Compiled by: Wu Talks about Blockchain
In this podcast, host Shang and Solana ecosystem deep cultivator Leo had an in-depth discussion on Solana's success factors, technical comparisons with Ethereum, and how Solana uses its unique infrastructure and low-cost advantages to attract users and transaction volume, especially to gain huge benefits in the Memecoin market boom. Leo shared how Solana's innovative mechanisms, including POH (Proof of History) and Solana's Layer 2 solution Sonic, can promote the future development of games and DeFi. In addition, Leo also explained in detail how the infrastructure in the Solana ecosystem, such as Jito and RPC service providers, make profits through liquid staking (LST) and MEV (maximum extractable value), and how they can use network effects to improve transaction efficiency and reduce costs.
Please note: The views of the guests do not represent the views of Wu Shuo. Wu Shuo does not endorse any products or tokens. Readers are requested to strictly abide by local laws and regulations.
The audio transcript was generated by GPT, so there may be some errors. Please listen to the full podcast .
Leo's self-introduction and initial experience with the Solana ecosystem
Shang: Hello everyone, welcome to this episode of Wu Shuo Podcast, I am the host Shang. Needless to say, the recent hot topic is that many people are rushing to Meme coins on the chain, especially recently almost all the Golden Dog coins are running on Solana. So it makes me think that many listeners must be very curious about what other related participants and projects are quietly making a lot of money behind this. Why do these activities almost all happen on Solana? What is so unique about Solana? Compared with Ethereum, what features make it the public chain with the most users and the largest transaction volume in this cycle?
Today, we are honored to invite Leo, who has been deeply involved in the Solana ecosystem for many years and is an active participant and builder. Leo, please say hello to everyone first.
Leo: Thank you Shang, hello everyone, I am Leo, online name iqx. Since I entered the circle in 2021, I have started to participate in the Solana ecosystem. When I first entered the circle, I experienced Ethereum and Solana at the same time. At that time, I felt that from the perspective of a newcomer, Solana's user experience was very good, so I have been paying attention to some of its Alpha projects.
When Solana was affected by the FTX incident in 2022, I also had a lot of assets on the Solana chain. During that time, I listened to a lot of spaces and AMAs in many communities, and found that the core builders of the Solana ecosystem did not leave because of this, but were still encouraging each other. At that time, I was deeply impressed by the community atmosphere of Solana, especially in January 2023, when everyone knew that Solana had an event called Super Team. I participated in its monthly meeting, which was mainly open to builders. Although the price of Solana has fallen by 95%, the atmosphere on the scene is very positive. There are more than 100 people participating. Everyone introduced their projects to each other and shared Alpha.
So I feel that Solana's core strength has not been lost, and the community is still very united. Another reason why I decided to stay in the Solana ecosystem is that some of my friends are also involved in technical development, and they also give high praise to Solana's technology. Most of them are full-stack engineers in the traditional Web2 industry, and they believe that the Rust language used by Solana has more advantages in security. Although Rust has a high entry threshold and it may not be easy for ordinary developers to get started, this is also the uniqueness of Solana. Therefore, I decided to continue to delve into the Solana ecosystem.
In April 2023, Mad Labs NFT was launched on the Solana network. At that time, its trading volume exceeded that of Ethereum's NFT blue chip project in the first month, successfully attracting a lot of heat back to Solana. I also started to create a Chinese community for Mad Labs and gradually became deeply involved in the Solana ecosystem. Currently, I am also a contributor to the Chinese community at Jito, Solana's largest LST and MEV provider. If you have any questions about Jito, you can always consult me. Thank you everyone.
Solana’s success factors compared to Ethereum’s technology
Shang: Okay, thank you, Leo. I think this podcast can be divided into two parts. In the first part, I think many listeners know that Solana has increased a lot and that Solana has a large trading volume, but they don’t have a deep understanding of Solana’s uniqueness, how it carries MEV and trading volume, its moat, etc., including myself. I may not pay special attention to these aspects. So, in the first part, we can talk about, as a Crypto industry participant who may be more involved in blockchain and on-chain transactions, but doesn’t know much about Solana, why do you think Solana is so successful? Why are there so many trading volumes and so many users on Solana now? What do you think is the main reason behind this?
