One year after the FTX bankruptcy, Solana, which was also affected, is gradually getting rid of its historical baggage and embarking on a new path.
Written by Peter Horton, Analyst at Messari
Compiled by: Luffy, Foresight News
Key points:
The Solana ecosystem minted nearly 45 million compressed NFTs (cNFTs) in the third quarter, a 316% increase from the previous quarter. Among them, NFTs minted by free collectibles distributor DRiP accounted for 87.5%, followed by Dialect and Helium.
The Solana Virtual Machine (SVM) and general technology stack are gaining traction and adoption. Rune published a post exploring a Solana fork of MakerDAO, L2 solution Eclipse announced support for the SVM, and Visa integrated payments on Solana.
Solana’s DeFi TVL grew 32% month-over-month to $368 million. This growth was driven by points programs launched by DeFi and liquid staking protocols, led by projects such as MarginFi, Jito, Cypher, and BlazeStake.
By the end of the third quarter, most clients had upgraded to V1.16, which reduced validator memory requirements, introduced confidential transmission capabilities, and improved support for zk proofs.
Despite concerns about FTX liquidating over 57 million of its SOL tokens, SOL’s market cap grew 17% quarter-over-quarter to $8.4 billion. FTX/Alameda’s SOL is subject to various unlocking schedules, with the full unlocking date not expected until Q4 2025.
About Solana
Solana is an integrated open source blockchain whose goal is to synchronize global information at the speed of light. Solana is optimized for latency and throughput, but sacrifices some verifiability. It attempts to achieve this goal through features such as a novel timestamping mechanism (Proof of History PoH), a block propagation protocol Turbine, and parallel transaction processing. Since the mainnet launch in March 2020, Solana has continuously improved network performance and resiliency through multiple network upgrades, including QUIC, stake-weighted quality of service (QoS), and a local fee market.
The non-profit Solana Foundation, Solana Labs, and other third-party organizations including Helius and Superteam work together to drive the development and growth of the Solana network and ecosystem. Solana Labs has raised over $335 million through private and public token sales. The Solana ecosystem has a growing number of projects across multiple sectors, including DeFi, consumption, DePIN, payments, and privacy.
Key indicators
financial analysis
In early June, the SEC filed a regulatory lawsuit against Coinbase and Binance, listing SOL as a security asset, causing the SOL price to fall by 34% at one point. However, SOL's rebound at the end of the second quarter was stronger than other tokens deemed securities by the SEC and continued into the third quarter. After a brief drop due to the possible liquidation of Alameda/FTX's SOL, SOL's market value at the end of the quarter was $8.4 billion, a 17% increase from the previous quarter. Notably, SOL outperformed assets of similar market value, rising from 10th to 7th in market value ranking.
Revenues (all fees collected by the protocol) in USD terms grew 19% to $4 million, while in SOL terms they grew 10% to 185,400 SOL. In the Solana system, half of these fees are burned and the other half is distributed to block producers. Currently, these burned tokens do not significantly reduce inflation, which ended the quarter at 5.8%. This inflation comes from new tokens issued for validator rewards and does not include other token unlocks.
The SOL inflation rate will decrease by 15% per year until it stabilizes at 1.5%. As of the time of writing, 71.6% of the SOL supply eligible for staking has been staked. Note that tokens held by Solana Labs or the Foundation, while not locked, are not all counted as circulating. Because the nominal yield is higher than the inflation rate and not all tokens are staked, SOL's annualized effective yield was 1.1% at the end of the quarter, up 31% month-over-month.
While all SOL from the initial allocation is liquid, secondary trading of locked tokens (e.g., grants or token purchases) could create inflationary pressures. Notably, Alameda and FTX purchased over 57 million SOL from the Solana Foundation and Solana Labs. However, these tokens are subject to various unlocking schedules and will not be fully unlocked until Q4 2025 (accounts with locked tokens can be sold over the counter). FTX received approval to liquidate its crypto assets at a pre-trial hearing on September 13. Prior to the hearing, SOL experienced negative price action, especially in the derivatives market. Open short positions increased significantly, which pushed funding rates to near year-to-date lows. SOL rebounded at the end of the quarter and continued into the fourth quarter.
