Solana is a decentralized, open-source blockchain that aims to provide fast, secure, and scalable infrastructure for decentralized applications (dApps) and smart contracts. It was created in 2017 by Solana Labs, a San Francisco-based company co-founded by Anatoly Yakovenko.
In addition to its high transaction throughput, Solana boasts several other notable features, including low transaction fees, fast block confirmation times, and support for a wide range of programming languages.
In this report, we will provide an overview of Solana’s main events, technological innovations, and use cases of 2022. We will also discuss the current state of the Solana ecosystem, including its adoption and growth. Finally, we look into 2023 and highlight some of the most exciting narratives and projects.
Although it has been a tough year for Solana, data supports the assumption that the ecosystem has matured enough for it to be somewhat impermeable to black swan events, given that the core user and developer base has not abandoned the ecosystem, having instead doubled down on the chain.
The popularity of FTX's DeFi products has helped drive significant volume and liquidity to the Solana blockchain, making it an attractive platform for other DeFi projects.
FTX contributed to the development and growth of the Solana ecosystem, however, the bankruptcy and allegations that came to light told a different story. Total-Value-Locked (TVL) registered its highest point of the year in the first week of January, at $6.68B. The FTX Crash caused a 78% drop in TVL, from $1B to $218M.
Despite experiencing a decline and dropping to the 22nd rank by market capitalization at its lowest point, data suggests that Solana remains one of the most active blockchains in both bull and bear markets.
Solana is in close competition with Ethereum and Polygon in terms of daily active addresses, a metric that measures the number of unique addresses that are active on the blockchain on a given day.
On-chain data shows that the number of daily active addresses on Solana has remained relatively stable compared to the average in 2021, even as the price of the Solana token has dropped 95% from its all-time high.
This stability in daily active addresses suggests that the Solana network and its user base are resilient.
Measuring developer activity on a blockchain is a critical task, but it is important to note that there is no standardized method for accurately calculating this metric.
The Solana Foundation recently released a report disputing the claim that only 75 developers are working on the Solana ecosystem.
According to the report, as of November 2022, there are a total of 2,053 active developers working on projects with a Solana integration, with 1,654 of them solely focused on Solana-based projects.
Solana has repeatedly suffered criticism over network instability, outages, and congestion. Although it has suffered from periods of increased instability, the network has drastically improved with recent patches aiming to solve several of these issues.
Per Solana Status, the last outage was recorded on October 3rd of 2022, lasting over 6 hours. Anatoly Yakovenko, the founder of Solana, has assured that throughout 2023, the network instability issues might be patched and fixed permanently.
Data from Solana Status shows that even in the worst month of downtime, Solana had 96% uptime.
On-Chain data shows Solana processes more daily transactions than all other major chains combined, which shows the power and throughput of the network when compared with all other chains.
It is worth noting that Solana's actual transaction per second count may differ from other blockchains. To get a more accurate comparison, it is better to look at the breakdown of transactions on Solana and only consider the "Vote" transactions.
While a significant portion of daily transactions on Solana is vote transactions, the number of non-vote transactions is still higher than the combined total of all other major blockchains.
Solana, which has faced criticism in the past for the centralization of its network, has made significant strides in decentralization.
As of 2022, the Network has a total of 2,160 validators operating 3,621 nodes in 230 different data centers located in 33 countries.
The largest concentration of stake in any single data center is 9%. Additionally, Solana's Nakamoto Coefficient, a measure of decentralization, is currently 32, higher than that of many other blockchains such as Ethereum, Polygon, and Binance.
In terms of the geographical distribution of stake, the United States holds 20.4% of the total stake in Solana, compared to 45.2% of Ethereum's total stake held by the U.S.
The unique fee Payers on Solana can be used as a measure of dedicated users.
On the Solana blockchain, the feepayer is the address that pays for the fees of a transaction.
The first address listed in each transaction is the feepayer. This metric can be used as a proxy for the number of non-custodial wallets active in the Solana ecosystem, although it should be noted that the feepayer may also refer to a centralized entity such as a wallet provider that pays fees on behalf of its users.
