Dialogue with Solana Nodes: Who is "quietly making a fortune" behind memecoins

Compilation | Wu Says Blockchain

In this episode of the podcast, host Shang engages in an in-depth discussion with Leo, a deep cultivator of the Solana ecosystem, covering the success factors of Solana, technical comparisons with Ethereum, how Solana attracts users and trading volume through its unique infrastructure and low-cost advantages, especially gaining huge profits during the Memecoin market frenzy. Leo shares Solana's innovative mechanisms, including POH (Proof of History) and Solana's Layer 2 solution Sonic, and how they promote the future development of gaming and DeFi. Additionally, Leo elaborates on the infrastructure within the Solana ecosystem, such as how Jito and RPC service providers profit through liquid staking (LST) and MEV (Maximal Extractable Value), and how they leverage network effects to enhance transaction efficiency and reduce costs.

Please note: The views of the guests do not represent those of Wu Says, and Wu Says does not endorse any products or tokens. Readers are advised to strictly comply with the laws and regulations of their respective locations.

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Leo's Self-Introduction and Early Experience in the Solana Ecosystem

Shang: Hello everyone, welcome to this episode of Wu Says podcast, I am your host Shang. The recent hot topic is undoubtedly the surge in Memecoins on-chain, especially since almost all of the recent Dogecoins have emerged on Solana. This makes me think that many listeners must be curious about what other participants and projects are quietly making big money behind this. Why are these activities almost all happening on Solana? What is so unique about Solana? Compared to Ethereum, what characteristics allow it to become the public chain with the most users and the highest trading volume in this cycle?

Today, I am honored to invite Leo, who has been deeply involved in the Solana ecosystem for many years and is an active participant and builder. Leo, please say hello to everyone.

Leo: Thank you, Shang. Hello everyone, I am Leo, online name iqx. Since entering the space in 2021, I have been participating in the Solana ecosystem. When I first entered the space, I experienced both Ethereum and Solana, and at that time, I felt that from a newcomer’s perspective, Solana's user experience was very good, so I have been following some of its Alpha projects.

In 2022, when Solana was affected by the FTX incident, I also had a significant amount of assets on the Solana chain. During that time, I listened to many spaces and AMAs in various communities and found that the core builders of the Solana ecosystem did not leave; instead, they encouraged each other. The community atmosphere of Solana left a deep impression on me, especially in January 2023, when everyone knew that Solana had an event called Super Team. I attended its monthly meeting, which was mainly open to builders. Despite Solana's token price having dropped by 95%, the atmosphere at the venue was very positive, with over a hundred participants introducing their projects and sharing Alpha.

So I felt that the core strength of Solana had not dissipated, and the community remained very united. Another reason that made me decide to stay in the Solana ecosystem is that some of my friends also participated in technical development, and they gave very high praise to Solana's technology. Most of them are full-stack engineers from traditional Web2 industries, believing that the Rust language used by Solana has advantages in security. Although Rust has a high entry threshold and may not be easy for general developers to get started, this is also Solana's uniqueness. Therefore, I decided to continue to delve into the Solana ecosystem.

In April 2023, the Mad Labs NFT was launched on the Solana network. At that time, its trading volume exceeded that of Ethereum's NFT blue-chip projects in the first month, successfully attracting a lot of heat back to Solana. I also began to create a Chinese community for Mad Labs and gradually became more involved in the Solana ecosystem. Currently, I am also a contributor to the Chinese community at Jito, the largest LST and MEV provider on Solana. If anyone has any questions about Jito, feel free to consult me. Thank you, everyone.

Success Factors of Solana and Technical Comparison with Ethereum

Shang: Thank you, Leo. I think we can divide this podcast into two parts. In the first part, I feel that many listeners know that Solana has risen significantly and that there is a lot of trading volume on Solana, but their understanding of Solana's uniqueness, how it handles MEV and trading volume, and its moat is not very deep, including myself, who may not have paid special attention to these aspects. So, in the first part, we can discuss, as someone who may be involved in blockchain and on-chain trading but does not know much about Solana, why do you think Solana is so successful? Why are there so many transactions and users on Solana now? What do you think are the main reasons behind this?