Network analysis
use
Network activity, measured by non-voting transactions and payers, declined month-over-month and reached yearly lows (excluding the network outage on February 25, 2023). Average daily non-voting transactions fell 25% month-over-month to 24.7 million, and average daily payers fell 37% month-over-month to 94,100. Payers are not representative of users in a context where applications subsidize end-user gas fees. Average daily signers, including these users, fell less than payers, falling 23% month-over-month to 235,500.
Average daily new paying users fell more sharply month-over-month, down 76% to 11,400. However, the second quarter saw an increase due to unusual activity from an unknown program that created a large number of new addresses in mid-May. By June, those new addresses were no longer active, resulting in a low monthly retention rate of 2.5% in May. The average monthly retention rate in the third quarter was 17.9%, roughly in line with the previous year.
Solana transaction fees remain the most stable and cheapest of all blockchain networks. In Q3, the average fee per non-voting transaction was $0.0002. Priority fees reduce network spam and work together with the local fee market to prevent a single hot contract from clogging the network. The percentage of non-voting transactions with priority fees has slowly declined since many wallets and applications first integrated the feature in Q1 of this year.
Security and decentralization
The total amount of SOL staked increased by 2% to 404.9 million this quarter. In terms of total staked market value, Solana ranks second with $8.2 billion, second only to Ethereum. The amount of SOL staked has almost returned to the level before the FTX crash.
Solana’s Satoshi coefficient fell 12% month-over-month to 29, but remains an industry leader. The number of validators increased slightly, up 5.5% month-over-month to 1,984. The Solana Foundation noted in its October validator report that it plans to make changes to the delegation program to encourage quality, not just quantity, of nodes. There are more than 73 million SOLs in the delegation program.
The Nakamoto coefficient is the minimum number of nodes required to halt the network or disrupt network liveness. In addition to being checked on all nodes, it can also be measured on other dimensions that are important to the resilience of the validator network, including stake position distribution, hosting providers, and clients.
Solana validators are spread across 34 countries, up 10% month-over-month and 27% year-over-year. The United States leads with a 29% staked share, just shy of the 33.3% threshold, giving Solana a geographic Satoshi coefficient of 2. The Solana Foundation said in its recent validator report that it plans to address the increase in the U.S. stake share over the past year to nearly the 1/3 threshold.
Solana validators are hosted in 312 separate data centers, up 10% month-over-month and 34% year-over-year. Solana’s data center Satoshi coefficient is 6.
As detailed in the validator report, Solana’s hosting providers have a Satoshi Factor of 3 and consist of TeraSwitch, AWS, and OVH.
Solana currently has two clients: the original Solana Labs client and Jito Labs’ MEV-optimized fork. The Jito client received over a third of all stake shortly after Q3 ended. However, it does not offer the same client diversity as the recoded client. To this end, we are writing two clients from scratch: Firedancer and Sig.
Jump Crypto is developing Firedancer in C++. Toly admitted that it is difficult to give an engineering timeline, estimating that Firedancer will be launched on the testnet by the end of this year and on the mainnet about six months later. In addition to client diversity, Firedancer may also bring performance improvements. It has exceeded 1 million TPS in a test environment, while the Solana Labs client can only achieve about 55,000 TPS in a similar environment.
Sig is a new client that was announced in late July. Syndica is leading the development of Sig, which will be written in Zig. Sig is being optimized for RPC reads and aims to reduce slot latency on Solana. It also focuses on readability and simplicity, hoping to be more accessible to developers.
In addition, the light client TinyDancer is also under active development. TinyDancer will allow users to verify status without running a full node themselves, thereby increasing the trustlessness of the network.
Finally, while it’s difficult to measure, the Solana Foundation has noted significant growth in participation in the validator network. Examples it points to include monthly community-led validator calls starting in March 2023, and Block Zero, the community-hosted Solana validator meetup in Q4.
Performance, Upgrades, and Roadmap
Validators began switching to the latest V1.16 version at the end of August. Although some minor bugs occurred in the middle, they were resolved with the help of the community. By Epoch 510, which started on September 28, the vast majority of validators were running the new software. Validators noticed a significant reduction in memory after the upgrade. In addition to RAM optimization, other new features in V1.16 include:
Support for SPL Token22 confidential transfers. Confidential transfers use zero-knowledge (zk) proofs to encrypt the balance and transaction amount of SPL transfers. Users can provide read access to other accounts, thereby achieving confidentiality without sacrificing verifiability. Confidential transfers will be enabled on the mainnet beta in late 2023.
