Standard Chartered Warns Solana May Struggle After Memecoin Peak

HomeNews* Solana sees most activity from memecoin trading, which makes up the bulk of its application revenue.

• According to a Standard Chartered report, this reliance on memecoins could limit Solana’s future growth as trading volumes decline.
• The report notes that Solana has passed the peak of memecoin activity and may face slower momentum if it does not expand into new areas.
• Ethereum and its layer-2 networks now rival Solana on transaction costs, reducing Solana’s cost advantage after the Dencun upgrade.
• Standard Chartered expects Solana to underperform Ethereum for the next two to three years before it may catch up in real terms. Solana, a leading layer-1 blockchain, has seen most of its recent activity centered around memecoin trading, according to a Standard Chartered report released on May 27. The bank’s analysis states that Solana’s network is designed for high-speed and low-cost transactions, which has made it popular for creating and trading memecoins.

• Advertisement - The report highlighted that memecoin trading now accounts for the majority of Solana’s application revenue, calling it the network’s main area of growth. “So far, this has been mostly in memecoin trading, which accounts for the majority of activity on Solana (as measured by ‘GDP’, which is application revenue),” Standard Chartered wrote.

The bank described the memecoin craze as a stress test for Solana’s scalability. However, it warned that the volatility and speculative activity of memecoin trading could bring drawbacks. As trading volumes for these digital assets, which are often based on internet jokes or trends, begin to fall, Standard Chartered cautioned that Solana may lose momentum. The report stated, “Declining usage and trading ‘cheap’ are not a good mix.” The bank suggested that the blockchain could find new applications in sectors that need fast and low-cost processing, like financial apps and consumer social media, though scaling these areas may take years.

Since the Dencun upgrade in March 2024, Ethereum’s layer-2 blockchain solutions have matched Solana on average transaction costs. Standard Chartered credited Ethereum’s modular design, which separates tasks like data storage and transaction execution, for allowing it to scale while remaining decentralized. “The modular approach allows Ethereum to scale transactions at a low cost (post-Dencun upgrade) while maintaining the security benefits of a highly decentralised mainnet blockchain,” the report stated.

The bank expects Solana to fall behind Ethereum over the next two to three years but suggests it could eventually catch up in real economic terms. The report also notes that transitioning from memecoin reliance to broader use cases could take significant time.

Additional coverage of these developments can be found on Cointelegraph.

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