth. Jito's TVL increased by 47% to 9.4 million SOL, overtaking Marinade to rank first in TVL. By the end of the quarter, Jito's liquid staking market share approached 50%. Marinade Liquid's TVL decreased by 9% quarter-over-quarter to 6.4 million SOL. Blaze's TVL increased by 38% quarter-over-quarter.

NFT

Average daily NFT trading volume increased by 57% quarter-over-quarter to $7.6 million. After surpassing a total trading volume of over $331 million in December 2023, growth in January and February reversed, but it rebounded again in March 2024.

In the NFT market, Tensor's market share increased by 9% quarter-over-quarter to 71%. Magic Eden's market share continued to decline, decreasing by 18% 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 the collaboration between Helium Wi-Fi and Telefonica, Io.net financing, and launch plans.

Financing

After enduring a prolonged bear market, funding for the Solana ecosystem is on the rise. Sixteen projects primarily built on Solana announced several rounds of financing in the first quarter, totaling $89.2 million. Combined with Q4 2023, 25 projects raised $146.3 million, compared to just $9.6 million raised by 7 projects in the previous two quarters.

Conclusion

After a strong performance in 2023, Solana continues to grow in 2024. Solana has become a major hub for retail and Memecoin traders. Its average daily spot DEX trading volume increased by 319% to $1.5 billion. Solana has also made significant progress in supporting institutional capabilities, 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 the upcoming network, scheduler, and fee market upgrades.

After a prolonged bear market, investment in Solana projects is heating up. Projects primarily built 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 has also become more decentralized. Former Solana Labs engineers and executives announced the establishment of the developer store Anza, while the former head of growth at the Solana Foundation initiated the growth organization Colosseum.