Unveiling the DeFi Ecosystem on Solana: Top Ten Products and Trends You Must Know

Solana: The Rapidly Rising DeFi Newcomer

According to Messari's Q1 2024 report, Solana's DeFi trading volume continues to grow, with daily spot DEX trading volume increasing by 319% month-over-month to $1.5 billion. This growth has been particularly driven by the trading of Memecoins led by SLERF and BOME. Solana has become a hub for retail and Memecoin traders, with its extremely low transaction fees and fast finality allowing DeFi protocols to provide a smooth user experience that other blockchain networks cannot support. Against the backdrop of a steady increase in SOL prices, Solana's total value locked (TVL) has also grown to $4.311 billion. Like other public chains, Solana's TVL is primarily contributed by DEXs, LSTs, lending platforms, and Perps.

Decentralized Exchanges (DEX)

Decentralized exchanges are generally single-chain and operate around a specific ecosystem, particularly for non-EVM Layer 1 chains like Solana.

|---------|----------------|-----------|-----------------|-------------| | Project | TVL (Total Value Locked in $100 million) | Circulating Market Cap ($100 million) | FDV (Fully Diluted Valuation in $100 million) | 24h Trading Volume ($100 million) | | Raydium | 9.65 | 4.58 | 9.65 | 6.50 | | Jupiter | 5.96 | 11.72 | 86.82 | 8.18 | | Orca | 2.36 | 1.07 | 2.68 | 5.96 |

Raydium

Raydium allows anyone to create a pool and guide token liquidity. This feature has led to a significant number of meme coins being launched on Solana, making Raydium the preferred DEX for meme coin issuance. As a result, Raydium's TVL ranks first in the Solana ecosystem, with approximately $9.65 billion and a 24-hour trading volume of about $11.62 billion.

However, with the rise of Meme platforms represented by Pump.fun (Blinks/Moonshot), the scenario of project initiation on Raydium is gradually being replaced, with more memes launching on other platforms rather than Raydium. Raydium's influence is expected to decline, especially if meme platforms establish their own DEXs, which would have a greater impact on Raydium.

Jupiter

As a liquidity aggregator, Jupiter finds the best price routes across all major DEXs and AMMs on Solana, minimizing slippage and trading costs, making the trading process more efficient and user-friendly.

Jupiter is not only a leading DEX platform in the Solana ecosystem but also has a decentralized perpetual contract trading platform where users can take long or short positions with leverage of up to 100 times. Users can participate as traders or liquidity providers. When traders seek to open leveraged positions, they borrow tokens from the pool. In return, liquidity providers earn fees from these leveraged trading activities, as well as borrowing fees and swap profits. As a JLP holder, you will receive 75% of the fees generated by the perpetual trading exchange. This money is directly reinvested into JLP, increasing its price and facilitating the continuous compounding of returns.

Simply put, buying JLP performs better than stablecoins in a slow bull market, with an APR of 31%, and JLP does not require active "staking" of tokens or "harvesting" of returns. This is directly reflected in the token price, rising from $1.5 in December 2023 to $3.1 now.

With the meme hype in Solana, on July 4, Jupiter announced the launch of a MEME market discovery tool called APE. The platform has two core functions. The first core function is to discover newly launched tokens, with APE continuously refreshing the 100 latest tokens from Orca, Raydium, and Meteora. When clicking on a specific token, there will be detailed token inspection results, especially for RUG risk screening.

The trading volume of Perp DEX on Solana is mainly driven by various active points reward programs. It can be said that the number of points is an important boost affecting user trading. The Jupiter points system, calculated at $0.8, allows users to receive at least $960. During the TGE, all users who have used Jupiter were rewarded with 200 $JUP, which is valued at about $80, providing significant assistance in attracting users. The next round of voting for ASR staking rewards for the active staking rewards from July to September is upcoming, and the next airdrop for JUP is expected in January-February next year.

Orca

With the slogan "DEX for people, not programs," Orca has long ranked among the top DEXs on Solana, featuring concentrated liquidity active market-making similar to Uniswap V3 - Whirlpools.

In the new model, LPs can choose to concentrate liquidity within a certain price range, meaning liquidity is no longer evenly distributed across the curve from 0 to positive infinity, but can instead focus on the price range where trading occurs most frequently, significantly improving capital utilization efficiency and generating more market-making profits.