Improved efficiency in verifying zero-knowledge proofs and support for 128 elliptic curve operations (equivalent to EIP 196-198).
For more information on the upgrade process and features of V1.16, please refer to this article.
V1.17 is expected to be released to mainnet in early Q1 2024 and will bring more ZK support, possibly including Poseidon system calls.
The Solana network has been online since February 25th and is currently experiencing near-record highs in sustained uptime. This improvement is the result of improvements to the upgrade process and new technical features introduced last year, such as QUIC, stake-weighted quality of service, and local fee markets.
The strong performance of SVM and Solana’s overall technology stack has attracted attention from outsiders. SVM adoption outside of Solana includes:
MakerDAO: One of the most surprising events of the third quarter was when MakerDAO founder Rune published a forum proposal to explore forking SVM to power the backend of the Maker protocol and its child DAOs. Rune noted that after much research, he believes Solana is the most promising codebase because:
Technical quality (optimized blockchain integration)
Multiple client implementations
Resilient ecosystem and thriving developer community
The history of forking application chains such as Pyth
That’s still a long way off. Even if MakerDAO decides to pursue a different solution, Rune’s post is a testament to the quality of Solana’s technology and its open-source nature.
Eclipse: Eclipse started out as a Rollup-as-a-service provider, offering SVM as an execution environment. In mid-September, it announced its move to a general-purpose L2 powered by SVM. While some have tried to frame this as a victory for Ethereum at the expense of Solana, many Solana community members were optimistic about the news.
Rome: Rome Protocol is a shared sorter leveraging Solana, launching at the end of this quarter. The shared sorter network will be deployed as a smart contract on Solana, with each Rollup using the network represented by its own Neon EVM deployment.
Neon EVM is the EVM engine for smart contract deployment on Solana, and its mainnet launched in mid-July. The network averages around 22,000 transactions per day, but over 80% of total volume comes from a four-day spike in activity. Neon received some criticism from Solana community members at launch for its token economics.
Two days after the launch of Neon, Solana Labs released the Hyperledger Solang compiler, enabling developers to write Solana programs in Solidity. While Neon allows developers to write EVM contracts that can run on Solana, Hyperledger Solang allows developers to write Solana programs, but only in Solidity, not Rust or C.
Ecosystem Analysis
DeFi
Over the past few quarters, there has been a lot of growth in new DeFi protocols calling themselves “Solana DeFi 2.0.” This label represents a promise to avoid the predatory, low-volume token economics that were prevalent in the last cycle. Furthermore, most of these protocols have yet to launch a native token.
Lending protocol MarginFi is one of the leaders of this trend. On July 3, MarginFi launched a points system to reward users for depositing, borrowing, and referring other users. In the third quarter, its TVL increased by 743% month-on-month, ranking sixth among Solana protocols with a TVL of $22 million. Just at the end of this quarter, MarginFi launched its own liquidity staking token LST, which is introduced in the liquidity staking section below.
Cypher, a perpetual contract trading platform, launched a points system in mid-July. Cypher, one of Solana’s fastest-growing DeFi protocols, suffered an attack worth about $1 million in early August. From IDO to airdrops, more than 50% of CYPH will flow to the community.
Solana Ecosystem Lending Protocol Solend launched a points program in early August. Instead of using points for potential airdrops, Solend linked points to its already launched token SLND. Solend Points Reward Season 1 will last about three months, with a minimum reward pool of 100,000 SLND ($54,000 as of September 30, 2023). Driven by the points system, Solend's TVL increased 43% month-on-month to $57 million.
Other DeFi developments worth noting include:
Phoenix is online: Phoenix, a fully on-chain limit order book trading platform, officially launched at the end of August after launching a beta version in March. A week before the August launch, Phoenix development team Ellipsis Labs announced a $3.3 million seed round led by Electric Capital. Since its launch in August, the most popular trading pair on Phoenix, SOL/USDC, has an average daily trading volume of more than $3.4 million. Although the TVL is much lower than other exchanges, Phoenix is still the most popular market in this trading pair by trading volume. As of the end of this quarter, Phoenix's TVL was $378,000.