Leo: I think, although I am not a developer by background and only understand some programming, I am not very proficient. From the perspective of an ordinary on-chain user, the biggest difference between Solana and Ethereum is that Solana introduces the concept of a clock, which is unique to POH (Proof of History). In traditional Ethereum and Bitcoin, a shared memory pool mechanism is used, while Solana does not have a memory pool. Transactions on Solana are referenced through time as the axis of transactions, whereas Ethereum does not have such a time concept; everyone's transactions are queued for packaging and processing.

In the Ethereum network, the concept of MEV (Maximal Extractable Value) emerges, a classic example being sandwich attacks. When your transaction has not yet been processed, others can cut in by raising the gas fee, execute their transaction, and then sell it, taking advantage of the price difference.

This is a typical example of MEV. Solana's MEV is somewhat different because Solana adopts the clock concept, where the competition for transactions is actually about speed and low latency of the network. If your transaction is not processed in the current time slot, it will go directly to the next slot without waiting for others. This is also one of the reasons why Solana has experienced several network outages.

One significant incident was caused by inconsistent time among nodes, which led to problems. Another reason was due to spam attacks (DDoS attacks), where a large number of transactions overwhelmed Solana's node validators, causing the network to crash. But you can see that after each network outage, Solana was able to fix the issues, and the system gradually became more refined. From my personal perspective, I believe these problems are issues that software companies encounter, and I can tolerate these bugs. I just think that when bugs occur, you need to know what caused them and how to improve. On the Ethereum side, although I have not done in-depth research, my impression is that its upgrades and improvements require very complex work. Recently, there was the Devcon conference, which launched the significant Beam Chain project, right? It relies more on a five-year plan to continuously increase complexity through code upgrades.

On the other hand, Solana, as I mentioned earlier, scales through hardware. The operating costs of our nodes are indeed high; many people say that the costs of Solana nodes are too high, which is true. However, from a long-term development perspective, hardware costs will continue to decline. In the future, the cost of network maintenance should become lower and lower. In contrast, if you look at Ethereum's five-year plan, you might wonder if the future maintenance costs of Ethereum's network will become higher and more complex, increasing the probability of bugs? From a technical perspective, this is the fundamental difference between Solana and Ethereum. Additionally, I also like the concept that Solana is the "Nasdaq on-chain." I believe that as history progresses and humanity continues to develop, it is essential to standardize commodities and improve the rate of information transmission.

Solana has always claimed to be a global real-time information exchange, and I think this is indeed the trend of the future. However, in this process, Solana will still encounter many problems. For example, in April of this year, there was an issue with the Solana network. It was not a complete outage, but I remember it was due to a token called ORE being launched, which was mined through Pow on Solana. This token was mined at a rate of 60 tokens per second, causing everyone to rush to mine, resulting in network congestion. You can simply understand this as a DDoS attack because Solana's transaction fees are too low, and the transaction speed is very fast, making the network susceptible to DDoS attacks to a certain extent.

Later, Solana added the QWSOD feature in the mainnet upgrade 1.18. In simple terms, Solana's nodes are divided into two types: one is the voting validator nodes, which are about 1,500 in number, and the other is non-voting nodes, commonly referred to as RPC nodes. RPC nodes help relay transactions to the validator nodes. In the early days, the cost of self-hosting nodes on the Solana network was very low, so many people self-hosted nodes to mine ORE. However, after the 1.18 version upgrade, the mechanism for RPC nodes became more efficient. If RPC nodes hold more staked tokens, they can process more transaction information, effectively alleviating network attack issues.

Of course, some people will comment that this mechanism will make the network more centralized, and I agree, but I believe this is currently a relatively effective solution. I believe that in the future, public chains like Aptos will also face similar issues when pursuing speed and low-cost features. As competition in the supply chain intensifies, DDoS attack issues are inevitable. I think Solana has already been a pioneer in this regard, providing a relatively good solution. I hope that more public chains can learn from Solana's experience and further optimize.

Infrastructure in the Solana Ecosystem and MEV Profit Models

Shang: Understood. Can you briefly summarize how some infrastructures in the Solana ecosystem, such as nodes, Jito, and RPC service providers, are profiting during the Memecoin craze? Who are the ones quietly making big money in this "gold rush"?

