Solana Decentralized Finance Ecosystem Recovery Analysis: How Do Various Projects Perform?

Recently, the Solana ecosystem has shown strong performance driven by emerging fields, with the price of SOL approaching 100 dollars at one point. The trading volume on decentralized exchanges on Solana briefly surpassed that of Ethereum, attracting widespread attention in the market. Meanwhile, the Ethereum ecosystem faces some doubts, especially as DeFi projects that led the last bull market are no longer favored. So, how are the DeFi projects on Solana performing currently? Are the established projects truly reviving?

Leading Liquid Staking Projects

Liquid staking is an important growth project in the Solana ecosystem. Staking itself locks up funds, which is beneficial for the rise in SOL prices, while various liquid staking tokens (LST) can be applied in other Decentralized Finance projects. The attractiveness of airdrops and incentive measures from new projects also drives the continuous growth of funds participating in liquid staking.

Marinade Finance and Jito are the two largest liquidity staking projects on Solana. As of December 22, their total locked value (TVL) reached $1.05 billion and $626 million respectively, ranking them as the top two in Solana's ecosystem TVL. Although the funds staked in Marinade account for only 57% of their peak in dollar terms, the number of staked SOL (11.15 million SOL) has reached a historical high.

In addition to providing staking services, Jito has developed MEV infrastructure. Thanks to the unexpectedly generous airdrop, Jito has established a solid user base. Recently, Jito has begun to incentivize the use of its liquid-staked token JitoSOL in Decentralized Finance projects, leading to a rapid increase in staking amounts, which currently stands at 6.42 million SOL.

Decentralized Exchange: Status Reversal of Established Projects

In the field of decentralized exchanges (DEX), Raydium and Orca remain the two most important projects, with no new excellent competitors emerging yet. Both projects have developed centralized liquidity functions based on their original foundations, but their market positions have changed.

For DEX, liquidity and trading volume are the most critical indicators. Raydium's liquidity has dropped from a peak of $2.21 billion to the current $113 million, only 5.1% of its peak. Orca's liquidity has decreased from a high of $1.41 billion to $184 million, which is 13% of its peak.

Recently, the trading volume of Solana DEX has surpassed that of Ethereum, attracting market attention. According to the data, whether for 24 hours or 7 days, Solana's trading volume is higher than that of Ethereum. Although some question whether this might be due to the repeated calculation of trading aggregator volumes, it was found that when calculating the trading volumes of each DEX separately, the total 24-hour trading volume of the main DEXs on Solana is indeed $1.55 billion, which exceeds the $1.18 billion of the main DEXs on Ethereum.

Another noteworthy metric is the trading volume/TVL ratio of DEXs, which reflects the efficiency of capital utilization. This ratio for Raydium and Orca is 4.81 and 2.87 respectively, significantly higher than the 0.26, 0.09, and 0.042 of major DEXs on Ethereum. This suggests that with the same principal, the returns from providing liquidity on Solana far exceed those on Ethereum, potentially attracting more capital into the Solana ecosystem.

Decentralized Lending: New and Old Changes

The decentralized lending space has undergone significant changes, with only Solend remaining among the top lending protocols that once had large amounts of funds, but it has also been surpassed by emerging projects. TVL is crucial for lending protocols as it represents the remaining amount of funds within the protocol.

Solend's TVL has dropped from a peak of $910 million to its current $187 million, which is 20.5% of its high point. Other established lending protocols have performed even worse, with TVLs for Port Finance, Larix, and Apricot Finance all experiencing declines of over 90%.

Emerging competitors marginfi and Kamino have performed remarkably, with TVL reaching $348 million and $204 million respectively, and they have seen rapid growth recently. Both projects have not yet issued governance tokens, but have launched point systems where users can earn points through deposits and loans. Driven by airdrops from projects like Pyth and Jito, funds are continuously flowing in, and various LSTs are also being supported, with liquid staking projects potentially providing additional incentives for these funds.

Yield Aggregators: Nearly Extinct

The yield aggregator track has almost been denied by the market. Since the transaction fees on Solana are already low, the advantages of investing through yield aggregators for automatic reinvestment and avoiding personal operation fees are no longer obvious.

The once most famous Sunny project saw its TVL drop from a peak of $3.4 billion to just $4.02 million. Other yield aggregators providing lending and leveraged mining functions, such as Francium and Tulip, also performed poorly due to declining mining yields, with their TVLs dropping to $2.089 million and $2.141 million, respectively.

Perpetual Contracts: Potential Waiting to Unfold

Compared to various perpetual contract projects on Ethereum Layer 2, Solana's performance in this area is not outstanding.

Currently, Drift has strong overall strength, using an order book trading model similar to dYdX, with a maximum leverage of 20 times. Drift's TVL has reached a new high of $105 million, and the trading volume of SOL-PERP in the past 24 hours was $43 million.

The TVL of the established project Mango has dropped from a peak of $210 million to $10.47 million. Mango has now added perpetual contract trading functionality, but the 24-hour trading volume for SOL-PERP is only $520,000.

Jupiter's JLP adopts a model similar to GMX V1, with a funding cap set at $23 million. The trading volume of SOL-PERP in the past 24 hours reached $101 million, surpassing Drift.

Decentralized Stablecoins: Lackluster

Solana has always lacked outstanding projects in the decentralized stablecoin sector.

The UXD Protocol once completed its IDO with a valuation of nearly $2 billion, but its TVL peaked at only $42 million and has now dropped to $11.19 million. The project has shifted from a Delta neutral hedging strategy to using USDC for 1:1 minting.

Other stablecoin projects that use over-collateralization, such as Parrot Protocol and Hubble, have also fallen into decline, with their TVLs decreasing to $8.61 million and $8.06 million, respectively.

Conclusion

The Solana DeFi ecosystem is experiencing a new wave of old and new changes. Liquidity staking projects are leading the growth of TVL, DEX trading volumes have significantly increased, and emerging lending platforms are gaining momentum. However, yield aggregators and stablecoin projects have shown mediocre performance. Although there has been development in the perpetual contract space, there is still a gap compared to the Ethereum ecosystem. Overall, the Solana DeFi ecosystem is undergoing a reconstruction and revival, and the performance of emerging projects is worth paying attention to.