Falling daily active addresses does not suggest a significant decrease in “actual” users, said Solana Foundation’s Austin Federa.
Less bots using the network could explain the drop.
Exploring the Numbers
Despite a spate of recent developments most would characterize as positive, the number of daily active addresses using Solana recently hit a low point.
But that’s not indicative of a significant decrease in “actual” users, according to Solana Foundation’s Austin Federa, acting head of strategy for the Layer 1 blockchain.
“There may be less bots running on the network, but what we are really looking at is how many humans are using the network,” Federa told The Block. “What we see is the actual humans, the wallets that are paying their own fees, the retention data, is still super solid.”
The number of daily active addresses on Solana, using a seven-day moving average, dropped from more than 300,000 mid-August to around 204,000 at the end of the month, according to The Block’s Data Dashboard.
The 7DMA metric shows the average value of a data point over the past week and can help spot trends.
“My assumption is there are fewer bots on the network because the economic incentives for bots to work on the network have been removed with a lot of these network upgrades. And a lot of those rolled out in Q1,” Federa said.
“It’s [also] possible traders who before were running multiple bots to be able to try and land an arbitrage or do an NFT mint, they can now just pay a priority fee like they would on Ethereum,” he added. “Some of that may be responsible for a drop in active addresses [so] the same number of people may be using the network, but the active addresses may be down.”
The Block Research Analyst Kevin Peng also doesn’t appear worried by Solana’s recent drop in daily active addresses.
“Most Layer 1s have seen relatively little change since the beginning of the year,” he said, adding he has consistently been bullish when it comes to Solana.
“The problem with using daily active addresses as a metric is that it can be easily manipulated or influenced by short term events,” said Peng. “A more meaningful metric is transaction fees, which directly reflects the amount of money users are willing to pay in order to use block space on a particular chain.”
While statistical declines in activity and trading volumes are more or less ubiquitous across crypto as the industry confronts a prolonged bear market, Solana has had reasons to believe use could be poised for an eventual uptick.
Earlier this month, Visa expanded its USDC stablecoin settlement capabilities to Solana, a move the protocol’s COO and co-founder Raj Gokal said would make digital payments more accessible. Also this month, MakerDAO co-founder Rune Christensen called the Solana stack “the most promising codebase” when discussing building a new blockchain as the organization looks toward the completion of its long-term strategy.
“Maker considering the Solana codebase for a new chain … underscores the platform’s momentum,” said Julian Deschler, co-founder of Elusiv, a protocol that has launched private token swaps on Solana.
In August, Solana announced its payment system had integrated with the e-commerce giant Shopify, a move that could generate additional interaction with merchants and consumers. “Solana Pay on Shopify opens up millions of merchants to a more dynamic and efficient payment choice,” Solana Foundation’s Josh Fried said at the time.
More Payment News on the Horizon
“Solana’s highly differentiated technology allows for applications that may not have previously been realistic for mass market use,” said Matthew Graham, founder of Ryze Labs (formerly Sino Global Capital). “Visa and MakerDAO undoubtedly will be the first of many significant adoption announcements.”
Federa wouldn’t spill the beans about exactly what else Solana has coming down the pike, but he did tease that there is likely more “payment news” on the way, maybe even as soon as next month.
“We are starting to have enough infrastructure that you can actually for the first time build real user-facing, user-friendly payment experiences on chain that rival the experience of something like Venmo,” he said.