Leo: First, we can take a look at the income rankings on DeFiLlama. You will find that Solana, Jito, and Raydium are almost regulars in the top five, and many times their income even exceeds the gas fee income of the Ethereum mainnet. These three can be said to be the main forces "making money quietly," and their tokens have performed quite well.

Speaking of RPC, RPC is actually the infrastructure supporting many TG bots. As we all know, many people use TG bots for high-frequency trading, and these bots can operate so quickly because they have a wallet private key custody form. Recently, a DEX's TG bot seems to have had a security incident; it needed to store users' private keys because it needed to control your transaction instructions, and these bots frequently send messages to validators across the network.

These transaction records may be sent to the top 30% of validators because Solana's validation mechanism has a leader for each slot, responsible for sorting transactions, while the remaining validators perform the validation. These unprocessed transactions are sent to the leader via RPC, where the leader sorts and processes them before broadcasting them to the entire network and relaying them to other RPC nodes.

As for Jito, let me briefly introduce it. Jito is currently the largest LST (liquid staking provider) on Solana, holding about 43% of the market share. What many may not know is that about 80% of validators on Solana are using Jito's client software for validation. Jito has a block engine that packages and sorts transactions, then sends them to the leaders running the Jito client for processing. This involves a concept called Jito Bundle, which is essentially a tip for validators.

For ordinary users, the features provided by Jito can directly impact their trading experience. For example, Jupiter, one of Solana's largest DEXs, has a feature called MEV Protection on Jito. When using Jupiter, if you want to avoid being front-run by other transactions, you just need to add a small tip to your transaction. By doing this, Jito's block engine will prioritize processing your transaction, ensuring that it is not sandwiched by other transactions.

Shang: So, the entire infrastructure behind Solana plays a very important role, right? I remember you mentioned before that Solana's validation method also has some flaws, especially in terms of MEV and transaction sorting. Then, Jito plays an important role in significantly enhancing Solana's operational economy and efficiency. I may not have expressed it completely; could you elaborate a bit?

Leo: You are absolutely right. Solana's parallel network does have its advantages, but it also has problems, especially the issue of unprocessed transaction accumulation. Each slot on Solana lasts about 0.4 to 0.6 seconds. If you catch a slot during this time and submit a transaction, it will successfully go on-chain; if you miss it, your transaction will have to wait for the next slot. Before Jito was introduced, many people attacked the network in a DDoS manner, causing transactions to not be processed in a timely manner.

I remember the first time was during a project IDO when everyone rushed to buy, and the network crashed. After the introduction of Jito's block engine, this problem was alleviated. Jito's block engine is essentially a core engine that requires all validators to use this mechanism to function. For example, if we currently have 300 validators using the Jito client as leaders, then if the next batch of slots does not use Jito nodes, Jito will not be able to correctly relay transaction information. Validators using the Jito client act like transaction sorting managers, solving the transaction congestion issue.

Through Jito, MEV (Maximal Extractable Value) and arbitrage opportunities are more available to validators. Moreover, according to the current economic model, most of the MEV revenue is distributed to stakers, with over 90% of the revenue going to these stakers.

Shang: Understood, this is why validator node operators like you are willing to install Jito, as it allows for more revenue generation.

Leo: Yes, that's right. We also operate a community node, and of course, we have installed the Jito client. This way, we can increase a portion of MEV revenue. The MEV revenue comes from users paying tips to us through Jito bundle services to prioritize processing these transactions. If a validator running a Jito client is the leader in a slot, it will first process these tip-laden transactions. Jito's block engine has already sorted the transactions; we just need to execute these sorted transactions.

Shang: Got it. Everyone must be very curious about how much MEV revenue there is; can you share some insights?

Leo: According to some reports I saw yesterday, the current inflation rate of the Solana network is about 5.8%. However, since not all SOL is staked, the staking incentives in the network are about 7.6%. In addition, MEV revenue accounts for about 3% of the network's income. Specifically, as validators, we can choose how much MEV revenue to allocate to stakers. Currently, we distribute about 90% of MEV revenue to stakers. So this means that staking on Solana can earn about 7.6% in base returns, while MEV revenue is an additional dividend. In simple terms, the more active the network is, the higher the MEV revenue will be. A few months ago, this MEV revenue was only about 1%.

Jito's Profit Model and Solana MEV Bot Arbitrage Opportunities

Shang: So does the Jito project itself profit from MEV or similar network growth and trading volume growth?

