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Hello readers,
Solana spent last year as crypto’s preferred venue for speculation. That positioning served as an invaluable “stress test” for the network. User activity, fees, developers, and investor attention exploded as a result.
However, it also left the network highly exposed to a cooldown once risk appetite faded. That cooldown arrived in Q1. Solana is now in reset mode.
In this week’s edition of The Watch List, we share a full data-driven update on the Solana Network’s Q1 performance and what we’re looking for next.
As a reminder, you can click the data citation under each chart to open a comprehensive dashboard with the onchain data supporting this week’s report.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.
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REV = Base Fees, Priority Fees, MEV (Jito Tips), and Vote Fee payments to access L1 blockspace. MEV (Jito Tips) accrue to SOL holders via staking. The remaining fees accrue to validators, with 50% of base fees burned.
The Solana Network did $89.9m in total fees in Q1 — the lowest since Q3-23. This was down 1.4% from Q4 and 68% y/y.
For context, the Ethereum L1 did $82m in fees in Q1.
The breakdown:
Base Fees: down 8.7% in Q1, but up 9.4% y/y
Jito Tips (MEV): down 19.7% in Q1 and 72.3% y/y.
Priority Fees: up 23% in Q1, but down 68.8% y/y.
Vote Fees: down 44.5% in Q1 and 16.4% y/y.
Solana was the “homebase for speculation” this past cycle (along with Hyperliquid). The strongest apps on the network (Pump, Axiom, Raydium, Jupiter) all cater to retail traders — making onchain revenues extremely cyclical and dependent on the demand to speculate.
The chart also helps visualize when speculation was at its most extreme levels in the last cycle: late ‘24 into early ‘25.
Social interest and onchain activity on Solana have been in a downtrend since that period. It’s difficult to see this trend reversing in the near term.
On the bright side, Pump Fun has held up relatively well in the bear market, and we’re starting to see emerging fintechs building on Solana using stablecoins (more later in the report).
Ultimately, we believe Solana needs to compete with Hyperliquid for perps traders + lead the tokenization of onchain equities (and other RWAs) to smooth out the extreme cyclicality of its onchain user base.
Real Onchain Yield = MEV (Jito Tips) paid to validators and passed onto SOL stakers (operator payments not included).
The average Real Onchain Yield (annualized) in Q1 was 0.17%, up 33% from last quarter, but down 67% y/y. The increase in Q2 can be attributed to the extreme volatility on DEXs in late January/early February.
The 67% y/y decline signals how much “speculative froth” has left the ecosystem since the frenzy we saw in Q1 of last year (when multiple G20 presidents launched memecoins on Solana).
Total Onchain Yield = MEV (Jito Tips) + Protocol Issuance paid to validators and passed onto SOL stakers (operator payments not included).
The Total Onchain Yield (average, annualized) in Q1 was 6.7%, with 89% of this coming from new SOL issuance.
For the quarter, the total onchain yield was up 0.25%, but down 66% y/y.
GDP = Total fees generated by top applications on the chain (does not include chain fees).
The top Solana apps generated $451m in network GDP in Q1 (5x the L1 REV), down 7% from Q4, and 54% y/y.
The top 10 Apps:
Pump Fun (social/retail trading): $103m (up 3% in Q1, down 13% y/y).
Circle (stablecoins): $63m (down 28% in Q1, up 105% y/y).
Axiom (trading app): $46m (down 24% in Q1, up 1829% y/y).
Jupiter (DEX aggregator & trading app): $45m (down 3% in Q1 and 45% y/y).
GMX (perps DEX): $32m (up from $160k in Q4).
Phantom (wallet): $29m (down 12% in Q1 and 46% y/y).
Raydium (DEX & launchpad infrastructure): $24.6m (down 26% in Q1 and 83% y/y).
Tether (stablecoins): $20.5m (up 24% in Q1 and 85% y/y).
Jito (transaction execution): $19.9m (down 19% in Q1 and 72% y/y).
Orca (public DEX): $14.3m (down 34% in Q1 and 55% y/y).
For reference, apps on the Ethereum L1 generated $1.9b in GDP in Q1 (4.2x Solana).
Pump Fun did more revenue than the Solana L1 in Q1. Yet SOL is currently priced at a 77x multiple to Pump Fun (43x on a fully diluted basis). We think there’s a dislocation there. That’s why PUMP is currently on The Watch List. If you’re interested in being notified if/when we add it back to our active portfolio, you can sign up for one month free here.