Leo: I think, although I am not a developer, and although I know some programming, I am not that proficient. As an ordinary on-chain user, from this perspective, the biggest difference between Solana and Ethereum is that Solana introduces the concept of clock, which is unique to POH (Proof of History). In traditional Ethereum and Bitcoin, both use the mechanism of shared memory pool, while Solana does not have a memory pool. Solana's transactions are referenced by time as the axis of the transaction, while Ethereum does not have such a concept of time, and everyone's transactions are queued and packaged for processing.
In the Ethereum network, the concept of MEV (maximum extractable value) emerged. A classic example is the sandwich attack. When your transaction has not been processed, others increase the gas fee to jump the queue to execute the transaction, and then sell it to take advantage of the price difference.
This is a typical example of MEV. Solana’s MEV is a little different because Solana uses the clock concept. The transaction competition is actually speed and low latency of the network. If your transaction is not processed in the current time slot, it will go directly to the next slot without waiting for others. This is also one of the reasons why Solana has experienced several network outages.
A very important one was because of the inconsistent time between nodes, which caused the problem. Another reason was that due to spam attacks (DDOS attacks), a large number of transactions hit Solana's node validators, causing the network to crash. But you can see that every time the network goes down, Solana is able to fix the problem, and the system gradually becomes more perfect. From my personal point of view, I think these problems are problems that some software companies will encounter, and I can tolerate these bugs. I just think that after a bug occurs, you need to know what the cause is and how to improve it. As for Ethereum, although I haven't done in-depth research, I feel that its upgrade and improvement requires very complicated work. Wasn't there a Devcon conference recently, launching a major project for Beam Chain? It relies more on a five-year plan and continues to increase complexity through code upgrades.
And Solana, as I mentioned before, Solana is scalable through hardware. The running cost of our nodes is indeed very high now. Many people say that the cost of Solana nodes is too high, which is true, but in the long run, the cost of hardware will continue to decline. In the future, the cost of network maintenance should be lower and lower. On the contrary, if you look at Ethereum's five-year plan, do you think that the cost of network maintenance for Ethereum will become higher and higher in the future, more and more complex, and the probability of bugs will be greater? From a technical point of view, this is the fundamental difference between Solana and Ethereum. In addition, I also like their concept of Solana being a "Nasdaq" on the chain. I think that as history progresses, human beings continue to develop, which is to standardize commodities, standardize many commodities, and the other is the rate of information transmission.
Solana has been saying that it is a global information exchange that can be synchronized in real time. I think this is really the trend of the future. But in this process, Solana will still encounter many problems. For example, there was a problem with the Solana network in April this year. It was not a downtime, but I remember it was because a token called ORE was launched, which was mined on the Solana network through Pow. This token mines 60 tokens per second, causing everyone to scramble to mine, causing congestion in the entire network. You can simply understand it as a DDOS attack, because Solana's transaction fees are too low and the transaction speed is very fast, so the network is very likely to suffer DDOS attacks to a certain extent.
Later, Solana added the QWSOD function in the mainnet 1.18 upgrade. Simply put, Solana's nodes are divided into two types, one is the verification node that can vote, there are about 1,500 nodes, and the other is the non-voting node, which is often called the RPC node. RPC nodes help pass transactions to verification nodes. In the early days, the cost of building a node on the Solana network was very low, so many people built their own nodes to mine ORE. But after the 1.18 version upgrade, the RPC node mechanism has become more efficient. If the RPC node holds more staked tokens, it can process more transaction information, effectively alleviating the problem of network attacks.
