Solana Decentralized Finance Ecosystem Overview: Key Products and Development Trends

Messari's Q1 2024 report shows that Solana's DeFi trading volume has significantly increased, with an average daily spot DEX trading volume reaching $1.5 billion, a month-on-month increase of 319%. This growth is mainly driven by Memecoin trading, particularly tokens like SLERF and BOME. Solana has become the preferred platform for retail and Memecoin traders due to its extremely low transaction fees and fast confirmation times. Against the backdrop of a steady increase in SOL prices, Solana's total locked value(TVL) has also risen to $4.311 billion. Similar to other public chains, Solana's TVL mainly comes from DEX, LST, lending platforms, and perpetual contract trading.

Decentralized Exchange (DEX)

Decentralized exchanges are usually developed for specific ecosystems, which is particularly evident on non-EVM Layer 1 chains like Solana.

|---------|----------------|-----------|-----------------|-------------| | Project | TVL Total Locked Value (in 100 million USD) | Circulating Market Cap (in 100 million USD) | FDV Fully Diluted Valuation (in 100 million USD) | 24h Trading Volume (in 100 million USD) | | 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 users to freely create trading pools and guide token liquidity. This feature has facilitated the issuance of a large number of meme coins on Solana, making Raydium a preferred platform for meme coin issuance at one point. Currently, Raydium's TVL is approximately $965 million, with a 24-hour trading volume of about $1.162 billion, ranking among the top in the Solana ecosystem.

However, with the rise of Meme platforms represented by Pump.fun, the influence of Raydium in project initiation may gradually decline. If these emerging platforms begin to build their own DEX, it could have a greater impact on Raydium.

Jupiter

Jupiter, as a liquidity aggregator, can find the best trading paths across all major DEXs and AMMs on Solana, effectively reducing slippage and transaction fees, while enhancing trading efficiency and user experience.

In addition to being a leading DEX platform, Jupiter also offers decentralized perpetual contract trading services, supporting long and short trading with leverage of up to 100 times. Users can participate as traders or liquidity providers. JLP holders can earn 75% of the fee income from the perpetual exchange, which is automatically reinvested into JLP, increasing the JLP price and achieving compound returns.

Jupiter recently launched the MEME market discovery tool APE, which can provide real-time updates on the latest token information listed on Orca, Raydium, and Meteora, and offers detailed token risk assessments.

Orca

Orca promotes itself with the slogan "DEX for people, not programs" and has long been at the forefront of Solana DEX. It introduces a concentrated liquidity market-making mechanism similar to Uniswap V3 - Whirlpools. This model allows liquidity providers to concentrate their funds in specific price ranges, improving capital efficiency and increasing market-making returns.

As a top DEX in the Solana ecosystem, Orca's fully diluted valuation (FDV) is only 268 million USD, which appears relatively reasonable compared to other DEXs on different chains.

Liquidity Staking (LST)

Solana users have relatively low demand for liquid staking, mainly because Solana has no minimum staking requirements, and the low price of SOL significantly lowers the barrier to becoming a validator.

|------------|---------|---------------------------|-----------------|----------|----------------| | Project | LST | APY (Annual Percentage Yield) (usually includes MEV revenue sharing) | TVL (Total Value Locked) (in hundreds of millions) | Circulating Market Cap (USD) | FDV Fully Diluted Valuation (USD) | | 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)

After Jito launched its airdrop points program in September 2023, it quickly became a leading project in the field. Currently, the TVL of JTO has reached 1.705 billion USD, making it the project with the highest TVL in the Solana ecosystem. The staking APY of Jito SOL is 8.26%, which includes Solana staking rewards and MEV revenue sharing.

The eligibility for airdrops for JitoSOL users is based on the Jito points program rankings. Only users with points reaching or exceeding 100 are eligible, and a distribution standard has been finalized with ten levels.

Marinade

Marinade is more popular in native staking, with a higher APY, making it a leading project in the ecosystem with $1.413 billion in locked value. Although its locked value is similar to that of Jito, Marinade's market cap and FDV differ significantly, which may indicate that $MNDE has certain growth potential.