ORCA is the top DEX in the Solana ecosystem, and as a leading DEX on a top public chain, ORCA's FDV is only $2.68 billion, indicating the bubble situation of other chains and DEXs.

Liquid Staking (LST)

The demand for liquid staking among users on Solana is not strong, mainly because Solana has no minimum staking requirements, and the relatively low price of SOL greatly lowers the barrier to becoming a validator.

|------------|---------|---------------------------|-----------------|----------|----------------| | Project | LST | APY (Annual Percentage Yield) (usually includes MEV revenue sharing) | TVL (Total Value Locked in $100 million) | Circulating Market Cap ($) | FDV (Fully Diluted Valuation in $) | | Jito | JitoSOL | 8.26% | 17.05 | 295 million | 2.374 billion | | Marinade | mSOL | 7.44% | 14.13 | 27.41 million | 101 million | | BlazeStake | bSOL | 7.06% | 2.75 | Unlock amount unknown | 6.83 million |

Jito (JTO)

Jito launched an airdrop points program in September 2023 and quickly became the leading project in this space after Lido exited Solana. JTO's TVL is $17.05 billion, making it the project with the highest TVL in the Solana ecosystem. The staking APY for Jito SOL is currently 8.26%, derived from Solana's staking yield and MEV revenue sharing.

The eligibility for JitoSOL users to receive airdrops is determined by their ranking in the Jito points program, with only those with points equal to or exceeding 100 qualifying for the airdrop, ultimately establishing a distribution standard across ten levels.

As shown in the chart, the lowest tier can receive 4,941 Jito, calculated at the first day's price of $2.13, which can yield a minimum of $10,524.

By staking SOL to obtain JitoSOL, each JitoSOL accumulates 1 point daily. Borrowing yields 1.5 points per JitoSOL, while providing liquidity in any JitoSOL/xSOL pair earns 1.5 points per JitoSOL, and for JitoSOL/SOL LP, it earns 2.5 points, while JitoSOL/USDC (and other volatile pairs like JitoSOL/UXD and JitoSTOL/stETH) earns 3.5 points.

Marinade

While Jito focuses on liquid staking, Marinade's native staking is more popular, with a higher APY, making Marinade a leading project in the ecosystem with a locked amount of $14.13 billion. Although it has a TVL close to Jito, its market cap and FDV differ by several times, indicating that Marinade's recognition is far lower than Jito's, suggesting that $MNDE has potential.

BlazeStake

BlazeStake's TVL is the second-largest LST project in the Solana ecosystem, approximately $2.75 billion. The estimated staking APY is 7.06%, slightly lower than Jito. Its FDV is $6.87 million, compared to Jito's $2.387 billion, indicating both growth potential and the fact that the ecosystem is primarily composed of memecoin players who need high APY to compete for users with leading projects.

As the article does not contain investment advice or specific project recommendations, we will publish more research on liquid staking projects in the Solana ecosystem on Twitter @MetaHub_ZH.

Lending

Save

Save (formerly known as Solend, as it later supported SUI) is an algorithmic decentralized protocol for lending on Solana. Lending has proven to be a key component of the DeFi ecosystem. Current lending products are generally slow and expensive, but on Solana, Save can scale to be 100 times faster and 100 times cheaper.

In November 2022, there was an oracle attack on the stablecoin USDH, affecting isolated pools from The Stable, Coin98, and Kamino, resulting in $1.26 million in bad debts, which Save fully compensated. This incident highlights the importance of oracles in the DeFi ecosystem, as Solana lacked secure and fast oracle infrastructure before the emergence of PYTH.

Later, Save adopted the PYTH oracle, similar to Chainlink for Solana, providing price data and market data for blockchain projects. It offers "mission-critical" price data in a secure and zero-latency manner for various asset classes (such as cryptocurrencies, foreign exchange, commodities, and stocks).

Currently, on one hand, the demand for lending in the Solana ecosystem is not high, and considering previous security issues, there are few lending products in the Solana ecosystem. A new lending protocol, Marginfi, is expected to be launched soon, which is also worth looking forward to.

Derivatives

Derivatives are financial contracts that derive value from underlying assets, used for risk management and speculating on future market trends. In addition to Jupiter, there are several other derivative protocols such as Drift, Flash Trade, and Zeta.

