Solana Ecosystem Recovery: Analysis of DeFi Project Performance

Recently, the Solana ecosystem has performed strongly driven by some emerging sectors, with the price of SOL approaching 100 dollars on December 22. The trading volume on decentralized exchanges on Solana once surpassed that of Ethereum, sparking discussions in the market about “Solana surpassing Ethereum.”

At the same time, Ethereum faces various doubts, especially as DeFi projects that led the trend in the last bull market are no longer favored. So, apart from the recently popular emerging fields, how are the DeFi projects on Solana performing? Are the old projects truly reviving? Let’s analyze together.

Liquidity Staking

Liquid staking is an important growth project in the Solana ecosystem. Staking itself locks up funds which helps drive up the price of SOL, while various liquid staking tokens (LST) can be utilized in other Decentralized Finance projects. The airdrop effects and incentive measures of new projects also attract a continuously growing pool of funds.

According to data platform statistics, as of December 22, the total locked value (TVL) of the two largest liquid staking projects on Solana is $1.05 billion and $626 million, ranking them as the top two in the Solana ecosystem TVL.

Although the staked funds of one project are only 57% compared to the peak when measured in USD, the number of staked SOL (11.15 million SOL) has reached a historical high. Another project not only offers staking but also provides MEV infrastructure, gaining a good community base due to an unexpected airdrop. Recently, due to the initiation of incentives for the adoption of its LST in DeFi projects, the staking amount in this project has continued to grow rapidly, with currently 6.42 million SOL staked.

Decentralized Exchange

The main projects in the decentralized exchange (DEX) space are still the two established exchanges, and no particularly outstanding new projects have emerged. Both of these projects have developed centralized liquidity features based on their original foundations, but their positions have changed somewhat.

From the perspective of liquidity and trading volume, the liquidity of an exchange has dropped from a peak of $2.21 billion to the current $113 million, which is only 5.1% of the peak. The liquidity of another exchange has decreased from a peak of $1.41 billion to the current $184 million, which is 13% of the peak.

A recent phenomenon that has garnered market attention is that the DEX trading volume on Solana has surpassed that of Ethereum. Data shows that, whether in the past 24 hours or the past 7 days, Solana’s trading volume has been higher than Ethereum’s. Although some have questioned that this may be due to double counting of trades from aggregators, a separate calculation of the trading volume of each DEX reveals that the total 24-hour trading volume of major DEXs on Solana is $1.55 billion, while the total trading volume of major DEXs on Ethereum is $1.18 billion, confirming that the trading volume of Solana DEXs indeed exceeds that of Ethereum.

Another metric worth noting is the trading volume/TVL ratio of DEXs, which reflects the utilization of funds. This ratio for the two major DEXs on Solana is 4.81 and 2.87, while the ratios for several major DEXs on Ethereum range from 0.042 to 0.26. This indicates that with the same principal, the income from providing liquidity on Solana is significantly higher than on Ethereum, which may attract more funds into the Solana ecosystem.

Decentralized Finance

The decentralized lending track has changed significantly; currently, only one lending protocol that once had a large amount of funds remains at the forefront, but it has already been surpassed by newcomers. TVL is crucial for lending protocols as it represents how much remaining capital is left in the protocol.

The TVL of a well-established lending protocol has dropped from a peak of $910 million to the current $187 million, which is 20.5% of the peak. Other established lending protocols have performed even worse, with their TVL dropping from several hundred million dollars at their peak to currently several million dollars.

This sector has also seen a number of new competitors emerge. The TVL of two new lending projects has reached $348 million and $204 million respectively, with rapid growth recently. They have not yet issued governance tokens but have launched a points system where users can earn points through deposits and loans. Driven by some project airdrops, funds are continuously flowing in, and various LSTs are also being supported.

Yield Aggregator

The yield aggregator track has almost been denied by the market. Due to the already low transaction fees on Solana, the advantages of investing through yield aggregators for automatic reinvestment and avoiding personal operation fee expenditures are not obvious.

The TVL of the most famous project in this sector has dropped from a peak of $3.4 billion to just $4.02 million currently. Other yield aggregator projects offering lending and leveraged mining functions have also performed poorly, with TVL decreasing from several hundred million dollars at its peak to around $20 million now.

Perpetual Contract

Compared to various perpetual contract projects on Ethereum Layer 2, Solana’s performance in this field is not particularly outstanding.

Currently, a project with strong overall strength in this field adopts a trading model similar to order book trading, with a maximum leverage of 20 times. This project has set a new high for TVL, reaching 105 million USD, and the trading volume of SOL perpetual contracts in the past 24 hours was 43 million USD.

The TVL of another established project has dropped from a peak of $210 million to $10.47 million. It has previously suffered a hack and now also offers perpetual contract trading, but the 24-hour trading volume is only $520,000.

There is also an emerging competitor in this sector, using a model similar to GMX V1. Its funding cap is set at 23 million USD, and the trading volume of SOL perpetual contracts has reached 101 million USD in the past 24 hours, surpassing other projects.

Decentralized Stablecoin

Solana has never had a standout project in the decentralized stablecoin space.

A project that once completed financing with a valuation of nearly $2 billion had a peak TVL of only $42 million, which has now dropped to $11.19 million. It initially hedged SOL collateral using a delta-neutral approach, but has now also turned to using USDC for 1:1 minting.

The other two stablecoin projects that used over-collateralization for minting have also fallen into decline, with TVL dropping from several hundred million dollars at its peak to currently less than ten million dollars.

Summary

The development status of various DeFi projects on Solana varies. Liquidity staking projects have led the growth of Solana’s TVL, with their LST widely used and incentivized across other projects. Although the liquidity of DEX is far lower than that of Ethereum, trading volumes have at times surpassed Ethereum DEX, indicating extremely high capital efficiency, which may further attract funds. New projects in the decentralized lending space are performing well and are expected to receive airdrops. The perpetual contracts sector has seen growth, but yield aggregators and stablecoin sectors have performed mediocrely. Overall, the Solana ecosystem is experiencing a round of recovery, but the performance differences across different tracks are significant.