Coinbase Report Shows Solana Has a Chance to Turn the Table and Be More Profitable Than Before

On February 22, U.S.-based exchange Coinbase announced a Report About Solana (SOL). The report notes that the platform has a unique technical infrastructure and healthy network activity indicators, and assesses its potential to re-establish itself as an Ethereum competitor.

The report addressed the fallout Solana suffered from the collapse of major exchange FTX and related investment firm Alameda Research last November, noting that the market capitalization fell by about 87% and the total value of assets staked (TVL ) -97%.

Due to the FTX shock, Solana has experienced massive outflows and price crashes. Major NFT projects such as “Degods” and “Y00ts” have announced their withdrawal from Solana and moved to other chains. There are also concerns about the existence of the chain itself.

Solana founder Anatoly Yakovenko claims that the relationship between Solana and FTX has been exaggerated in the past. He explained that the development of Serum’s decentralized order book (which received contributions from FTX) was forked and replaced by the community-run OpenBook. Coinbase acknowledged that this had a significant impact on market sentiment and led to a drop in value, but emphasized that Solana is a “blockchain optimized for high throughput, minimal cost, and natural scalability” and that its unique technical aspects are key to the future value proposition. Base.

Launched in March 2020, Solana became an overnight success with a market capitalization of $77 billion in November 2021. Solana allows for fast and affordable transactions, attracting many new users looking for an alternative to Ethereum due to the “rapid increase” in transaction fees during the 2021 bull run.

The report argues that Solana’s activity on the network, as measured by the number of active transactions and users, is “comparable to current Ethereum activity.” Specifically, Solana’s current market capitalization is only about 4.3% of Ethereum’s, but the number of daily active users on the network is equivalent to 43.7% of Ethereum’s (Solana: ~150,000, Ethereum: ~344,000).


Market Cap to Daily Transaction Ratio over 30 Days | Source: Token Terminal and Artemis


Market cap of 30-day average daily active users | Source: Token Terminal and Artemis

Also, when comparing daily transaction volumes, Solana processes 17 times as many transactions as Ethereum (Solana: 17.7 million transactions, Ethereum: 1 million transactions). Coinbase sees Solana’s significantly lower fees as a driver of user activity and attributes it to the protocol’s technical value.

Solana’s potential can be measured not only by network activity, but also by developer activity across the ecosystem. According to Github data, Solana’s developer activity will surpass that of Ethereum in late 2021 and early 2022. However, the indicator then fell below Ethereum in May 2022. Currently, there are 63 active developers on Solana, compared to 133 on Ethereum. However, Solana refuted the above figures, claiming that the actual number of developers working full-time for Solana was 120. They also point out that some repositories and organizations on Github are private and therefore not counted.


Developer Activity Trends (Solana and Ethereum) | Source: Ties

Electric Capital recently published a developer activity report that takes a broader approach and suggests a higher total for both networks. According to the report, Solana had 383 full-time developers in mid-December, compared to Ethereum’s 1,873. Full-time is defined as a developer who commits to coding more than 10 days in a month. However, even the limit of at least 63 active developers on Solana shows strength relative to Ethereum after adjusting for large differences in network market capitalization.

Another notable Solana initiative is the upcoming Solana Saga phone, which provides users with a secure platform to store private keys and access decentralized applications. This cryptocurrency-specific mobile stack will also allow developers to build applications beyond the control of the existing Web2 platform, thereby providing more opportunities for innovation. The device was sent to developers for testing in mid-December and is expected to be available to the public in the first quarter of 2023.

get conclusion

In 2022, the general decline in the crypto market also affected Solana, and the collapse of FTX in particular had a major impact on market sentiment. Even so, Solana’s technical value proposition remains intact as a blockchain optimized for high throughput, minimal cost, and native scalability. The platform represents a unique approach in the Tier 1 space. According to the report, Coinbase sees Solana as a formidable competitor in terms of transaction volume, users, and growth.

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according to Kyptos

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