According to a recent report by Nansen, a well-known blockchain analytics firm, Solana has experienced a significant uptick in its Total Value Locked (TVL), which has nearly doubled to 30.95M SOL this year. This growth is noteworthy, especially considering the network’s past challenges, such as network halts and its complex relationship with trading platforms like FTX and Alameda Research.
Technological advancements have been pivotal for Solana. The network has rolled out features like state compression, which has remarkably reduced the cost of NFT minting by over 2000 times. Moreover, the network is in the process of implementing an upgrade known as Firedancer. This upgrade aims to optimize the validator client and is being closely watched for its potential to shift market dynamics, particularly in relation to Ethereum’s Virtual Machine (EVM).
In the realm of liquid staking, Marinade Finance, Lido, and Jito have emerged as frontrunners. However, the Nansen report indicated that only 3-4% of SOL is currently staked in these liquid staking protocols, suggesting a significant opportunity for growth in this sector. The report also highlighted that Solana’s staking yield is currently double that of Ethereum, indicating a competitive edge in attracting liquidity.
On the institutional side, the report highlighted that Visa has integrated Solana into its settlement layer for USDC transactions. Additionally, a new payment system is in development through a partnership with Shopify. While these partnerships indicate Solana’s increasing institutional appeal, the long-term ramifications remain uncertain, the report added.
Consumer-facing applications are also recognizing Solana’s advantages. The blockchain offers a fully-fledged tech stack optimized for retail adoption, including cNFTs suited for large-scale NFT mints and local fee markets designed to eliminate network congestion.
However, the network faces several challenges. The Nansen report identified potential risks, including the uncertain status of SOL holdings by FTX and Alameda Research. Such uncertainty could introduce volatility into the SOL market. Furthermore, despite maintaining a 100% uptime this year, any future network interruptions could tarnish Solana’s reputation.
Furthermore, the report added that the Nakamoto Coefficient for Solana has remained stable at around 30-31% over the past year. There are ongoing efforts to diversify validator client implementations to enhance network resilience, but the effectiveness of these initiatives is yet to be determined.
The report also touched on Solana’s DeFi velocity, a measure of chain activity and adoption. Solana has reported a DeFi velocity ratio of 0.71 for volume per dollar of TVL in the last seven days, outperforming peers like Arbitrum, Binance, and Ethereum.
