Introduction
The Solana network has emerged as a formidable player in the decentralized finance (DeFi) landscape, consistently outperforming its two primary competitors: Ethereum and the widely-used Base layer-2 scaling network. According to DefiLlama, daily trading volumes across Solana-based DeFi platforms approached $3.8 billion on January 6, surpassing the combined total of $1.7 billion for Ethereum and $1.2 billion for Base, which powers Layer-2 scaling.
Trading Volume Trends
Hourly Trading Volumes
The growing trading volumes underscore Solana’s increasing dominance in DeFi, positioning it as a viable competitor to Ethereum. A notable point is the significant outperformance of Solana’s native token, SOL, compared to Ether (ETH). From 2023 data on TradingView, SOL has demonstrated an impressive eightfold increase since its peak earlier that year.
Total Value Locked (TVL)
In addition to trading volume, Solana’s total value locked (TVL) is growing at a remarkable pace. According to DefiLlama, Solana’s TVL has surged fivefold in 2024, expanding from approximately $1.4 billion to over $9.5 billion. This growth highlights the network’s ability to attract liquidity and support DeFi protocols.
Retail Trading Growth
Increasing Accessibility
The surge in trading volumes is partly attributed to growing accessibility for retail traders. According to Grayscale Research, retail traders are increasingly entering the crypto market through platforms like Solana, driven by heightened speculation around Solana-based memecoins and AI agent tokens. This trend is further fuelled by the rising adoption of Layer-2 protocols.
Memecoin Phenomenon
Pump.fun as a Driver
The popularity of memecoin platforms has been a significant driver of trading volumes on Solana, particularly for DEX platforms like Raydium. Pump.fun, one of the most prominent memecoins, has achieved remarkable success, with its market capitalization reaching approximately $130 billion as per CoinGecko.
Monthly Trading Volume
In November, Pump.fun ranked eighth among blockchain protocols in terms of earning potential, trailing giants such as Uniswap and Circle. The platform generated nearly $250 million in trading volume during this period, showcasing its growing influence in the DeFi space.
Raydium’s Dominance
Market Leadership
Raydium, Solana’s leading decentralized exchange (DEX), has solidified its position as a market leader, experiencing an 11-fold increase in 24-hour trading volumes. In January, Raydium’s trading volume stood at $57 million, while in December, it surged to over $609 million.
Comparison with Uniswap
Raydium’s dominance is further highlighted by its comparison with Uniswap, which saw a 33% drop in trading volumes during the same period. This stark contrast underscores Raydium’s growing appeal and competitive edge in the DeFi landscape.
Conclusion
Solana’s meteoric rise in the DeFi space is driven by its superior performance in both trading volume and TVL metrics. The network’s ability to attract retail traders through platforms like Raydium, coupled with the growing influence of memecoin protocols, positions it as a leader in the competitive DeFi ecosystem.