Data shows the number of users on the Solana network peaked earlier this year at 2.7 million, before declining back to pre-peak levels.
It is worth noting that during the bear market, the number of monthly fee payers on the Solana network did not drop as significantly as other metrics such as total value locked, token price, or monthly DEX volume.
This suggests that the network has gained a significant level of adoption and has a large and dedicated community.
The main narrative surrounding Solana in 2022 was NFTs. They are one of the most important adoption drivers of Solana and data shows that the community has matured.
The volume of non-fungible tokens (NFTs) traded on the Solana network has seen several spikes throughout the year, namely due to successful projects such as DeGods and OkayBears.
Toward the end of the year, the volume has begun to trend upward, particularly after the FTX crash.
The fact that NFT volume on Solana increased following the crash suggests that the network has a strong and active community of users who are utilizing the platform daily.
The SolanaFloor NFT Index consists of a carefully selected basket of Bluechip collections based on multiple weighted criteria: volume, social trends, age, and other statistics. This basket is reviewed monthly.
The SolanaFloor Chart presents the index in SOL (green) and USD (purple).
The USD Index is currently at or near its all-time low. This is not surprising given the current bear market. The Solana Token (SOL) has also seen a significant decline, with a value that is down about 97% from its all-time high.Since January, the index has been down-trending. At its highest, the index was valued at $12,400, driven by the DeGods, Blocksmith, and SMB rise. The All-Time-Low of $685 occurred during the FTX crash in November, when fear and panic took over the ecosystem, placing most Bluechips at a 50%-70% discount.
The SOL Index paints a completely different picture. It is clear that from a USD standpoint, this year has not been easy for any long-term investor looking to leverage their position using NFTs.
However, it has been a great year for experienced traders to stack SOL.
The FTX crash was the catalyst for the most aggressive bull run for Solana NFTs, in SOL terms. The index rose almost 300% in less than 30 days, led by y00ts, DeGods, SolanaMonkeyBusiness, and Famous Fox Federation, to name a few.
The price decline in both SOL and USD terms unlocked a wave of liquidity from users who saw a chance to finally be able to purchase their favorite projects.
The Daily Average Mints per Address is a metric that can be used to measure the level of engagement or maturity of a community. A higher Average of Mints per Address indicates a more active and invested community.
During a bear market, where the value of assets is generally declining, it is common for liquidity to flow from weaker projects to stronger ones. As a result, the number of projects minting may decrease, as the risk of failure becomes greater compared to the potential for success.
In the Solana NFT ecosystem, this has led to ambitious teams launching successful projects.
There is a bearish argument that the size of the community has shrunk due to the bear market, with only the most engaged users remaining.
This is supported by the inverse correlation between the Daily Average Mints per Address and the price action of the SolanaFloor Index in US dollars.
DeGods had a good year. The team’s ability to navigate and steer a well-orchestrated marketing machine has led them to become the most traded collection on Solana.
They have changed the NFT whitelist meta with a well-designed submission platform, y00tlist, which was immediately adopted by upcoming collections.
On Christmas Day (December 25th), DeGods announced the migration of DeGods and Y00ts to Ethereum and Polygon, respectively.
Blocksmith Labs is a team focused on developing professional tools for the Solana NFT ecosystem. Their whitelist management tool, Mercury, has onboarded 1118 projects and registered over 400,000 wallets. Through Mercury, users have claimed over 3 million whitelists. Bifrost, another tool developed by Blocksmith Labs, is a price discovery launchpad that helps projects optimize their capital raise while providing a smooth minting experience with anti-bot measures.
Blocksmith Labs just recently teased Atlas3 in a video trailer, however, there is no confirmation as to what it could be.
Famous Fox Federation (FFF) is a well-known project that has released several successful products. The team behind FFF has developed more than 20 tools that are widely used by members of the NFT community.
These tools include an exchange, a platform for NFT raffles, a peer-to-peer swap platform, and a marketplace for art commissions.
Most of these tools are either free to use or require a small fee in $FOXY tokens. FFF has created a functioning economy around its tokens, which are widely used and provide utility to many Solana NFT users.