Drift Growth: Among the top Solana protocols, perpetual DEX Drift was one of the fastest growing protocols in Q3. It ended the quarter with a TVL of $17.3 million, up 87% month-over-month and 976% year-to-date. Drift had several notable upgrades throughout the quarter, including Drift Liquidity Providers, Market Maker Incentives, and MetaMask Snap CONNECT. The CONNECT upgrade allows users to trade on Drift and supports MetaMask cross-chain from EVM to Solana, and has been downloaded more than 1,000 times.
Solflare Snap: Wallet Solflare also launched a MetaMask Snap, which has been downloaded nearly 19,000 times. The Snap allows users to store Solana tokens and NFTs, cross-chain from the EVM to Solana (powered by deBridge), and access Solana applications that support Solflare (all from MetaMask). Solflare also launched an incentive program SolScout, which provides a total of $100,000 in rewards to users who complete daily ecosystem-related tasks through Solflare or its MetaMask Snap.
Jupiter V3: Trading aggregator Jupiter launched V3 at the end of July. It uses a new routing algorithm, Metis, which provides a better price discovery mechanism. Jupiter also launched limit orders, dollar cost calculation function, and cross-chain comparator. Judging from the active addresses and transaction volume in the third quarter, Jupiter is one of the top DeFi protocols on Solana.
Maple returns: After FTX collapsed and stopped developing on Solana, Maple Finance returned to Solana in early September with a cash management solution. The product provides US Treasury yields to DAOs and high-net-worth individuals (with a 0.5% management fee). As of the end of this quarter, Maple's TVL on Solana reached $4.2 million.
Circuit launch and funding: In August, Circuit launched a private beta version of Circuit Vaults and subsequently announced a round of funding, with Multicoin and others participating in this round of funding. Circuit has partnered with Drift to allow users to deposit funds into Supercharger Vault to access Circuit’s Delta Neutral AMM strategy deployed on Drift.
Further developments included tBTC integration, Credix’s USDC receivables pool, Kamino Creator Vaults (Kamino also launched Kamino Lend shortly after the end of the quarter), Zeta V2, and the EUROe stablecoin launch.
Liquidity Staking
Due to the high SOL staking rate and low liquidity staking rate, a large amount of SOL is not participating in the ecosystem. Liquidity staking protocols have been looking to improve this through incentive programs.
Liquidity staking protocol Blaze has been airdropping to bSOL holders since last year. In early August, it launched a points system that rewards users with points for holding bSOL, and higher rewards for using bSOL in DeFi protocols. Soon after, Blaze launched its token BLZE and began airdropping based on user points, with 64.5% of the BLZE supply distributed to users through the initial airdrop and ongoing rewards. Blaze's TVL in SOL grew 1,234% month-on-month to 452,000 SOL ($9.2 million as of September 30, 2023).
Following the launch of a referral program in late August, Jito launched a points system in mid-September. Like Blaze, Jito rewards JitoSOL holders and increases their points rewards for DeFi activities. Jito’s TVL in SOL grew 227% quarter-over-quarter to 2.4 million ($48.8 million as of September 30, 2023). At the end of the quarter, about 35% of JitoSOL was held in the program rather than in wallets, compared to 13% at the beginning of the quarter.
Similar to the DeFi ecosystem, Marinade, a liquidity staking giant that has issued tokens, launched a rewards program in mid-September in an attempt to keep up with the growth of new protocols. Marinade's TVL in SOL slowly declined throughout the quarter, but began to rise again after September 20. Marinade also launched Marinade Native, a native staking product to complement Marinade's liquidity staking, at the end of July. Marinade Native is a staking automation platform that routes stakes to more than 100 of the best performing validators without paying fees or introducing any smart contract risks.
As mentioned above, MarginFi launched its own liquidity staking token, called LST, at the end of the quarter. LST distributes stake to three validators run by the MarginFi team. It differs from other liquidity staking providers in that it sacrifices a degree of decentralization in exchange for a higher staking yield. All three validators use the JitoLabs client, which distributes all MEV-boosted rewards to LST holders. The MarginFi team has also hinted at launching LST-backed stablecoins in the past.