Leo: It seems that about 5% of the revenue goes to Jito's major foundation, while the remaining revenue is distributed to LST holders. Because Jito itself, as the largest LST on Solana, provides B-end services that 80% of users use the Jito client for, and these clients are actually free. On the other hand, Jito, as the largest LST on Solana, derives its profits from users holding JitoSOL.

For users holding JitoSOL, they convert SOL into JitoSOL, no longer using native staking, but staking through the JitoSOL staking network. JitoSOL automatically delegates these SOL to the top 200 validators in the system, which are usually the highest yield ones. We are also continuously working to improve our ranking; currently, we are around the 300th position. To enter the top 200, a validator's voting rate must exceed 99%, and they must provide sufficiently high yields.

So the income from JitoSOL is actually the largest source of income in the entire Jito protocol. Currently, this portion of income is almost entirely distributed to JitoSOL holders. There has also been a recent proposal to allocate 0.15% of this income to Jito token holders, which has led to a recent increase in Jito's token price.

In fact, this portion of dividends is very small right now; if you really look at the numbers, but I think it is still a good demonstration. This proportion may increase in the future, but it is uncertain whether it will. Because recently, after the founder took office, many regulatory issues have begun to loosen, and everyone is starting to test the waters. If dividends are really implemented, this token may be regarded as a security.

Shang: So it sounds like Jito tokens are also a way for ordinary people to profit from Solana or the trading volume of Memecoins; can we understand it this way?

Leo: I think, from the current stage, JitoSOL is the best choice because it generates direct income.

Shang: What do you think of the entire Jito project? How do you see its future development?

Leo: If you are optimistic about the Jito project, its current infrastructure is free, and it actually profits by providing staking services to users. Users transfer SOL to Jito, and Jito helps users make money through its top validators while earning some fees from it.

Of course, Jito's future restaking is also doing very well; this is just getting started, and we can talk about it later. However, if you are bullish on Jito in the long term, buying Jito tokens is a good choice. From the topic we discussed today regarding Memecoins, I believe JitoSOL is a very good investment target.

Shang: Understood. I actually want to discuss another topic because you just mentioned that Solana has a clock, which is very different from Ethereum's memory pool. Can we discuss the differences between MEV bots on Solana and Ethereum in detail? This should be a quite interesting topic that many people may not realize.

Leo: Understood. Well, the MEV on Ethereum mainly comes from your ability to know unprocessed transaction information and then arbitrage. In Solana, due to the lack of a shared memory pool, it is difficult to obtain this information. Of course, Solana also has similar situations. I can briefly explain that if I am a validator, during a round of transaction processing, I know which transactions have not been processed. At this point, as a validator, I also have the opportunity to perform "sandwich attacks" like on Ethereum, but this information is private; only I know it, and the other 1,499 validators cannot know.

This situation does exist, but due to Solana's permission control mechanism, many validators will follow the rules. For example, Solana Foundation and Jito have blacklists. If you are a validator and engage in such unethical transactions, you will not receive delegation support from Jito. The Solana Foundation also has its own delegation project; if you engage in such "bad transactions," they will not delegate SOL to you. This part is similar to Ethereum.

Shang: Understood. From the perspective of on-chain traders, does this mean that there won't be situations like slippage or being front-run on Solana as there are on Ethereum? On Ethereum, we often see MEV bots front-running transactions to make profits. Because Solana has this clock mechanism, it means that if you submit an order in the first second, the bots cannot front-run you. Can this situation be understood this way?

Leo: Yes, Solana has indeed weakened traditional MEV. The Ethereum mainnet can only process 60 transactions per second, while Solana can process many more transactions quickly. This means that the transaction queue on Solana is relatively short, and the arbitrage space for MEV bots is also reduced. On Ethereum, bots only need to raise gas fees to front-run transactions, while on Solana, bots require higher hardware specifications.

On Solana, the role of MEV is diminished because it uses a clock mechanism, which avoids the common front-running issues seen in Ethereum. MEV on Solana occurs more after transaction processing. The blockchain structure of Solana is permissionless, meaning there are many different transaction pools on-chain. For example, when someone submits a large transaction, there may be price differences between different pools, at which point bots can arbitrage by listening to transaction information.