Matrica is a Discord-based NFT verification tool developed by Matrica Labs. It gained popularity during a strong NFT market cycle in the first half of 2022.
Recently, Discord announced that it will integrate Solana NFTs into its platform, and this early release was made possible thanks to Matrica's role in streamlining the verification process on Solana.
The Solana verification tool is expected to have a bright future in 2023, and it is even possible that Discord may consider acquiring the tool.
The NFT marketplace raised $130 million in a Series B funding round, bringing its valuation to $1.6 billion just nine months after launching on the mainnet.
Magic Eden launched later than its competitors in the Solana NFT marketplace, but it quickly became the dominant player, processing around 95% of the total volume of Solana NFTs and averaging 9.4 million visits per month.
To expand its reach and increase revenue, Magic Eden has since integrated both Ethereum and Polygon NFTs into its platform.
While NFT marketplaces were fighting to capture market share by waving platform fees and adding creator royalty optionality, Hadeswap found a way to create value for creators and give back power to the users in a fair way.
The leading NFT AMM has since become the second-biggest trading platform by volume transacted.
HGE, the founder of the ABC collection and the Hadeswap protocol, has brought several successful experiments to the Solana ecosystem, and with it a new wave of innovation: NFT DeFi.
Sharky is considered a highly promising project for 2023.
The peer-to-peer NFT lending and borrowing platform has seen steady growth since launching its 10,000-item NFT collection.
Sharky currently has a large user base and a significant market share, with more than 200,000 SOL total value locked, over 15,000 active loans, and over 200,000 SOL volume in its NFT collection.
Project’s founder, Restuta, has mentioned plans to develop NFT mortgages, which would allow users to borrow and lend against a small percentage of the total value of an NFT.
Kamino is a DEX-based automated liquidity solution that uses concentrated liquidity market makers (CLMMs).
Users often struggle to fully utilize concentrated liquidity due to price volatility, the risk of impermanent loss (IL), inefficient range settings, manual compounding of fees/rewards, and time consumption.
Kamino addresses these issues by actively managing LP positions, allowing users to "set it and forget it." Kamino maximizes capital efficiency and yields through advanced market-making strategies, automated position rebalancing, auto-compounding of fees/rewards, and passive user participation (improved UX).
Zeta is a derivatives exchange that aims to make it easy for anyone to trade derivatives.
Zeta's platform offers both options and futures, which allow traders to hedge against market movements, speculate on price changes, and take positions on a wide variety of cryptocurrencies. Zeta also offers under-collateralized trading and cross-margin, which gives traders more flexibility and control over their positions.
The goal of Zeta is to democratize the derivatives market and make it accessible to everyone.
Jupiter is a platform that connects different decentralized exchanges (DEXs) and automated market maker (AMM) pools together on the Solana blockchain.
Jupiter is designed to help users find the best prices for their trades by comparing prices across different decentralized exchanges (DEXes) on the Solana blockchain. In addition to direct markets, Jupiter can also find the best prices by routing trades through intermediary tokens.
For example, a user may be able to get a better price for their trade by converting their USDC to mSOL and then to SOL, rather than trading USDC directly for SOL. This can happen when there are price inefficiencies or volatility in the markets that Jupiter routes through.
By finding the most efficient and cost-effective routes, Jupiter can help users save money and get the best prices for their trades.
USDH is a censorship-resistant, crypto-backed stablecoin pegged to the US Dollar.
It is fully collateralized by a basket of cryptocurrency assets that are deposited into the Hubble Smart Contract on the Solana blockchain. For every 1 USDH in circulation, there is more than $1 of crypto assets deposited into Hubble.
Users can create new USDH by depositing their crypto assets into the Hubble Protocol. When a user deposits collateral, they enable the minting of new USDH, which increases the total amount of USDH in circulation.
USDH can be held in any Solana wallet and is native to the Solana blockchain. By using USDH, users can take advantage of the stability of the US dollar while still enjoying the benefits of cryptocurrency.
Remittances, which are financial transfers sent by migrant workers to their families in their home countries, play a crucial role in the global economy, particularly in developing nations.
