Solana’s on-chain trading ecosystem is proving to be incredibly lucrative, with high revenues being generated due to the network’s unique architecture and the opportunities it offers to traders. According to a report by David Duong and David Han from Coinbase, if Solana’s on-chain trading ecosystem is considered as a standalone financial sector, it ranks as the third most profitable category in the crypto world, following stablecoins and layer 1s.
The trading-linked activity on Solana consistently contributes to a large portion of Solana’s transaction fees, ranging from 75-90%, which is significantly higher than other networks like Ethereum, Base, and Arbitrum. Despite the growth and innovation seen in layer 2 solutions, they face scalability challenges and user fragmentation issues that differ from Solana’s approach. Solana’s fee dynamics and user activity patterns remain distinct and appealing to traders.
Coinbase recently introduced cbBTC, enabling the trading, lending, and borrowing of bitcoin on Solana, which is essential for the growth of decentralized finance (DeFi) within the ecosystem. The revenue generated by Solana-based protocols and trading bots is impressive, with platforms like Photon and pump.fun generating over $6 million in revenue in the last seven days, surpassing heavyweight DeFi protocols on Ethereum such as Maker, Lido, and Aave.
One of the key contributors to this revenue is memecoins, which are joke cryptocurrencies known for their high volatility. Pump.fun, a Solana-based protocol facilitating the creation of new tokens, has made Solana a prominent hub for memecoin trading activity. Additionally, Telegram trading bots like Photon, Bankbot, and Trojan, exclusive to Solana, have proven to be highly profitable, indicating that traders on Solana are less sensitive to execution fees due to the assets’ volatility and lower liquidity.
Solana’s fee spending peaks later in the day, aligning with U.S. West Coast hours, indicating a specific cohort of active users in that region. Builders on Solana are capitalizing on the network’s unique dynamics to tailor the on-chain ecosystem to users’ preferences. For instance, Zeta Markets, a decentralized exchange offering perpetual contracts, aims to provide users with the ability to trade memecoins and leverage without the need for multiple wallets, enhancing convenience and accessibility.
The convenience of trading on Solana DEXs has led to a deviation in volumes from centralized exchanges like Coinbase, showcasing the formation of a distinct trading ecosystem on Solana. This independence from CEX activity highlights the growing popularity and appeal of Solana’s on-chain trading environment.
In conclusion, Solana’s on-chain trading ecosystem presents vast opportunities for traders and developers to capitalize on the network’s unique features and dynamics. The growing revenue and distinct user activity patterns on Solana indicate a promising future for the network’s role in the crypto market. As Solana continues to innovate and attract traders, its position as a profitable trading ecosystem is likely to strengthen further.