Of course, some people will comment that this mechanism will make the network more centralized, and I agree, but I think it is a relatively effective solution at present. I believe that in the future, public chains like Aptos will also face similar problems in the pursuit of fast and low-cost features. As competition in the supply chain intensifies, DDOS attacks are inevitable. I think Solana is already a pioneer in this regard, and it provides a relatively good solution. I hope that more public chains can learn from Solana's experience and further optimize it.
Infrastructure in the Solana Ecosystem and MEV Profit Model
Shang: Got it. Can you briefly outline how some of the infrastructure behind the Solana ecosystem, such as nodes, Jito, and RPC service providers, are making profits during the Memecoin craze? Who are they that are quietly making a lot of money in this "gold rush"?
Leo: First, let’s take a look at DeFiLlama’s revenue rankings. You’ll find that Solana, Jito, and Raydium are almost always in the top five, and their revenues often even exceed the gas fee revenue of the Ethereum mainnet. These three companies can be said to be the main force of “making a fortune in silence”, and their tokens are also performing quite well.
Let's talk about RPC. RPC is actually the infrastructure that supports many TG bots. As we all know, many people use TG bots for high-frequency trading. The reason why these bots can be so fast is that they have a private key custody form of a wallet. Recently, a TG bot of a DEX seems to have had a security incident. It needs to save the user's private key because they need to control your trading instructions, and these bots will frequently send information to validators across the entire network.
These transaction records may be sent to the top 30% validators, because Solana's verification mechanism is that each slot has a leader, the leader is responsible for sorting transactions, and the remaining validators perform verification. These unprocessed transactions will be sent to the leader via RPC, sorted and processed by the leader, and finally broadcast to the entire network and passed to other RPC nodes.
As for Jito, let me briefly introduce that Jito is currently the largest LST (liquid staking provider) on Solana, accounting for about 43% of the market share. What you may not know is that about 80% of the validators on Solana are using Jito's client software for verification. Jito has a block engine that packages and sorts transactions, and then sends them to the leader who has installed the Jito client to let them process these transactions. This involves a concept called Jito Bundle, which is actually a tip for the validator.
For ordinary users, the functions provided by Jito can also directly affect their trading experience. For example, Jupiter, one of Solana's largest DEXs, has a function called MEV Protection on Jito. When using Jupiter, if you want to avoid being cut in line by other transactions, you only need to add a little tip to the transaction, also known as Tips. In this way, Jito's block engine will prioritize your transaction and ensure that your transaction will not be sandwiched between other transactions.
Shang: So in fact, in Solana, the entire infrastructure behind it plays a very important role. Right? I remember you mentioned before that Solana's own verification method actually has some flaws, especially in terms of MEV and transaction ordering. Then, Jito plays an important role, which greatly improves Solana's operating economy and efficiency. I may not have said it completely, can you add a little bit?
Leo: You are right. Solana's parallel network does have its advantages, but it also has problems, especially the problem of unprocessed transactions. Each slot time of Solana is about 0.4 to 0.6 seconds. If you catch a slot and submit a transaction within this time, it can be successfully uploaded to the chain; if you don't catch up, your transaction will have to wait for the next slot. Before the introduction of Jito, many people attacked the network in the form of DDoS, resulting in transactions not being processed in time.
I remember the earliest one was an IDO project. Everyone was scrambling to buy it, and the network crashed. After the introduction of Jito's block engine, this problem was alleviated. Jito's block engine is equivalent to having a core engine, which requires all validators to use this mechanism to play its role. For example, if we now have 300 slot validators using the Jito client as the leader, then if the next batch of slots does not use Jito's node, Jito will not be able to pass on the transaction information correctly. Using the Jito client's validator is like managing the transaction sorting, which solves the problem of transaction congestion.
Through Jito, MEV (maximum extractable value) and arbitrage opportunities are given to validators. And according to the current economic model, most of the MEV income is distributed to stakers, with more than 90% of the income going to these stakers.
Shang: I see, that’s why validator node operators like you are willing to install Jito, because you can earn more revenue.