The information transmission structure of Solana resembles a tree diagram. The more SOL you stake, the earlier you know about transaction occurrences, and the time difference is very small. For some bots, this tiny time difference determines whether they can profit. Jito also provides a service; since Jito coordinates 80% of the validators on Solana, you can subscribe to Jito's service to learn which transactions can be arbitraged.

In Jito, there is a service called searcher that can help you quickly obtain arbitrage opportunities in the network. By subscribing to Jito's service, when you discover an arbitrage opportunity, you can pay a tip through Jito's bundle service to ensure that these transactions are prioritized for processing. This entire process actually creates arbitrage space between processed transactions and the ecosystem.

For example, a few weeks ago, someone contacted me; they made four to five million dollars by listening to transaction addresses. Their arbitrage model was to buy immediately when they heard a developer releasing a new token, using the bonding curve, as later users would push up the price, allowing the earliest buyers to profit.

Interestingly, these arbitrage bots do not need to care about the specific narrative; as long as others buy in, they can sell out and make a profit. The tips they provided were very low, yet they could still buy in first. Later, another team tried to replicate their approach, but they were always one to two slots behind that address. This is the advantage of Solana; only machines in the same physical data center can obtain information and react to transactions the fastest. This is also why high-frequency traders pay special attention to physical location.

Shang: Just like high-frequency trading on Wall Street, movies often say that to be a little faster than others, traders even lay cables, and this tiny difference can lead to huge profits.

Leo: Yes, it is precisely because of this physical location difference that those addresses with servers in the same data center can obtain transaction information faster and trade ahead, while others will lag behind a few slots on the network, even if they pay higher tips.

Shang: Right, the money that these MEV bots make can also be considered as impermanent loss for LPs. For ordinary traders, they do not need to be too greedy. Do you think Solana's mechanism, or rather its functionality, will become its moat? Is this an important reason for Solana's continued brilliance?

Leo: I believe so. Solana's innovative mechanisms, especially improvements in MEV and transaction processing, indeed constitute its competitive advantage. In addition, Raydium's income is also very high; I myself am a fan of Memecoin LPs.

Shang: Memecoin LPs are indeed a very interesting field.

Leo: Yes, indeed.

Memecoins and LP Profit Opportunities in the Solana Ecosystem

Shang: Many people think that being an LP is a very risky thing, but it seems that in the Raydium and Memecoin markets, LPs are actually very profitable. I especially want to hear your experiences in this area.

Leo: This actually depends on whether your trading fees can cover impermanent loss. I once saw a report stating that the overall returns of being an LP on Ethereum are negative because the fees simply cannot compensate for impermanent losses. I think this issue mainly arises from Ethereum's performance limitations. Many token trading volumes on Ethereum are concentrated on CEXs (centralized exchanges) because the costs on CEXs are lower, while on-chain LPs often become tools for arbitrage on CEXs.

So many people say that AMMs (automated market makers) on Ethereum absorb a lot of "toxic flow," meaning that others buy low on CEXs and sell high, then buy low on AMMs, creating an arbitrage model that makes most of AMM's flow come from arbitrageurs, while good flow mostly occurs on exchanges rather than on-chain.

Shang: It seems that the only trading volume comes from arbitrageurs; ordinary users have no reason to trade on-chain, especially to pay such high gas fees.

Leo: Exactly, why would ordinary users want to pay hundreds of dollars in gas fees on-chain? They could just buy a few hundred dollars worth of tokens directly on Binance, right? In fact, on Ethereum, these high gas fees make people reluctant to trade. However, on Solana, the trading costs for Memecoins are very low. I remember during the first round of the Memecoin cycle, around Q1 2023, I saw someone in a Telegram group who had moved from Ethereum to Solana, saying they made a lot of money on Solana because they could earn 100 times their investment, while on Ethereum, they couldn't even cover the gas fees.

Indeed, Solana's trading costs are much lower, which is why trading aggregators like Jupiter can succeed on Solana while facing many difficulties on Ethereum. On Ethereum, Uniswap dominates the flow, but even with good trading routers like 1inch, it is challenging to complete trades due to high gas fees. On Solana, gas fees are almost negligible, so transaction slippage is smaller, allowing for more liquidity pools and higher liquidity.

