Solana Q1 Ecosystem Overview: Data Fully Declines into "Cooling," 5 Key Pillars May Determine the Success or Failure of the Next Expansion

By Michael Nadeau, The DeFi Report

Compiled by Glendon, Techub News

Over the past year, Solana has remained the go-to platform for speculation in the cryptocurrency space. This positioning provided its network with an invaluable “stress test.” As a result, user activity, fees, developer count, and investor attention have all surged explosively.

However, it also makes the network highly vulnerable to the effects of “cooling down” once risk appetite fades. This “cooling” effect arrived in Q1. Solana is now in reset mode. This article will share a comprehensive, data-driven update on Solana’s Q1 network performance, as well as the directions we will focus on next.

Operational Performance

Actual Economic Value

Data source: DeFi Report

REV = base fees, priority fees, MEV (Jito tips), and voting fees used to access L1 block space. MEV (Jito tips) are distributed to SOL holders through staking. The remaining fees go to validators, with 50% of the base fees being burned.

Total fees on the Solana network in Q1 were $89.9 million—its lowest level since Q3 2023. Down 1.4% quarter-over-quarter, and down 68% year-over-year.

For reference, Ethereum L1 fees in Q1 were $82 million.

Detailed analysis is as follows:

Base fees: down 8.7% in Q1, but up 9.4% year-over-year;

Jito tips (MEV): down 19.7% in Q1, down 72.3% year-over-year;

Priority fees: up 23% in Q1, but down 68.8% year-over-year;

Voting fees: down 44.5% in Q1, down 16.4% year-over-year.

Key takeaways

In the last cycle, Solana was a “hotbed of speculation” (tied with Hyperliquid). The network’s strongest applications (Pump, Axiom, Raydium, Jupiter) all target retail traders, resulting in highly cyclical on-chain revenue that is highly dependent on speculative demand.

This chart also helps visualize the period when speculation reached its most extreme levels in the last cycle: from late 2024 to early 2025. Since that time, Solana’s social attention and on-chain activity have been trending downward. It is difficult to see a reversal of this trend in the short term.

On the positive side, Pump Fun performed relatively steadily during the bear market, and we are starting to see emerging fintech companies build stablecoin applications based on Solana (details to follow later in the report). Ultimately, we believe Solana needs to compete with Hyperliquid for perpetual contract traders and lead the tokenization of on-chain equity (and other real-world assets) to mitigate the extreme cyclical volatility among its on-chain user base.

Actual on-chain yields

Actual on-chain yield = MEV paid to validators and passed to SOL stakers (excluding operator payments).

The average actual on-chain yield in Q1 (annualized) was 0.17%, up 33% quarter-over-quarter, but down 67% year-over-year. The Q2 growth can be attributed to extreme DEX volatility from late January to early February.

A 67% year-over-year decline suggests that, since the frenzy we saw in Q1 last year (when multiple G20 leaders launched meme coins on Solana), much of the ecosystem has already exited the speculative bubble.

Total on-chain return

Total on-chain return = MEV + protocol issuance passed to SOL stakers (excluding operator payments).

The total on-chain return in Q1 (average annualized return) was 6.7%, of which 89% came from newly issued SOL.

In this quarter, total on-chain return increased by 0.25%, but fell 66% year-over-year.

Network fundamentals

Monthly GDP

GDP = total fees generated by top on-chain applications (excluding on-chain fees). Solana’s top applications created $451 million in network GDP in Q1 (5x L1 REV), down 7% from Q4 2025, and down 54% year-over-year.

Top 10 applications:

Pump Fun (social/retail trading): $103 million (up 3% in Q1, down 13% year-over-year)

Circle (stablecoins): $63 million (down 28% in Q1, up 105% year-over-year)

Axiom (trading application): $46 million (down 24% in Q1, up 1829% year-over-year)

Jupiter (DEX aggregator and trading application): $45 million (down 3% in Q1, down 45% year-over-year)

GMX (perpetual contract DEX): $32 million (a significant jump from $160,000 in Q4)

Phantom (wallet): $29 million (down 12% in Q1, down 46% year-over-year)

Raydium (DEX and launchpad infrastructure): $24.6 million (down 26% in Q1, down 83% year-over-year)

Tether (stablecoin): $20.5 million (up 24% in Q1, up 85% year-over-year)

Jito (trade execution): $19.9 million (down 19% in Q1, down 72% year-over-year)

Orca (public DEX): $14.3 million (down 34% in Q1, down 55% year-over-year)

For reference, applications on Ethereum L1 generated $1.9 billion in GDP in Q1 (4.2x Solana).