Leo: Yes, that's right. We also operate a community node ourselves, of course, with the Jito client installed. In this way, we can increase some of our MEV revenue. MEV revenue comes from users paying us tips through the Jito bundle service, giving priority to the block engine to process these transactions. If a validator of a Jito client is the leader in a slot, it will process these transactions with tips first. Jito's block engine has already sorted the transactions, and we only need to execute these sorted transactions.
Shang: I see. I'm sure everyone is very curious about how much revenue these MEVs have. Could you please tell us?
Leo: According to some reports I saw yesterday, the current inflation of the Solana network is about 5.8%. But because not all SOL is staked, the staking incentive in the network is about 7.6%. In addition, MEV income accounts for about 3% of the network income. Specifically, as a validator, we can choose how much MEV income to allocate to stakers. We currently distribute about 90% of MEV income to stakers. So this means that Solana's staking can get about 7.6% of the basic income, and MEV income is an additional dividend. Simply put, the more active the network is, the higher the MEV income will be. A few months ago, this MEV income was only about 1%.
Jito’s profit model and Solana MEV robot arbitrage opportunities
Shang: Does the Jito project itself make profits through MEV or similar network growth or transaction volume growth?
Leo: It seems that there is. About 5% of the revenue will be taken by Jito’s giant foundation, and the rest of the revenue will be distributed to LST holders. Because Jito itself is the largest LST of Solana, 80% of the B-side services it provides use Jito clients, and these clients are actually free. But on the other hand, as the largest LST of Solana, Jito’s profit source is still through these users holding JitoSOL.
For users who hold JitoSOL, they convert Sol into JitoSOL and no longer use native staking, but instead stake through JitoSOL's staking network. JitoSOL will automatically delegate these Sols to the top 200 validators in the system, which are usually the ones with the highest returns. We are also continuously working to improve our rankings, and we are probably around 300th at the moment. In order to enter these top 200, the validator's voting rate must be above 99%, and must provide sufficiently high returns.
So JitoSOL's revenue is actually the largest source of revenue in the entire Jito protocol. Currently, this part of the revenue is almost entirely distributed to JitoSOL holders. Recently, there is also a proposal to distribute 0.15% of this part of the revenue to Jito's token holders, so the price of Jito's coin has also risen recently.
In fact, this part of the dividend is very small now, if you really look at the numbers, but I think it is still a good demonstration. This proportion may increase in the future, but it is not certain whether it can increase. Because after the founder took office recently, many regulatory issues began to be relaxed, and everyone began to test the waters. If the dividend is really implemented, this token may be regarded as a security.
Shang: So it sounds like Jito tokens are also a way for ordinary people to profit from Solana or Memecoin's trading volume. Is that right?
Leo: I think, at this stage, JitoSOL is the best choice because it generates revenue directly.
Shang: What do you think of the entire Jito project? How will it develop in the future?
Leo: If you are optimistic about the Jito project, its current infrastructure is free, and it actually makes a profit by providing staking services to users. Users transfer Sol to Jito, and Jito helps users make money through its best validators, while Jito earns some fees from it.
Of course, Jito's future restaking is also doing very well, which is just getting started, and we can talk about it later. However, if you are optimistic about Jito in the long term, buying Jito tokens is a good choice. If we look at the topic discussed today, about Memecoin, I think JitoSOL is a very good investment target.
Shang: Got it. Actually, I want to talk about one more topic, because you just mentioned that Solana has a clock, which is very different from Ethereum's memory pool. Can we talk in detail about the difference between the MEV robot in Solana and Ethereum? This should be a very interesting topic, and many people may not be aware of it.
Leo: I see. Well, Ethereum's MEV mainly comes from your ability to know unprocessed transaction information and then arbitrage. In Solana, since there is no shared memory pool, it is difficult for you to know this information. Of course, Solana has a similar situation. I can briefly introduce it. Suppose I am a validator. In a round of transaction processing, I know which transactions have not been processed. At this time, as a validator, I also have the opportunity to do a "sandwich attack" like Ethereum, but this information is private, only I know it, and the other 1,499 validators cannot know it.