Before the FTX incident, Mongo was always at the top, but following the SEC's charges against Avraham Eisenberg for manipulating the MNGO token as a security on the crypto platform Mango Markets, Eisenberg was imprisoned on criminal charges, and the platform's locked amount nearly dropped to zero. Currently, the platform's locked amount is around $15 million, slightly lower than Flash Trade, while the currently leading Drift has a TVL of about $3.8 billion, which is 25 times Mongo's TVL and surpasses Mongo's peak of $2 billion.

|--------------|-----------------|----------------| | Project | TVL (Total Value Locked in $100 million) | FDV (Fully Diluted Valuation in $) | | Drift | 360 million | 530 million | | Flash Trade | 14.69 million | 550 million | | Zeta Markets | 9.70 million | Not yet issued |

Drift

With a TVL of $360 million, Drift is an integrated DEX with pre-market trading, 20x leverage, and collateralized lending.

The project is supported by Multicoin Capital, an investment firm focused on cryptocurrencies, which led a $3.8 million seed funding round for the DEX in October 2021.

Drift protocol is currently running its v2, which is a sequel to the project's v1, offering enhanced liquidity, market-making, and collateralization to improve the trading experience.

When Drift v2 was launched last year, the protocol noted that Drift v1 attracted over 15,000 cumulative users and over $10 billion in trading volume within six months, demonstrating Drift's popularity and ability to attract capital.

Flash Trade

Focusing on decentralized spot and contract trading on the Solana network, Flash Trade features low trading fees and minimal price impact.

Flash Trade has a unique multi-asset pool system, being the first to adopt this technology on Solana, and also utilizes an innovative NFT structure to increase user engagement and account functionality.

What sets Flash Trade apart is its pool-to-point trading model, which ensures zero price impact and optimal trading conditions. Liquidity providers are rewarded by collecting trading fees.

Additionally, it employs the Pyth oracle and a backup oracle system for dynamic pricing to ensure high uptime. By incorporating NFTs, the platform further gamifies the trading process, incentivizing users to participate more.

With a good user experience, pool-to-point model, and NFT gameplay, it has attracted $17 million in TVL, which is quite impressive.

Zeta Markets

Zeta Markets is a DeFi derivatives platform aimed at democratizing derivatives trading by providing liquidity, under-collateralized derivatives options, and futures trading to individuals and institutions. The platform offers two core products: DEX (decentralized derivatives exchange) and FLEX (option minting and auction base layer, enabling any protocol to utilize options). Their mission is to simplify the derivatives trading experience, allowing anyone to hedge, speculate, and express opinions on market trends.

The operational interface appears clean and smooth, with candlestick charts connected to TradingView, and tokens have airdrop expectations, which explains the multi-million TVL.

PYTH

Blockchain oracles are the bridge connecting blockchains with the real world. Blockchains are inherently closed and deterministic, processing and storing only transactions and events occurring within them. However, many smart contracts require reliance on data and events outside the blockchain, such as stock prices, weather conditions, and sports results. Oracles obtain this external data and securely and reliably transmit it to the blockchain, enabling smart contracts to make conditional judgments and execute related operations based on this data. Oracles can be applied to products such as financial derivatives trading, risk management, insurance payouts, and supply chain management. They not only enhance the value of blockchain technology but also promote its widespread application across various industries.

As the leading oracle on the Solana chain, PYTH has many innovations compared to the established Chainlink, with faster and more stable data updates. It can now be applied not only to the Solana chain but also to other blockchains, offering immense potential for future development.

Conclusion

As the Solana ecosystem continues to grow, more and more DeFi products are emerging on its platform, such as the recent launch of a prediction market called B.E.T. These DeFi projects not only enrich Solana's ecosystem but also provide users with more financial tools and choices. Recently, several promising DeFi products have also been launched. From Solana's current DeFi product ecosystem, it is indeed a large cake; mature products have advantages, having established a strong user base and market trust. However, emerging products have invested significant resources in user interface design, user education, and community building, lowering the usage threshold for users. Through carefully planned brand building and marketing activities, they can quickly attract a large number of users and share in the profits. In the future, as more innovative products emerge, Solana's DeFi ecosystem will become even more prosperous and diverse.

In the next issue, we may explore projects that have not yet issued tokens. If you would like to see a detailed analysis of a specific product and market movements, feel free to leave a message on Twitter @Metahub_zh.