Key takeaways

Pump Fun’s revenue in Q1 exceeded that of Solana L1. However, SOL’s current valuation is 77 times Pump Fun’s (43 times on a fully diluted basis). We believe there is a misalignment here. This is why PUMP is currently on our watchlist.

Active addresses

Unique active address = independent wallet address that initiates at least one transaction per day. In Q1, the Solana network averaged 2.4 million daily active addresses, up 7.5% quarter-over-quarter, but down 4.8% year-over-year.

SOL active staking

Active staked amount grew 1.2% in Q1 and 10.8% year-over-year. As of March 31, 2026, 426.4 million SOL are staked on the network, accounting for 74.4% of circulating supply and 68% of total supply.

Key takeaways

Unlike Ethereum, an increase in SOL staking does not increase the amount of new issuance paid to validators. Instead, according to a fixed, anti-inflation schedule, issuance decreases by 15% each year until it reaches 1.5% per year.

Cost to generate $1 in revenue (REV)

In Q1, the average cost to generate $1 of actual economic value was $8.10, down 31% quarter-over-quarter, but up 93% year-over-year.

Why does this matter?

An increasing cost to generate $1 of actual economic value indicates that more issuance (network inflation) is needed to secure the network relative to the actual value generated this quarter. This suggests that the network’s costs/operating expenses are declining faster than revenue.

For reference, Ethereum’s cost to produce $1 REV in Q1 was $13.79.

Stablecoins

Stablecoin supply

Solana now has a total of $15.9 billion in stablecoins on the network. Q1 was down 2.7%, but up 18% year-over-year. This accounts for 4.5% of all stablecoin supply in crypto, placing Solana behind Ethereum, Tron, and BNB.

Major stablecoin issuers on the Solana platform:

Circle/USDC: $9 billion (down 16% in Q1, down 11% year-over-year).

Tether/USDT: $3.5 billion (up 27% in Q1, up 46% year-over-year).

Paypal/USDPY: $720 million (down 23% in Q1, but up 440% year-over-year).

Paxos/USDG: $940 million (up 8% in Q1, up 1021% year-over-year).

World Liberty Finance/USD1: $884 million (up 670% in Q1).

Solstice/USX: $355 million (up 16% in Q1).

We expect Solana to see more stablecoin innovation in the following areas:

LatAm fintech companies that serve remittances, payroll, and card/exchange fees. A few promising examples include Rain, Morse, and Takenos.

US-licensed fintech companies that provide new payroll solutions using stablecoins. We think this may emerge after the passage of the Clarity Act, and we still believe the eventual winning stablecoin issuers will offer a range of services around the token.

Stablecoin circulation velocity

Effective stablecoin circulation velocity measures the daily turnover rate of stablecoin supply on-chain per $1. This metric filters out distortions such as wash trading and circular trading, resulting in a true circulation rate, measured as daily net dollar transfers / circulating supply. An increase indicates more economic activity on the Solana network.

In Q1, the average stablecoin circulation velocity was 0.07, down 69% quarter-over-quarter, but up 29% year-over-year.

The 0.07 reading in Q1 indicates that 7% of the stablecoin supply “turns over” every day. For reference, Ethereum L1 turns over its stablecoin supply at a daily rate of 2% in Q1.

As emerging fintech companies build on Solana and new regulations are integrated, we expect stablecoin circulation velocity to grow steadily over the next few years, while reducing reliance on cyclical/“risk appetite”-driven trading and speculation.

Token economics

Net dilution rate

Net dilution rate = daily protocol issuance minus burned SOL / circulating supply (annualized). A positive net dilution rate dilutes (un-staked) SOL holders.

SOL’s net dilution rate in Q1 (annualized) was 4.38%, down 5.3% from Q1, and down 7.7% year-over-year. Key drivers:

SOL issuance: 6.26 million in Q1 (below 6.45 million in Q4)

SOL burned: 677,000 in Q1 (above 637,000 in Q4)

Net result: 6.19 million new SOL issued in Q1 (annualized inflation rate of 4.38%)

Please note that, unlike Ethereum, an increase in staked assets in Solana does not increase the amount of SOL that Solana validators receive. This means SOL issuance on Solana is always decreasing (pre-programmed to be so, with an annual deflation rate of 15%).

What impact does it have on validators/stakers?

When more SOL is staked on the network, if on-chain fees cannot make up the difference, staking yields will decline.

DeFi

DEX trading volume

This sector includes 11 public DEXs and 9 private DEXs. The story within Solana DeFi is still private DEX growth (which now dominates).