You can see that recently, Solana's monthly trading volume is even double that of Ethereum's mainnet, even though Solana's TVL (Total Value Locked) is still significantly lower than Ethereum's, even less than half. But for LP providers, Solana's low TVL and high trading volume mean that fees are relatively high, which can fully cover costs.

Let me give you the most exaggerated example: last year, during the MOTHER Memecoin project, I made LP for the first time within 24 hours and earned very high returns. Initially, the APR showed over 19,000, with an APY of 36,500%. I could earn 50% in fees in just one day. Of course, as time goes on, the returns will decrease, but during that period, I invested one or two thousand dollars and ultimately earned nearly 20,000 dollars in fees.

Shang: From one or two thousand to 20,000?

Leo: Yes, I made some adjustments to the concentrated liquidity. When the first wave rose to twenty cents, I started selling some, and later when it pulled back, I added more, but overall, I earned three to four times in fees. In about three weeks, I made these profits.

Additionally, I also shared another Memecoin called Gecko in the Mad Labs group. Its community is very active; although its market cap is not large, it has high trading volume. Although the token price does not fluctuate much, it still has strong community support. During the testing period, I earned over double the fees, with the highest annualized yield reaching 500% to 1000%.

Shang: So, compared to simply holding tokens, being an LP for MOTHER earned you more?

Leo: Yes, I should have earned about double. If you focus on the Solana Memecoin market, being an LP is very worthwhile. The Solana Memecoin market has many high-frequency trading opportunities. If you only do LP for the short term, like 12 or 48 hours, the fees are unlikely to cover impermanent losses. Therefore, the best way to be an LP is to hold long-term, ensuring that the trading fees can cover the losses.

The biggest characteristic of Solana's Memecoins is their volatility; prices rise and then fall, and when they rise again, they can bring high returns. For poor Memecoins, like the Christmas tree project, they may rise once and then disappear. However, if the Memecoin community is active, with frequent updates on Twitter and ongoing project management, then being an LP is very advantageous.

Currently, I believe Solana's Memecoins have entered a second cycle. The first cycle was from February to April, and the second cycle has attracted more participants. The second cycle market is more mixed, but this also gives many VCs and project parties opportunities. They have resources to enter the market and may earn some profits in the short term.

This makes the market more competitive and the risks greater. But right now, I am mainly doing LP for two Memecoins, WIF and Popcat. Through concentrated liquidity trading, my daily earnings are maintained at around 0.5% to 3%, which is very ideal for LP earnings on Solana, while it is almost impossible to achieve such profits on Ethereum.

Memecoin projects on Solana, such as Popcat and other Memecoins, already have many LP pools, occupying a significant proportion in the ecosystem. Through these LP pools, you can earn higher returns with lower trading costs.

Shang: I often see that many Memecoin trades are actually providing liquidity by pairing two Memecoins together.

Leo: Yes, if you really like these two Memecoins, although some people may think being an LP is a loss, in reality, during the holding process, you do not know whether it is rising or falling. My philosophy is that if I really like these two Memecoins, I will pair them together to provide liquidity and earn fees; whichever earns more makes me happy. Ultimately, one will definitely perform better than the other, but as a holder, as long as I like these two Memecoins, my goal is to accumulate more of both. Therefore, if you provide liquidity for these blue-chip Memecoins, it is actually a very stable choice. I have been doing LP for about one to two months because I believe these Memecoins are relatively stable, especially BONK and WIF, which are no longer the "leading" Memecoins.

Yes, we used to think that WIF represented dogs, while Popcat represented cats, and the price fluctuations of these two Memecoins also have a certain correlation. Therefore, the impermanent loss when providing liquidity is not too great, which actually makes the entire ecosystem more robust. In the past, people trading Memecoins might only make money through "buy and hold," and ultimately, you still have to sell. But on Solana, you can earn fees through LP, and just relying on fees can make money, providing another profit model for the Memecoin ecosystem.

This also allows more people like me to participate. I am not the kind of person who can do high-risk trading every day, but I believe in the Memecoin culture. As for the "super cycle" of Memecoins, I believe that only top Memecoins truly have culture; the others are essentially junk coins. In this case, I can support the prices of these Memecoins indirectly by providing liquidity for these blue-chip Memecoins. The prices of blue-chip Memecoins will help boost the prices of second- and third-tier Memecoins because their prices are interconnected.

