Launched in 2020, the Solana blockchain was designed to provide Web3 developers an alternative to Ethereum, which became notorious for its high fees and scaling issues as it attracted more users.
By immediately implementing a much lighter proof-of-stake consensus model to validate transactions, Solana became a hub to quickly build and deploy decentralized apps (dApps) within a low-cost and scalable ecosystem.
From selling $314 million of its native SOL token to a group of investors led by Andreessen Horowitz in 2021 to suffering a high-profile hack of associated wallets in 2022, Solana has certainly had its ups and downs since launching.
Benefiting and suffering from the recent bull and bear market cycles, the ecosystem has endured the volatile nature of crypto, solidified itself as one of the most prominent ecosystems for users and developers alike, and become a leading cryptocurrency—currently 5th in market cap at almost $70 billion.
But this year, in particular, the spotlight has been focused on the Solana network, and for good reasons. The ecosystem has grown exponentially, recording a 151 percent rise in network activity from the beginning of the year through July.
This is reflected in the price of SOL which dipped to under $20 in September before ballooning to over $200 in March. As of August 15, the token sits at around $143.
From a different point of view, Solana’s price over the last 12 months has climbed more than 50 percent versus the dollar, outperforming both Ethereum and Bitcoin.
However, some are skeptical that this growth is sustainable.
Industry analysts credit Solana’s unprecedented growth to its leading role in the surprise memecoin revival. Trendy memecoins like dogwifhat (WIF) and Bonk (BONK) have generated a lot of buzz, but investors worry that these types of projects rely on social media hype and speculation rather than providing any tangible value to Solana’s ecosystem.
News that the memecoin launchpad pump.fun recorded $5.3 million in revenue within a 24-hour window this month has also fuelled investor hesitations in Solana. The platform boasts about its transparent way of countering common insider trading that plagues memecoin token launches, but some worry that it's killing the market by oversaturating the space with worthless coins that don’t offer anything other than speculation.
While the long-term stability of Solana-based memecoins is uncertain, the growth witnessed over the last year is at least partially a result of the ecosystem’s DeFi (decentralized finance) community expanding and playing a larger role within the broader crypto space.
As such, Solana leapfrogged Binance’s BNB Chain this year to become the second-largest blockchain by total value locked (TVL). Earlier this month, Solana’s DEX (decentralized exchange) aggregate turnover hit $9.4 billion over 7 days, outperforming all other blockchains’ DEX volumes except for Ethereum.
Several innovative DEXs are attracting a new class of investors and traders to Solana with flexible liquidity pools, high yields, and user-friendly interfaces that can cater to less tech-savvy users.
Standing out among the crowd is stabble, a protocol aiming to modernize liquidity pools by introducing protocol-managed and arbitrage pools.
As the first Solana-based protocol established to minimize financial loss by reducing operation costs, stabble introduces mechanisms to promote capital efficiency and risk management for the network's infrastructure.
After a 14-month of testing, stabble recently launched its DEX to give Solana users a diverse toolkit to easily trade in, invest in, and establish customized liquidity pools. Another major development that will boost the entire network is the upcoming Firedancer upgrade, which will improve Solana’s transaction processing capabilities.
This could allow the network to handle millions of transactions a second, setting a new gold standard for blockchain scalability. We can’t expect Solana to dethrone Ethereum anytime soon or surpass its all-time token price high of $259 from November 2021.
However, the recent progress it’s made on multiple fronts solidifies itself in the eyes of both crypto advocates and institutional players. Investor trust should continue to grow as Brazil is set to approve the first-ever Solana ETF ahead of similar moves in the U.S. and U.K.
While ETFs likely won’t be a game changer, the steady maturation across the Solana network and steady interest from institutional investors demonstrates its ability to serve as a key center for DeFi innovation, thus proving its potential for long-term sustainability.