The average (total) daily DEX trading volume in Q1 was $3.2 billion, down 32% quarter-over-quarter and down 4% year-over-year. For reference, Ethereum L1’s average daily DEX trading volume in Q1 was $2 billion; including L2 DEXs, it was $3.6 billion.

Private DEXs account for 60% of total trading volume (19.0 million/day), but declined 14% in Q1.

In Q1, average daily trading volume of public DEXs was $1.3 billion, down 47% from Q4 and down 37% year-over-year.

Leading DEXs on Solana by trading volume:

HumidiFi private DEX: $613 million/day (down 55% in Q1).

BisonFi private DEX: $574 million/day (up 614% in Q1).

Meteora public DEX: $447 million/day (down 36% in Q1).

Raydium public DEX: $298 million/day (down 69% in Q1, down 60% year-over-year).

Orca public DEX: $278 million/day (down 41% in Q1, down 21% year-over-year).

DeFi circulation velocity

DeFi circulation velocity measures the turnover rate of each dollar within DeFi protocols. When this value is greater than 1, it means the network’s daily trading volume exceeds the total value locked (TVL) in DeFi protocols. In Q1, DeFi circulation velocity averaged 0.43, meaning the network turned over its TVL at an average rate of 43% per day. This number fell 7% quarter-over-quarter and 23% year-over-year.

Key takeaways

Last week, we pointed out that the network dilution rate is the most important metric for Ethereum. For SOL, we believe DeFi circulation velocity is the most important. Why?

Solana’s core philosophy is “Fast DeFi.” Speed and turnover rate are major drivers of network fees. This is also why Solana’s realized yield has stayed higher than Ethereum’s throughout 2024/2025. We believe Solana’s speed will ultimately make it a magnet for capital in environments with higher risk appetite. This makes SOL an asset with extremely high responsiveness and a high beta.

New transaction tokens

New transaction tokens = the number of tokens created on Solana launchpads.

In Q1, a total of 3 million tokens were created on Solana, up 42% from the previous quarter and up 21% year-over-year. Among them, Pump Fun continues to lead the market, adding 2.5 million tokens in Q1 (85% market share). Pump Fun’s performance during the bear market has been impressive, and it remains a major highlight in the Solana ecosystem (alongside private DEX growth). Again, to emphasize: the revenue created by this application in Q1 exceeded that of Solana L1.

Fair value key performance indicators

Conclusion

In the last cycle, Solana was a “paradise for speculators,” and the number of new crypto users it attracted exceeded that of any other blockchain. This enabled the network to establish itself as a “building platform” by generating some of the fastest-growing, most profitable crypto applications (Pump, Axiom, Jupiter, etc.) and stress-testing its network infrastructure (and succeeding).

Today, although developers may not be as “overwhelmed” as in 2022, the network is undoubtedly going through a new reset. Looking ahead, we see five key pillars that could determine Solana’s success in its next expansion:

Consumer/retail trading application scenarios. For years, crypto-native venture capital firms have funded on-chain “gaming” application scenarios. But in reality, there is no true “gaming” in crypto—it refers to retail trading. And it could be argued that this is the most valuable use case in crypto. As the report notes, even in the current bear market, Pump Fun has been a major highlight for Solana. The team is now focused on improving the mobile experience, making it a mainstream social/trading application (rather than a crypto-native desktop terminal).

Perpetual contract markets. Solana needs to compete with Hyperliquid in this area. Notably, Solana’s most popular perpetual contract DEX (Drift) was attacked on April 1, and nearly half of its TVL was stolen by hackers. This is a major blow to the ecosystem, which already had lost ground to Hyperliquid in the competition. This could now create convenient opportunities for competitors or new builders to launch perpetual contract projects on Solana—something worth closely watching.

Introducing TradFi. To become the “Nasdaq on the blockchain,” Solana needs Nasdaq-like assets. This means it needs to attract asset issuers that want to tokenize their assets (stocks, bonds, etc.). Aside from regulation, finding an incentive mechanism that works for issuers is likely the biggest obstacle. This will take some time.

Become a leading public blockchain that serves enterprises building fintech products with stablecoins, especially in emerging markets such as Latin America.

Keep winning the “developer war.” Compared with peers in crypto, the Solana Foundation’s operations resemble a well-managed technology company. As a result, Solana often has a stronger pool of developers, enabled by a global “hacker house” program to find and onboard developers into Solana. Continued organization and investment in this area are crucial for the network’s ongoing success. For reference, Solana’s full-time developers are currently down 32%, while Ethereum’s are down 29%.