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Solana Flips Ethereum on DEX Volume as Liquid Staking and Memecoins Find a New Home

Last Updated March 21, 2024 11:51 AM
Valdrin Tahiri
Last Updated March 21, 2024 11:51 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • Volume in Solana DEXs has surpassed that on Ethereum in a weekly basis for the first time.
  • Orca and Raydium are leading the way for decentralized exchanges in the Solana ecosystem.
  • The rise of Solana positions it as a potential emerging competitor for the DeFi crown.

The decentralized exchange landscape has seen a notable shift as Solana’s ecosystem surges forward, overtaking Ethereum in weekly volume. Orca and Raydium emerge as frontrunners, propelled by liquid staking and memecoins.

But what exactly is liquid staking, and how does it intertwine with DeFi and the future of Solana? Let’s delve deeper into this paradigm shift and explore its implications.

DEX Volume Analysis

Since 2021, Ethereum (blue) has nearly always led activity stats on DEXs. Volume on DEXs reached its previous all-time high of $71 billion in May 2021, during the height of the DeFi mania.

At the time, Ethereum led with nearly $38 billion in weekly volume, followed by BSC at $24.70 billion. The only period when Ethereum was in second place were two weeks in April 2021. This was likely as a result of increased interest in PancakeSwap, which accounts for the bulk of DEX volume  in BSC.

Decentralized Exchange Volume By Chain
Decentralized Exchange Volume | Credit: DeFiLlama

However, two weeks ago, the total volume on DEXs reached a new all-time high of $72 billion. While volume on Ethereum and BSC DEXs is not close to its all-time high, the introduction and growth of exchanges in Solana and Arbitrum caused this increase.

Last week, the volume on Solana DEXs eclipsed that of Ethereum for the first time in history. The increase was mainly caused by liquid staking and memecoins.

Liquid Staking and Memecoins on the Forefront

Upon closer inspection, the two decentralized exchanges with the highest amount of volume in the Solana ecosystem are Orca and Raydium. Orca  is a decentralized exchange that offers Solana Program Library (SPL) tokens. These are the equivalent of ERC-20 tokens on Ethereum.

Additionally, Orca offers trading pools that allow for yield farming  with generous rewards. Currently, the pools that offer the highest rewards are those that contain the SLERF memecoin. The SLERF/USDC pool has a 5.83% Yield/TVL while the SLERF/SOL pool has a 9.86% ratio.

Liquid staking solutions dominate the Orca markets. More than 53% of the base currencies are BlazeStake Staked SOL (bSOL), and more than 20% are Marinade Staked SOL (MSOL). Both are liquid staking solutions. Most users use these currencies to receive Wrapped Solana (WSOL) and USDC. Then, these currencies are utilized in the yield farming protocols.

Orca Market Breakdown
Orca Breakdown | Credit: Bitdegree

Liquid staking allows users to access liquidity while still receiving rewards from their staked assets.

A simplified example would be a user staking SOL on the SolBlaze protocol  and receiving bSOL in return. Then, the same user utilizes the bSOL to receive Wrapped Solana. Finally, the Wrapped Solana is used to receive rewards in the liquidity pool. Hence, the user receives rewards in the form of airdrops from the staked SOL in SolBlaze, and in the form of APY from the Wrapped SOL utilized in the liquidity farming pool.

The benefits of liquid staking are improved ecosystem liquidity, higher DeFi adoption and increase in deentralization, since staked assets are distributed across multiple validators.

Similar liquid staking protocols for Ethereum are Lido Finance (LDO) and Rocket Pool (RPL). Liquid staking gained popularity after the Shanghai upgrade. The upgrade allowed users to unstake their staked ETH from the Beacon chain after more than two years. The increased popularity was aided by the fact that staking rewards were on average higher than the liquidity pool deposit yields. 

In the case of Raydium , Memecoin trading dominates the market. More specifically, SLERF/SOL accounts for nearly 60% of the total volume, followed by WIF/SOL and BODEN/SOL .

Solana Performs Well in Different Sectors

Solana has emerged as a formidable contender in the DEX arena. The rise of liquid staking on Solana and the outperformance of memecoins in the ecosystem can lead to an increase in DeFi activity in the network.

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