What’s been happening?

How about a million NFTs minted for $110?! Solana is set for a HUGE update.

Let’s dive in…

TLDR

• Solana TVL has performed particularly well in March.
• DEX volumes are rising, but at a slower pace than other chains.
• Solana announced a chain update that will make transactions cheaper and reduce memory requirements.
• Injective Protocol, a Cosmos-based chain, integrates Solana assets, linking the two ecosystems.

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your responsibility and yours only. 

Solana overview

Solana DeFi has bounced since the start of the year. It’s now up about 120%. However, this should be put in perspective…

As you can see, Solana DeFi is still severely down. The significant drop in November 2022 coincided with the FTX/Alameda collapse. Sam Bankman-Fried and his crew had their fingers in the whole Solana pie, which is undoubtedly one of the key reasons the ecosystem is still reeling. Still, Solana holders, supporters, and developers remain behind the project.

Daily transactions remain constant, and there is a slight uptick in the number.

Now, let’s dive into the news.

Key developments

• Dialect, a mobile messaging tool, utilises the new Solana compressed NFT functionality (see below). One possible use case is to tokenise emojis and chat stickers. This would further the cause to provide unique online identities.
• The issues causing Solana downtime have been resolved. In a recent report, Messari states that the issues causing Solana outages have been mostly fixed - even though Solana went down again in February. The jury is still out on whether Solana is fundamentally flawed, but each time the chain goes down, the devs come up with a fix. A different issue causes each outage, so the silver lining is that each specific issue is unlikely to happen again.

Hot narratives

Solana compression

 

This week Solana unveiled a process to reduce the size of the blockchain. The Solana blockchain is in the hundreds of TBs, which is a huge issue for validators and would-be validators. The longer the chain exists, the bigger the storage requirements. Solana’s new compression algorithm will save lots of storage space.

The upgrade will also cut transaction costs significantly. Solana’s tx cost is already one of the lowest in the space - that’s one of the things that made Solana so attractive to begin with. The savings are in the title: 1 million NFTs minted for $110. Solana NFT mints have caused chaos over the last couple of years - sometimes bringing the entire chain to a halt. This shouldn’t be the case in the future.

Injective be injecting

Injective, a Layer-1 protocol, has integrated Solana assets within its ecosystem. This is a key development, as Injective acts as a portal to the Cosmos ecosystem through Interblockchain Communication Protocol (IBC), Cosmos’ cross-chain comms infrastructure. Solana assets are now tradeable on the Cosmos ecosystem, likely boosting both the Solana and Cosmos DeFi economies.

DEX volumes rising

In line with DEXes across most ecosystems, Solana DEX volumes increased in March. This is good to see, as it shows that there is still life in the Solana DeFi space, albeit at much smaller volumes.

Orca takes the cake for the largest volumes - as much as the next 4 combined. With DeFi trending up, it’s encouraging to see Solana following. Still, volume growth has been lower than on other chains. This is likely due to a loss of trust after the FTX drama. Users have been hesitant to return, and the reputation damage will take some time to recover.

Analysis

SOL, 1W

SOL has been steadily dropping since January, forming new lows in the process. It is stuck inside the $22 - $19 region, bouncing between levels.

Although we can argue that SOL is a good asset to trade, given how it is constantly testing both sides of this region, we can't deny that there's little to no demand here.

For that reason, you might want to stay away from SOL for the time being. In the meantime, a weekly closure above $22 or under $19 could offer short-term trading opportunities.

Other news

• SharkyFi, a P2P NFT lending protocol, has over 32,452 active loans.
• Solana Pay could take over Tron user base after Justin Sun implicated by SEC.
• Wormhole Bridge has facilitated more asset inflows to Solana than outflows.

Cryptonary’s take

Although still reeling from last year’s FTX collapse, Solana developers continue to develop and users continue to use. Key metrics to watch are DEX volumes, transaction counts, and CEX volumes. For Solana to make a comeback, it’s imperative to attract users. Confidence must be restored.

Regarding development and outage issues, we expect they’ll continue despite what Messari says. The issues with Solana aren’t going to be resolved by flicking a switch. However, with each issue resolved, the chain becomes more robust. We expect the latest upgrade to resolve one of the leading troublemakers: NFT mints. Not only will minting fees be lower, but the load on the chain will be reduced.

Overall, not a lot of news coming out of the Solana ecosystem, but the major update is a welcome sight!