This essentially makes Solana's Memecoin ecosystem more robust and explains why Solana stands out in this round. Although other chains may also have hotspots and even new competitors may emerge, the hottest Memecoins will still be on the Solana ecosystem. I believe this is a very important reason.

Shang: Thank you for sharing the wealth code, haha.

Memecoins as the Future Trend Combining Social and E-Sports

Leo: I think Memecoins are now truly a future trend that combines social interaction and e-sports. You know Roblox, right? That American gaming platform has made a lot of money. Although I have tried it, I find it unappealing, and the graphics are poor. Many people say our token is also doing very well, but it doesn't really matter because it’s the concept of "my world."

Shang: Can it be understood as a commercial version of "my world"? Where everyone can create their own games without needing much coding.

Leo: Yes, Roblox is launched by Microsoft, and it makes money through commissions. I believe projects like PumpFun might be the social and competitive way for the younger generation. I feel that the evolution of social interaction has moved from early text messages, QQ, to WeChat, and now to Douyin, showing that electronic social interaction increasingly demands attention. The next generation might be kids glued to PumpFun all day, watching live streams and rushing for tokens.

I have asked many friends, especially those in the community, and many feel that after 25, it is hard to adapt to this high-intensity PVP gameplay. For many young people, although they may not have much money, this model is very suitable for helping them earn their first pot of gold. You see, recently a kid created a token called QUANT when he was 12 or 13, and he rug-pulled and made tens of thousands of dollars, later being pushed up to a market cap of 40 million by big players. I think there are negative aspects to this, but it also has its unique value and deserves attention. Moreover, all of this is happening on Solana, precisely because of its high network efficiency.

My ideal blockchain is like this: In the past, Ethereum's big players analyzed the importance of blockspace. Blockspace is actually Ethereum's auction mechanism, making money by auctioning blockspace. But I believe that as an infrastructure (INFA) provider, it should carry higher value at a lower cost. Whether trading $1,000 or trading on Nasdaq, Solana's costs are much lower. I believe that in the future, Solana can become an "on-chain Nasdaq," where everyone trades 24/7. But from my perspective, this market is essentially a casino business. I do not oppose it, but you must choose which assets and tokens can be the house. If you believe in the casino business of tokens like Sol, Jito, and Raydium, then go participate, but understand that if you don’t participate, you might be in a bad position; it’s better to take a small cut.

Shang: Understood. As you gain more understanding of this field, the ways for ordinary people to participate in this gold rush become clearer, especially for those investors who are unwilling to take on too much risk. For example, they can choose to hold tokens like Sol, Raydium, and Jito, or participate in LP.

Leo: Yes, LPs for SOL and WIF, or SOL and GOAT are also very profitable. I checked today and have already earned 30% in fees, which feels great. Young people always exchange time and energy for money, but ultimately, you still need to learn how to use money to make money. The tokens and strategies we discussed earlier are all good ways to help you earn more money with your own money.

Shang: I completely agree, especially for those veterans in the crypto space who feel anxious. Many previously familiar areas, like altcoins and Ethereum, seem to have not made progress in this cycle. Meanwhile, new areas like Memecoins are gaining more attention, and the market narrative is becoming larger.

Leo: I also strongly agree with this point. Indeed, many participants have shifted from traditional markets to Solana, especially for those investors who are unwilling to take too much risk; participating in Memecoin LP is a relatively safe way. Moreover, the DeFi on Solana, compared to Ethereum, has smaller liquidity pools, but the returns from participating in Solana's staking are much higher.

Although Solana's inflation rate is relatively high, as long as the number of new wallet addresses on the network grows beyond an annualized 5.8%, theoretically, the token price will continue to rise. For big players, participating in staking not only maintains the security of the Solana network but also profits from MEV income, which is a very good model.

Future Directions for Solana in Payments, Layer 2, and Gaming

Shang: Earlier, we mentioned that Solana's hotspots and narratives are currently mainly focused on casino businesses, but over time, these hotspots may rotate. What do you think about the future development trend of Solana? Will there be new supply chains or public chains that gradually become the next competitor to Ethereum?

