Solana Ecosystem DeFi Panorama: Liquid Staking Leads the Rise of New Projects

The Solana ecosystem has shown strong performance recently, driving the SOL price close to $100 on December 22. The trading volume on Solana's DEX has surpassed Ethereum at one point, sparking discussions in the market. Meanwhile, Ethereum is facing many doubts, especially as the DeFi projects that led the last bull run have lost followers. So, how is the development of DeFi projects in the Solana ecosystem currently? Are the established projects truly reviving? Let's analyze together.

Leading the liquid staking project

Liquid staking is an important growth point in the Solana ecosystem. Staking locks up funds which is beneficial for the rise in SOL prices, while various liquid staking tokens (LST) can be applied in other DeFi projects. New project airdrops and incentive measures continue to attract capital inflow.

Marinade Finance and Jito are the two largest liquid 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 Marinade's dollar TVL is only 57% of its historical high, the staked SOL amount (1115 million SOL) has reached a new high. In addition to providing staking services, Jito also offers MEV infrastructure. Thanks to a successful airdrop campaign, Jito has garnered widespread support. Recently, Jito started incentivizing the use of JitoSOL in DeFi projects, driving the staked amount to grow rapidly to 6.42 million SOL.

DEX competition landscape

In the field of DEX(, Raydium and Orca remain major players, but their positions have reversed. In terms of liquidity, Raydium has dropped from its historical high of $2.21 billion to the current $113 million, only 5.1% of its peak. Orca has decreased from a high of $1.41 billion to $184 million, which is 13% of its peak.

Recently, the volume of Solana DEX has surpassed Ethereum, drawing attention. Data shows that, whether in 24-hour or 7-day trading volume, Solana is consistently higher than Ethereum. Although some believe this may stem from the repeated calculation of trading aggregators, looking solely at the data for each DEX, the main DEX on Solana has a total 24-hour trading volume of $1.55 billion, which is indeed higher than the $1.18 billion on Ethereum's DEX.

It is worth noting that the volume/TVL ratio of DEX on Solana is significantly higher than that of Ethereum, reflecting greater capital efficiency. This means that with the same principal, the returns on providing liquidity on Solana could far exceed those on Ethereum, potentially attracting more capital inflow.

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) Decentralization lending new and old replacement

The decentralized lending sector has undergone significant changes. Among the once leading projects, only Solend remains in a prominent position, but it has been surpassed by emerging projects. Solend's TVL has dropped from a peak of $910 million to $187 million, which is 20.5% of its high. Other established lending protocols have performed even worse, with TVLs of Port Finance, Larix, and Apricot Finance all experiencing significant declines.

Emerging projects marginfi and Kamino have performed impressively, with TVL reaching $348 million and $204 million respectively, and growing rapidly. These two projects have not yet issued governance tokens but have both launched point systems to incentivize user participation. With various airdrop expectations and LST support, these projects continue to attract capital inflow.

The yield aggregator is hard to escape decline.

The yield aggregator track has almost been disproven by the market. Due to the already low transaction fees on Solana, the advantage of automatically reinvesting through aggregators to save on fees is no longer obvious. Once a shining star, Sunny's TVL has plummeted from a peak of $3.4 billion to just $4.02 million. Other aggregator projects providing lending and leveraged mining functions, such as Francium and Tulip, have also performed poorly due to declining mining yields.

The perpetual contract market still has potential.

Compared to the perpetual contract projects on Ethereum Layer 2, Solana has performed mediocre in this field. Currently, Drift is performing well, adopting an order book trading model similar to dYdX, with a TVL reaching a new high of $105 million. Mango, as an established project, saw its TVL drop from a peak of $210 million to $10.47 million, but has added a perpetual contract trading feature. Jupiter's JLP adopts a model similar to GMX V1, although the capital limit is only $23 million, it has achieved a 24-hour trading volume of $101 million, surpassing Drift.

Decentralization stablecoins are lackluster

Solana has consistently underperformed in the field of decentralized stablecoins. The UXD Protocol, once valued at nearly $2 billion, has a maximum TVL of only $42 million, and currently only has $11.19 million left. Other stablecoin projects that use over-collateralization models, such as Parrot Protocol and Hubble, have also seen a significant decline in their TVL.

Overall, the DeFi projects in the Solana ecosystem show a trend of new and old alternation. Liquid staking and DEX sectors are performing well, emerging lending platforms are rising rapidly, while yield aggregators and stablecoin projects remain sluggish. Although the perpetual contract market has not developed as vigorously as in the Ethereum ecosystem, it still shows some potential. The future development of the Solana DeFi ecosystem is worth continued follow.

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