Unique Active Addresses = distinct wallet addresses that initiate at least one transaction per day.
The Solana Network averaged 2.4m daily active addresses in Q1, up 7.5% from Q4, but down 4.8% y/y.
Active stake increased 1.2% in Q1 and 10.8% y/y. As of 3/31/26, 426.4m SOL were staked to the network, representing 74.4% of the circulating supply and 68% of the total supply.
Unlike Ethereum, the increase in SOL staked does not increase the amount of new issuance paid to validators. Instead, issuance declines 15% per year on a set, disinflationary schedule until it hits 1.5% per year.
The average Cost to Produce $1 of Real Economic Value was $8.10 in Q1, a 31% decrease from Q4, but a 93% increase y/y.
A rising Cost to Produce $1 of Real Economic Value indicates that more issuance (network inflation) was required to secure the network, relative to the real value produced during the quarter. It’s telling us that network costs/overhead declined faster than REV did in Q1.
For reference, Ethereum’s Cost to Produce $1 of REV in Q1 was $13.79.
Solana now has a total of $15.9b of stablecoins on the network, down 2.7% in Q1, but up 18% y/y. This represents 4.5% of all stablecoin supply in crypto, placing Solana behind Ethereum, Tron, and BNB.
The leading stablecoin issuers on Solana:
Circle/USDC: $9b (down 16% in Q1 and 11% y/y).
Tether/USDT: $3.5b (up 27% in Q1 and 46% y/y).
Paypal/USDPY: $720m (down 23% in Q1, but up 440% y/y).
Paxos/USDG: $940m (up 8% in Q1 and 1021% y/y).
World Liberty Finance/USD1: $884m (up 670% in Q1).
Solstice/USX: $355m (up 16% in Q1).
A few areas where we expect to see more stablecoin innovation on Solana:
LatAm Fintechs serving remittances, payroll, cards/interchange. A few promising examples include Rain, Morse, and Takenos.
U.S.-licensed fintechs offering new payroll solutions using stablecoins. We think this could come after the Clarity Act, and we continue to believe the winning stablecoin issuer will wrap services around the token.
Effective Stablecoin Velocity measures the daily turnover rate of each dollar of stablecoin supply onchain. This metric filters out noise from wash trading and circular transactions to arrive at true velocity, measured as net USD transfers per day/circulating supply. A rising value indicates increased economic activity on the Solana Network.
Stablecoin velocity averaged 0.07 during Q1, down 69% in Q1, but up 29% y/y.
The reading of 0.07 in Q1 indicates that 7% of the stablecoin supply “turned over” each day during the quarter. For reference, Ethereum L1 turned over 2% of its daily stablecoin supply in Q1.
As emerging Fintechs building on Solana merge with new regulations, we expect stablecoin velocity to steadily increase in the coming years and become less cyclical/reliant on “risk-on” trading/speculation.
Net Dilution Rate = Daily Protocol issuance less burned SOL/circulating supply (annualized). A positive Net Dilution Rate is dilutive to SOL holders (who are not staking).
SOL’s Net Dilution Rate (annualized) in Q1 was 4.38%, down 5.3% in Q1 and 7.7% y/y.
The drivers:
SOL Issuance: 6.26m in Q1 (down from 6.45m in Q4)
SOL Burned: 67.7k in Q1 (up from 63.7 in Q4)
Net Result: 6.19m new SOL issued in Q1 (annualized 4.38% inflation)
Note that, unlike Ethereum, more staked assets do not increase issuance of SOL to Solana validators. That means that issuance is always dropping on Solana (the network is pre-programmed to do so, with disinflation at 15%/year).
The impact on validators/stakers?
Staking yields will drop when more SOL is staked on the network if onchain fees do not make up the difference.
*Includes 11 public DEXs and 9 private DEXs.
The story within Solana DeFi continues to be the growth (and now dominance) of private DEXs. For more on Private DEXs, we recommend the Helius blog post and Jump Crypto’s recent thread on X.
Average (total) DEX volume in Q1 was $3.2b/day — down 32% in Q1 and 4% y/y. For reference, Ethereum L1 averaged $2b in DEX volume/day in Q1, and $3.6b/day including the L2s.
