It was an eventful second quarter for Solana, with diversification of TVL to more DeFi protocols, an increase in NFT volume, and more validators.
A Period Marked by Highs and Lows
Amid the market downturn, Solana experienced a mixed Q2 in 2022. Though the growing Non-Fungible Token (NFT) marketplace reached a billion dollars in sales volume, there was a steep decline in the Total Value Locked (TVL), but greater TVL diversification into a growing number of Decentralized Finance (DeFi) applications.
The market went into a downward spiral during Q2 2022, due to macro forces such as interest rate hikes and the $60 billion collapse of Terra. The recent Messari report on Q2 of Solana provided plenty of crucial insights on Q2 for Solana. Let’s look at some key highlights:
1. Transactions, Revenue, Usage
The average number of daily transactions decreased by 17.6%, and revenue decreased by 44.4%. However, network usage measured by unique fee payers continued to increase despite the market conditions.
2. TVL Decline, NFT Growth
Solana’s TVL declined roughly 68% in USD quarter-over-quarter in Q2 similar to other layer-one networks.
However, the downturn in Q2 was limited to DeFi protocols as Solana’s NFT sector grew rapidly. Moreover, all other protocols outside the top 10 make up 50% of Solana DeFi TVL, suggesting a healthy distribution.
3. NFT Successes
The number of newly minted NFTs increased by 46.4% to over 7 million per day. The high NFT traffic in Solana can be attributed to Metaplex’s continued success, Serum launching its NFT Ecosystem Series, and Magic Eden raising funds in Series A and Series B funding rounds.
While the Solana NFT markets went live on OpenSea almost simultaneously during Q2, Magic Eden’s move to capture market share caused competitive forces to flare up. Currently, Solana is the second largest NFT protocol by secondary NFT sales volume, behind only Ethereum.
Web3Wire reached out to Magic Eden to learn about their role in taking the narrative of Solana NFTs forward, but we didn’t get an immediate reply. However, the community is enthusiastic about the NFT platform’s growth, as one Twitter user said:
4. Validators, Staking
The average validator count grew from 1,264 to 1,975, representing a 19.4% increase in network security participants over the quarter. Moreover, Solana’s average engaged stake has remained at 75% over the last year. In some ways, this stability mitigates the volatility of network value.
The Nakamoto coefficient for Solana remained around mid-teens throughout 2021. The stake amount stabilizing and a rise in validator count led to an improvement to 27 in Q2 from 20 in Q1. Comparing Solana to other Layer-1 networks, its improvements continue to surpass the industry average.
Further, one of the most notable events came in June when Solana Labs announced the Solana Mobile Stack (SMS) launch for Android and Saga. Saga is an Android smartphone that will natively incorporate SMS.
Parting Thoughts
In the second quarter, the Solana network continued to experience periods of decreased performance. However, Solana implemented solutions to improve network stability and grow its user base despite the negative macro-environment.
Core developers developed QUIC and a novel fee prioritization mechanism to enhance the network’s reliability and reduce downtime during congestion. In addition, the expansion of NFT marketplaces, progress toward EVM compatibility, advancement of Solana Pay, and introduction of Solana Mobile contributed to strategies to expand ecosystem adoption.
Source : web3wire