Leo: At present, I still have high hopes for Solana, although I also acknowledge some criticisms of Memecoins. Memecoins are indeed more about emotional speculation, but they also showcase the advantages of Solana's infrastructure. Previously, a partner from Placeholder mentioned that Solana is like Apple, while Ethereum is like Angel. The current infrastructure structure of Ethereum leads to fragmented liquidity, affecting the development of the ecosystem. In contrast, Solana, through the POH (Proof of History) validation method, can unify the entire ecosystem, allowing liquidity to gather together. I believe this is a breakthrough for Solana in terms of infrastructure, reaching a new height.

I hope that in the future, more high-performance public chains will emerge, allowing more ordinary people to enter the crypto space. Currently, Solana's progress is already rapid, but some new public chains, like MOVE systems and EVM parallel execution systems like Monad, although their white papers are well-written, may take years to truly land in practical applications. Recently, the Sui network experienced an outage, and I saw some big players in the Solana community celebrating, saying congratulations for it getting on the right path. Outages are not shameful; what matters is finding the problems and optimizing from them. In fact, Solana has not experienced frequent outages in the past year; events like the early-year inscription release and the airdrop claim for Jupiter went very smoothly, demonstrating Solana's progress in network stability.

Next, as Lily mentioned, in the payment field and the application space for stablecoins, I believe Solana will have great development potential. The most lacking aspect of Solana in some professional institutions is stability, and now the stability of this network has improved significantly, which will attract more projects to enter the Solana ecosystem.

The FTX incident did have an impact on the Solana ecosystem, but new good projects and excellent developers are still working quietly. I believe that excellent projects usually take two to three years to mature, like Jito, Jupiter, and Raydium, and even projects like the Camel lending platform that I like, which existed before the FTX incident and have a history of two to three years. In the future, I am very interested in some emerging projects, such as ride-hailing protocols on the Solana network, similar to Uber. This project has been in operation for two years and is currently in trial operation in the United States, showing very good data performance. Additionally, DePIN has great potential in the Solana ecosystem.

The connection between DePIN and blockchain is primarily in payments. My physical devices need to operate, and I need to reward users with tokens. On Ethereum, if I want to issue a token worth $5, I might need to pay $3 in gas fees, making this model unsustainable. However, on Solana, DePIN can settle in real-time, making Solana an ideal choice for hardware mining and various end-user payments. As more hardware projects develop on Solana, they can pay end users at lower costs and higher efficiency. I believe that although the overall failure rate may be high, as long as one or two blockbuster projects emerge, it can significantly drive up the price of Solana tokens. I believe that Solana (SOL) will see greater value appreciation in future cycles.

Shang: Besides the current MEV, new emerging fields like DePIN may appear in the future. What do you think about Solana's future development, especially in the gaming sector? Recently, it seems that some new teams and projects have started to pay attention to Solana but have not yet gained widespread attention.

Leo: Yes, indeed. For example, Solana recently launched its first Layer 2 project called Sonic. Sonic is a Layer 2 designed specifically for gaming, utilizing Solana's technology to optimize game operations. What it can do is that many games hope to achieve on-chain services, but fully on-chain game interactions often lack economic value. For example, certain gambling games may aim for fairness rather than direct profit. Traditionally, if such games run on the mainnet, they incur high costs.

Sonic can place the underlying rules of the game on its own network. If the game has token incentives, for example, when players complete a task and receive a token, Sonic can directly set these tokens to operate on the Solana mainnet as Layer 2. This design is very suitable for the future development of games. You see, Layer 2s like IMX, although they place games on-chain, do not solve liquidity well. One of the core issues of crypto games is price support; if there is no liquidity, no one wants to play.

Sonic's design is clever because it allows game developers to continue obtaining liquidity on Solana's mainnet while enjoying the advantages of the Solana network. This design can help game developers operate more efficiently, avoiding the difficulties of building an independent ecosystem. You cannot build a Layer 2 and an ecosystem of decentralized exchanges like DEX, Raydium, Orca, and Meteora independently; the liquidity of Solana's mainnet serves as the underlying support for these games.

I believe that once Sonic is launched, it may drive the development of GameFi and attract more traffic to Solana. I have heard that they have signed contracts with some game projects. Although game projects in the crypto ecosystem do not currently have the same prominence as Memecoins, I believe the potential for games is still enormous, and more developers and teams will enter the Solana ecosystem.

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