At the end of the quarter, Lido published a proposal to stop or renew funding for development on Solana. Ultimately, the community voted to stop. Since Lido accounted for nearly 24% of the market share of liquid staking TVL at the end of the quarter, this will provide a huge opportunity for other protocols to absorb its share.
Protocols like Super Stake and Sanctum are further enhancing the liquidity staking ecosystem. Super Stake launched at the end of Q2, using a recursive lending strategy on Drift to amplify LST yields. It added support for JitoSOL in Q3, joining mSOL. Currently, both treasuries have reached their caps. Sanctum (formerly unstake.it) provides liquidity and stability for Solana's liquidity staking and DeFi ecosystem. It has instant liquidity for staked SOL and a "safe haven" SOL pool for quick loans to close LST collateralized loan positions.
While liquidity staking protocols are competing with each other for market share, they are all working towards the same goal of increasing Solana’s liquidity staking ratio. In addition to the incentive program, the Solana Foundation’s move of a portion of its native staking SOL to liquidity staking SOL, which the Foundation is working on, could significantly increase this ratio.
Consumption
NFT
After a surge brought by the Solana Monkey Business sweepstakes on the last day of the second quarter, the average daily NFT trading volume on Solana fell 57% month-on-month to US$1.1 million, and the number of sales and unique buyers also fell month-on-month.
NFT developments worth noting this quarter include:
Mint events for Tensorians, Meegos, Reavers, Gates of BroHalla, and VTOPIANS.
On September 23, the two-year-old NFT series of virtual horse racing game Photo Finish LIVE became the number one Solana series NFT by market capitalization. This was likely driven by the anticipation of the fourth virtual Kentucky Derby (officially licensed) to be held on September 23. However, by the end of the quarter, Mad Lads reclaimed its position as the highest market capitalization NFT.
Magic Eden regained the majority of Tensor's market share at the end of the quarter. Tensor's market share started the year at 1.2% and reached a high of over 74% in early August.
Source: Top Ledger
At the beginning of Q2, Solana introduced state compression. This upgrade provides a cost-effective way to store data on-chain by hashing it into a Merkle tree and publishing the Merkle root hash on-chain. Its first major use case is the compressed NFT (cNFT) standard created by Metaplex. The cost of minting and storing 1 million cNFTs ranges from 5.3 to 63.7 SOL, depending on the composability level, and 24,000 SOL without compression.
Nearly 45 million cNFTs were minted in the third quarter, up 316% from the previous quarter. DRiP holds 87.5% of the market share of these cNFT mintings. DRiP works with artists to provide free art NFT minting, with series much larger than the normal 10,000. In mid-August, DRiP announced a $3 million seed round led by Placeholder.
Dialect is another leading cNFT use case. Dialect is a Web3 messaging app that uses cNFTs as Dialect stickers. In early September, Dialect launched its app.
As mentioned above, Tensor launched its own line of Tensorian cNFTs in August. Users need Tensorian Shards to mint Tensorian, which were airdropped to users as part of the Season 2 rewards. Total trading volume for Tensorian and Tensorian Shards combined in Q3 was approximately $7 million.
Tensor has become the dominant marketplace for cNFT trading since launching support in May 2023. However, Magic Eden is looking to change that and added cNFT support in mid-September. Since Magic Eden integrated cNFTs, Tensor has retained nearly all of its market share, accounting for 97.2% of the total volume.
In early September, developer kiryl launched a cNFT multiple destruction tool, and a new cNFT use case emerged. The September “Burning Man” task incentivized burning specific cNFTs to obtain prizes.
game
In addition to Photo Finish LIVE, other notable game developments include:
Star Atlas SAGE Labs: Star Atlas launched early access to SAGE Labs’ open-world game in late September, with users competing for $1.2 million in prizes. Since every action happens on-chain, SAGE is driving a massive increase in Solana’s total transaction volume.
Bonk SVB: On August 1, the meme coin Bonk launched Silicon Valley (SVB) BONK, an on-chain lottery game where users compete to be the last person to purchase a key, and if they win, they will receive a portion of the funds used to purchase the key.