They can help poor families improve their quality of life, access to healthcare, education, and better hygiene standards, and allow them to save money and build retirement accounts.
The COVID-19 pandemic did not significantly impact the inflow of remittances to low and middle-income countries, which received approximately $540 billion in 2020, representing 75% of the total remittance volume.
Solana is a blockchain platform that is well-suited for handling remittances due to its low fees, high throughput, and user-friendly interface. These features make it easy for migrant workers to send money back home to their families quickly and affordably.
Blockchain technology has the potential to disrupt the payments industry by allowing for faster, cheaper, and more secure transactions.
One of the main ways it does this is by eliminating the need for intermediaries, such as banks and payment processors, to facilitate transactions. In a traditional payment system, these intermediaries are responsible for verifying the authenticity of transactions and ensuring that the parties involved have sufficient funds or credit. This process can be slow and costly, especially for cross-border payments.
On the other hand, a blockchain is a decentralized network of computers that work together to validate and record transactions on a public ledger. This means that, in a blockchain-based payment system, the intermediaries are replaced by a network of computers that work to verify and record transactions directly. This can significantly speed up the process and reduce the associated fees.
In the future, large consumer-oriented businesses may adopt blockchain and NFTs for various purposes, including the use of NFTs as a replacement for traditional membership cards in fields such as supermarkets, eCommerce, sports, and more. By paying with a wallet that holds a specific NFT, users can access discounts. This approach addresses the shortcomings of the traditional membership card system.
Solana Pay is building the necessary tools to provide a seamless experience in payments through blockchain. Completing a transaction on the Solana network costs less than $0.01 while paying with a credit card can range from 1.8% to 3.5%.
Solana Pay is a payment system that allows merchants to accept US digital dollars directly at the point of sale, with almost no cost and immediate settlement. It is a fully decentralized payment system that does not require intermediaries or has significant fees.
Global maps are largely controlled by a small number of companies which leads to high costs for businesses, abuse of personal data, censorship, and uneven coverage.
The Hivemapper Network is a system that incentivizes map coverage, freshness, and quality with ownership. By installing a simple 4K dashcam on a car or truck, a contributor can earn a new cryptocurrency, own part of the decentralized global map, and support the world’s critical geospatial infrastructure cost-effectively.
Cryptocurrency exchanges are missing several markets. Parcl wants to offer exposure to the residential real estate markets around the world.
Parcl enables users to explore real estate markets around the world, get in-depth insights, and make buy or short investments based on their prediction of whether real estate values will rise or fall.
To ensure the data they use for trading is as accurate and trustworthy as possible, Parcl's prices are generated by the Parcl Price Feed.
This feed reflects the median price per square foot/meter at the city or neighborhood level, aggregated and refreshed daily.
Circle, a cryptocurrency payment company, plans to introduce its Euro-backed stablecoin Euro Coin on the Solana blockchain in the first half of 2023.
A Euro-backed stablecoin on Solana will contribute to a higher rate of adoption on the network. In addition, EUROC will unlock the development of several unique DeFi products.
Aten is a platform that allows users to create and operate their online stores without the need for any coding skills.
It is fully functional on the Solana blockchain and offers integrations with both Web2 and Web3 for maximum flexibility in managing a business.
Aten supports payments in both fiat currency, through Stripe, and various cryptocurrencies including USDC, SAMO, STEP, and mSOL.
The Solana community has endured a year of many tough challenges; however, data shows the worst may be over as on-chain metrics suggest a broad recovery in Active Addresses, DeFi and NFT Volume.
Solana NFTs are still the main narrative to follow on Solana, with several collections looking to take the number one spot, such as ABC, Blocksmith Labs, Famous Fox Federation and the Taiyo Robotics team.
DeFi is experiencing a slow recovery with several projects developing products which bring much needed innovation to the ecosystem. Kamino Finance, Orca, Marinade and Jupiter Aggregator are some examples.
The main narratives to follow in 2023 are NFTs, and other mass adoption use cases such as blockchain-based payments, remittances, and the growth of DeFi through network adoption and the introduction of the Euro-backed stablecoin EUROC by the cryptocurrency payment company Circle.