BlazeStake

BlazeStake is the second largest LST project in the Solana ecosystem, with a TVL of approximately $275 million. The estimated staking APY is currently 7.06%, slightly lower than Jito. Its FDV is $6.87 million, which is far below Jito's $2.387 billion, indicating growth potential on one hand, and reflecting the current situation where the ecosystem is primarily composed of memecoin players on the other hand, who need to compete for users through high APY and leading projects.

Lending

Save

Save (formerly known as Solend) is an algorithmic decentralized lending protocol on Solana. On the Solana network, Save is able to provide lending services that are 100 times faster and 100 times cheaper.

In November 2022, Save experienced an oracle attack targeting the stablecoin USDH, resulting in a bad debt of 1.26 million dollars, but Save provided full compensation. This incident highlighted the importance of oracles in the Decentralized Finance ecosystem.

Afterwards, Save adopted the PYTH oracle to provide secure and real-time price data for various assets. Currently, the demand for lending in the Solana ecosystem is relatively low, which may be related to previous security issues. The new lending protocol Marginfi is about to launch, and it is worth looking forward to.

Derivatives

Derivatives are financial contracts based on the value of underlying assets, used for risk management and market forecasting. In addition to Jupiter, there are several derivatives protocols on Solana such as Drift, Flash Trade, and Zeta.

|--------------|-----------------|----------------| | Project | TVL (Total Value Locked) (in hundred million USD) | FDV Fully Diluted Valuation (USD) | | Drift | 360 million | 530 million | | Flash Trade | 14.69 million | 550 million | | Zeta Markets | 9.7 million | Unissued tokens |

Drift

Drift is a multifunctional integrated DEX that offers pre-market trading, 20x leverage, and collateralized lending services, with a TVL of $360 million. The project is supported by the cryptocurrency investment firm Multicoin Capital, which led a $3.8 million seed round investment for Drift in October 2021.

Drift v2 attracted over 15,000 users within six months, with a trading volume exceeding 10 billion dollars, demonstrating its strong appeal and profitability.

Flash Trade

Flash Trade is a decentralized spot and contract exchange focused on the Solana network, known for its low trading fees and low price impact. Its unique multi-asset pool system is the first of its kind on Solana to adopt this technology and introduces an innovative NFT structure to enhance user engagement and account functionality.

Flash Trade adopts a pool-to-point trading model, ensuring zero price impact and optimal trading conditions. Liquidity providers are rewarded by collecting trading fees. The platform uses Pyth oracles and a backup oracle system for dynamic pricing, ensuring high availability of the system. By incorporating NFT elements, the platform further gamifies the trading process, incentivizing user participation.

This innovative user experience, pool-to-point model, and NFT gameplay have attracted a TVL of 17 million USD.

Zeta Markets

Zeta Markets is a Decentralized Finance derivatives platform aimed at popularizing derivatives trading by providing liquidity, under-collateralized derivatives options, and futures trading. The platform offers two core products: DEX (Decentralized Derivatives Exchange) and FLEX (Options Minting and Auction Base Layer).

The interface of Zeta Markets is simple and smooth, utilizing Tradingview for candlestick chart services. The project has an airdrop expectation, which may be one of the reasons for attracting over ten million TVL.

PYTH

PYTH is the main oracle on the Solana chain. Compared to the traditional Chainlink, PYTH has made innovations in data update speed and stability. Currently, PYTH is not only used on the Solana chain but can also be applied to other blockchains, demonstrating great development potential.

Oracles, as a bridge connecting blockchain and the real world, have a wide range of applications in financial derivatives trading, risk management, insurance payouts, and supply chain management. They are crucial for enhancing the value of blockchain technology and promoting its application across various industries.

Summary

The continuous development of the Solana ecosystem has brought about an increasing number of Decentralized Finance products, such as the recently launched prediction market B.E.T. These projects not only enrich the Solana ecosystem but also provide users with more financial tools and choices. While mature products have a strong user base and market trust, emerging products have lowered the barriers to use by optimizing user interfaces, enhancing user education, and building communities, and have quickly attracted users through well-planned brand building and marketing activities. In the future, as more innovative products emerge, Solana's DeFi ecosystem will become even more prosperous and diverse.