The Heist Season 2: The popular game The Heist returned for Season 2 in mid-August with a new in-game currency and NFT collection. Mobile support was added in mid-September. Heist led all NFT collections in sales in Q3.
social contact
One of the hottest narratives in the crypto space in Q3 was friend.tech, which demonstrated the potential for social applications to become a breakthrough use case for crypto. Solana’s social applications include:
Access Protocol: Access is a creator monetization platform. In Q3, 21 new creators were added, bringing the total number of creators to 38. Total subscribers doubled quarter-over-quarter to 227,000.
Solarplex: Web3 social media platform Solarplex opened its V2 experience in mid-August and received initial attention.
SolLinked: In mid-August, Solana Labs co-founder Anatoly Yakovenko announced on Twitter that it was "Friend.tech's version of LinkedIn." More than a week later, developer darksoulsfanlol implemented it. SolLinked allows users to set up email and calendar accounts, set prices for email replies or calendar reservations, and use TipLink and USDC for payments within the app.
Friendzy: Friendzy is a more traditional friend.tech fork, though the keys to an account can be traded before the account owner initiates it. Friendzy TVL peaked at $190,000 on September 26 after launching in mid-September, but ended the quarter at $76,600.
Hub3: Hub3 is another spinoff of friend.tech, adding features like group chat, discovery tools, and NFT whitelisting services. It launched on September 24th and saw a pick-up in activity after the end of the quarter.
DePIN
Solana is becoming the hub for DePIN applications, including Helium, Hivemapper, Teleport, Render (which plans to migrate to Solana), and GenesysGo.
Notable events in the third quarter include:
Helium: Helium is a decentralized wireless network that migrated to Solana in April 2023. In mid-August, Helium Mobile, which leverages the network, launched a $5 per month unlimited calling plan, initially only available to Miami residents.
Hivemapper: Hivemapper aims to create a decentralized global map. At the end of August, it launched Hivemapper Bursts, which provides additional HONEY rewards for customer-requested mapping of hot spots. Hivemapper mapped more than 1 million miles of roads in the third quarter, bringing its total mileage to more than 3.3 million miles.
Payment
Payments are another emerging use case on Solana, with several big wins this quarter, namely Visa and Shopify integrations.
In early September, Visa announced the expansion of its USDC settlement pilot to Solana (previously Ethereum). The Visa Crypto team published an in-depth look at Solana, highlighting the reasons why they believe Solana can help drive mainstream payments, including Solana’s cheap and predictable fees through a native fee market, parallel transaction processing, fast transaction finalization, a large number of nodes, and multiple validator clients.
At the end of August, Solana Pay integrated with Shopify, allowing Shopify merchants to accept Solana’s native USDC payments. Shopify accounts for about 10% of all US e-commerce, and merchants can now use Solana payments to replace credit cards (1.5%-2.5% fee standard) to reduce expenses.
Other notable payments developments include:
TipLink Gift Cards: TipLink allows users to send Solana tokens via a link. In mid-September, it added the ability to purchase gift cards with crypto, providing an on-ramp for users to receive crypto via a link.
Beam: Offramp Beam went live in mid-August, supporting Solana as well as several other networks. It then launched an SDK at the end of the month, making it easy for developers to integrate the solution into their applications.
CandyPay Mobile SDK: CandyPay allows applications to use tokens on Solana at checkout. In mid-August, it launched its mobile SDK.
Meso SDK Early Access: Meso has opened up its SDK experience, allowing developers to integrate its entry products into their applications.
Helio and WooCommerce: Multichain payment platform Helio partnered with WooCommerce in early September to enable support for crypto payments on WordPress. A week later, it launched its own self-hosted Solana wallet, allowing users to log in with email or Web2 social accounts.
privacy
Solana already has a growing number of privacy-enabled protocols. In addition to the core zero-knowledge (ZK) upgrade in V1.16, developments in Q3 include:
Light Protocol: Light Protocols is a zero-knowledge layer on Solana for building Private Solana Programs (PSPs). Light Protocol takes a UTXO-based approach to privacy. It also uses private state compression, so private transactions cost exactly the same as regular Solana transactions. In early August, it released the first PSP reference implementation.
