Despite adverse market conditions negatively impacting layer-one blockchains, the Solana ecosystem has continued improving its network stability and growing its user base, stated Messari in its Q1 report on the matter. However, noticeable declines in key metrics demonstrate that the Ethereum challenger has faced difficulties maintaining high network activity and volume due to ongoing security concerns.
Noticeable slowdown
After the explosive growth of 2021, Solana experienced a decline in network usage and financial performance in the second quarter. The average number of daily transactions decreased by 17.6%, while revenue decreased by 44.4% due to degraded QoQ network performance.
However, the number of active users, who paid for at least one transaction per day, reached an all-time high of 450,000 in May, averaging around 320,000 during Q2. In addition, to address the recurring outage issues that destructed the network stability, Solana implemented the early stages of the Mainnet Beta v1.10 Series at the end of May, leading to a subsequent increase in activity.
“For perspective, the average daily TPS has fallen to around 700 during periods of degraded network performance. After the v1.10 rollout began, the TPS reached all-time highs above 3000 and averaged closer to 2300 per day.
In terms of the number of developers working in the ecosystem, Solana went on following a months-long downtrend with roughly 8,000 active devs in June, nearly 50% below the number recorded for November 2021 – when the whole crypto market soared in an optimistic atmosphere.
DeFi Protocols
Messari viewed Solana as a leading Layer 1 network that achieved a consistent amount of Total Value Locked (TVL), evenly distributed across various DeFi protocols.
In the case of the BNB chain, 50% of the TVL is in PancakeSwap; contrarily, no single Solana application obtained the status as “too big to fail,” with the high-profile protocol Serum accounting for 10% of the TVL at the end of Q2. A greater level of diversified TVL could overall decrease the ecosystem risks, added Messari.
Additionally, Solana’s TVL declined at the average rate (-68%) of the peer group, with part of it possibly coming from its exposure to TerraUSD and the discontinuation of Wormhole and Terra transfers. For context, DeFi as a whole was in shambles in Q2, with total TVL falling from $228 billion to $75 billion, representing a 67% drop in US dollars.
NFT Activity
Unlike the slowdown in DeFi volume, Solana-based NFT activity grew drastically, with renowned marketplaces such as Magic Eden and Serum-launched ecosystem grabbing massive attention in the quarter.
The number of new NFTs on the network grew to 7 million in the second quarter, representing a 46% growth quarter-on-quarter. Additionally, just behind Ethereum, Solana maintained its position as the second ranked network by secondary NFT sales volume.
Road Ahead
Looking forward, the crypto research firm expects the upcoming releases of Neon EVM on the mainnet, Solana Mobile Stack, and the advancement of Solana Pay to further expand ecosystem adoption. However, the concern regarding network reliability continues clouding users.
The notorious outages that are damaging blockchain fundamentals and reputation stem from Gulfstream, Solana’s alternative to the mempool for pending transactions. Gulfstream allowed bots to come up with an arbitrary number of transactions, forcing block producers to verify all transactions before creating a block.
Ultimately, block production continued to suffer in congestion due to the overwhelming number of junk transactions, causing the network to experience greater degraded performance throughout Q2.
As mentioned above, the introduction of the v1.10 series has stabilized the network, but relevant concerns persist in the community.