Private DEXs accounted for 60% of the volumes ($1.9b/day), but were down 14% in Q1.
Public DEXs averaged $1.3b/day in Q1, down 47% from Q4 and 37% y/y.
The top DEXs on Solana in terms of volume:
HumidiFi Private DEX: $613m/day (down 55% in Q1).
BisonFi Private DEX: $574m/day (up 614% in Q1).
Meteora Public DEX: $447m/day (down 36% in Q1).
Raydium Public DEX: $298m/day (down 69% in Q1 and 60% y/y).
Orca Public DEX: $278m/day (down 41% in Q1 and 21% y/y).
Data: The DeFi Report
DeFi Velocity measures the turnover rate of each dollar within DeFi protocols. When it exceeds 1, it means the network is doing more volume/day than the total value locked in DeFi protocols.
DeFi Velocity averaged 0.43 in Q1, as the network turned over its TVL at an average daily rate of 43%. This was down 7% in Q1 and 23% y/y.
Last week, we noted that the Network Dilution Rate was the most important chart for ETH. For SOL, we think it’s DeFi Velocity.
Why?
Solana is all about “fast DeFi.” Speed and turnover are what drive network fees. It’s why Solana’s Real Yield was consistently higher than Ethereum’s in ‘24/25. We think Solana’s speed can ultimately make it a magnet for capital in risk-on environments. This makes SOL an extremely reflexive, high-beta asset.
New Trading Tokens = number of tokens created on Solana launchpads.
In total, there were 3 million tokens created on Solana in Q1 — up 42% during the quarter and 21% y/y.
Pump Fun continues to lead the market, with 2.5m new tokens in Q1 (85% market share).
Pump Fun’s performance during the bear market has been impressive, and continues to be the primary bright spot within the Solana ecosystem (along with Private DEX growth). Again, the app generated more revenue than the Solana L1 in Q1.
The DeFi Report, Glassnode
Solana was the “home for speculation” in the last cycle, while onboarding more new crypto users than any other chain.
This allowed the network to:
Establish itself as the “place to build” by producing some of the fastest-growing and most profitable crypto apps (Pump, Axiom, Jupiter, etc.).
Stress test network infrastructure (successfully).
While the developers may not be “chewing glass” as they were back in ‘22, the network is certainly going through its latest reset.
Looking forward, we see five key pillars that could determine Solana’s success in the next expansion:
Consumer/retail trading use cases. For years, crypto-native VCs have funded onchain “gaming” use cases. But there is no actual gaming in crypto. The “game” is retail trading. And it’s arguably the most valuable use case in crypto. As noted in the report, Pump Fun has been a bright spot for Solana so far in this bear market. The team is now focused on improving the mobile experience to make it a mainstream social/trading app (rather than a crypto-native desktop terminal).
Perps markets. Solana needs to compete with Hyperliquid here. Notably, Solana’s top perps DEX (Drift) was exploited on April 1, in which nearly half the TVL was hacked. It’s a major blow to the ecosystem, just as it was already losing ground to Hyperliquid's. This could now open up the door for a competitor or a new builder to launch perps on Solana — something to keep an eye on.
Onboard TradFi. To be “Nasdaq on blockchain,” Solana needs Nasdaq’s assets. That means it needs to onboard asset issuers that want to tokenize their assets (equities, bonds, etc). Finding an incentive model that works for the issuers is likely the largest barrier after regulation. This will take some time.
Establish itself as the leading public blockchain for fintechs building with stablecoins, especially in emerging markets such as LatAm.
Continue to win the “developer wars.” The Solana Foundation operates like a well-run tech company compared to its crypto counterparts. For this reason, Solana tends to have a stronger developer pipeline, sourced through a global “hacker house” program that seeks out and helps onboard developers to Solana. Continued organization and investment in this area will be critical to the network's ongoing success. For reference, Solana full-time developers are currently down 32% (Ethereum is down 29%).
We were contrarian buyers of Solana in late 2022/early 2023, establishing a core position at a cost basis of $15.39, which we exited at 10x + gains in late ‘24/early ‘25.
We’re now building our portfolio for the next market expansion. If you’d like to gain access and receive notifications when we make changes, you can sign up for TDR Pro and get one month free here.
The Watch List: Pump Fun
The Watch List: Memecoins
Ethereum: Q1 Ecosystem Update
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.