Elusiv: Elusiv is another privacy support layer that adopts a shared pool approach. At the end of August, Elusiv launched a private token trading function, using temporary keys to separate the link between users' public keys and their transactions. Elusiv leverages Jupiter liquidity.
Development
The resources and infrastructure built by Solana Labs and independent companies such as Helius and Ironforge further promote the development of the ecosystem.
Notable developments in the third quarter include:
GameShift: Solana Labs released the GameShift API in mid-July, designed to simplify Web3 game development.
Helius Pyre: In mid-July, Helius launched Helius Pyre, an open source platform for gamifying learning about Solana development. Helius also released Test Drive, an open source Postman-like tool for testing RPCs with documentation and examples.
Solana Course: freeCodeCamp released a free developer course that walks developers through 15 projects to help them get familiar with building on Solana.
Synthetic Asset Platform: Towards the end of the quarter, Solana Labs released an open source reference implementation of its synthetic asset platform.
Other developments: Graph integration, Ironforge’s Playground, four new Solana development courses, Ellipsis’ proof-of-concept building tools, and Magicblock’s gas-free RPC API for games.
Ecological growth
Grants, hackathons, accelerators, and other initiatives launched by independent organizations such as the Solana Foundation, Lamport DAO, and Superteam further promote the development of the ecosystem.
Notable events in the third quarter include:
OPOS Hackathon: The OPOS (The Only Possible on Solana) hackathon was a community hackathon organized by Lamport DAO in August. Over 600 participants competed, winning $100,000 in prizes from 40 sponsors across 25 tracks. The top prize winners were Onda Protocol ($10,000, State Compression track) and Ned Finance ($10,000, Jupiter track).
Hyperdrive Hackathon: The Solana Foundation’s online Hyperdrive Hackathon kicks off in early September. Through October 15, over 5,000 builders will compete across seven tracks for up to $1 million in prizes.
Hacker Houses: Solana 2023 Hacker Houses, sponsored by Jump Crypto, Circle, and the Solana Foundation, provide a place for developers to build, find collaborators, and learn from community members. This quarter, Hacker Houses were held in Berlin, Bangalore, and Mumbai.
PlayGG: The Solana Foundation hosted the PlayGG Gaming Festival in mid-July. The event featured demos, livestreams, tournaments, and workshops highlighting dozens of Solana-based games.
Further events include the launch of task platform Layer3, Solana Summer Fest, a session on how to run a Solana developer workshop, Demo Day at accelerator Solana University, and the Monacode Hackathon.
Upcoming Q4 events include Solana’s annual Breakpoint conference, Hong Kong Hacker Houses, Encode Club’s Solana Accelerator, Berlin Demo Day, and more.
Summarize
Given the bear market, the Solana ecosystem saw significant growth in Q3, spanning DeFi, liquidity staking, spending, DePIN, and privacy protocols. Compressed NFTs (cNFTs) are becoming a popular state compression use case, with nearly 45 million cNFTs minted in Q3, up 316% month-over-month, with free collectibles dealer DRiP accounting for 87.5% of these mints. Bucking the market trend, Solana’s DeFi TVL grew 32% month-over-month to $368 million. This growth was primarily driven by points programs launched by DeFi and liquidity staking protocols, led by MarginFi, Jito, Cypher, and BlazeStake.
Solana’s underlying technology is also gaining traction and adoption. Examples from Q3 include Rune’s post exploring MakerDAO’s Solana fork, Eclipse’s launch of L2 with SVM support, and Visa’s payments integration on Solana. Additionally, Solana’s technology continued to improve this quarter. The V1.16 upgrade reduced validator memory requirements, introduced confidential transfer capabilities, and improved support for zk proofs.
Finally, SOL’s market cap grew 17% month-over-month to $8.4 billion. This growth came despite concerns that FTX would liquidate its 57 million+ SOL tokens (which the company received approval for at a preliminary hearing in mid-September). FTX/Alameda’s SOL is subject to various unlocking schedules until Q4 2025. That said, locked tokens can still be sold over the counter. Nonetheless, Solana’s network and ecosystem are preparing to leave the bear market stronger than they entered it.