This situation does exist, but due to Solana's permission control mechanism, many validators will follow the rules. For example, Solana Foundation and Jito have blacklists. If you are a validator and make such an unethical transaction, you will not be able to obtain Jito's delegation support. Solana Foundation also has a delegation project, and if you make such a "bad transaction", they will not delegate Sol to you. This part is similar to Ethereum.
Shang: I see. From the perspective of an on-chain trader, will there be no slippage or front-running on Solana like on Ethereum? On Ethereum, we often see MEV robots front-running transactions to make profits. Because Solana has this clock mechanism, it means that if you submit an order in the first second, the robot cannot front-run your order. Can this situation be understood this way?
Leo: Yes, Solana is indeed weaker in terms of traditional MEV. Ethereum mainnet can only process 60 transactions per second, while Solana can process more transactions faster. This means that the transaction queue on Solana is relatively short, and the arbitrage space for MEV robots is also reduced. In Ethereum, robots only need to increase gas fees to preempt transactions, while on Solana, robots require higher hardware requirements.
On Solana, the role of MEV is weakened because it uses a clock mechanism, which avoids the common front-running problem in Ethereum. MEV on Solana occurs more after the transaction is processed. Solana's blockchain structure is permissionless, which means there are many different transaction pools on the chain. For example, when someone submits a large transaction, there may be a price difference between different pools, and robots can arbitrage by monitoring transaction information.
Solana's information transmission structure is like a tree diagram. The more SOL you stake, the earlier you will know about the transaction, and the time difference is very small. For some robots, this tiny time difference determines whether they can make a profit. Jito also provides a service. Since Jito coordinates 80% of the validators on Solana, you can subscribe to Jito's service and learn which transactions can be arbitraged through Jito.
In Jito, there is a service called searcher, which can help you quickly obtain arbitrage opportunities in the network. After you subscribe to Jito's service and find arbitrage opportunities, you can pay tips through Jito's bundle service to ensure that these transactions are processed first. This whole process actually creates arbitrage space between processed transactions and the ecosystem.
Let me give you an example. A few weeks ago, someone came to me and said that they made four to five million dollars by monitoring transaction addresses. Their arbitrage model is to monitor a developer releasing a new token and buy it immediately. Using the bonding curve, later users will push up the price, and the earliest traders will make a profit.
Interestingly, these arbitrage robots do not need to care about the specific narrative. As long as others buy, they can sell and make a profit. The person actually gave a very low tip, but he was still able to buy first. Later, another team tried to copy his approach, but they were always one or two slots later than that address. This is the advantage of Solana. Only machines in the same physical computer room can get information and respond to transactions the fastest. This is why high-frequency traders pay special attention to physical location.
Shang: Just like high-frequency trading on Wall Street, it is often said in movies that traders even lay cables just to be a little bit faster than others, and this tiny gap can bring huge profits.
Leo: Yes, it is precisely because of this difference in physical location that those addresses with servers in the same data center can obtain transaction information faster and trade first, while others will lag behind by several slots on the network, even if they pay higher tips.
Shang: Yes, the money earned by these MEV robots can also be counted as LP's impermanent loss. For ordinary traders, they don't need to be greedy too much. Do you think this mechanism of Solana, or this function of Solana, will become Solana's moat? Is this an important reason for Solana's continued glory?
Leo: I think so. Solana's innovative mechanisms, especially the improvements in MEV and transaction processing, do constitute its competitive advantage. In addition, Raydium's revenue is also very high, and I am also a Memecoin LP enthusiast.
Shang: Memecoin’s LP is indeed a very interesting area.
Leo: Yes, that’s right.
Memecoin and LP Profit Opportunities in the Solana Ecosystem
Shang: Actually, many people think that being an LP is a pitfall, but it seems that in the Raydium and Memecoin markets, being an LP is actually very profitable. I would like to hear about your experience in this area.
Leo: It actually depends on whether your transaction fees can cover the impermanent loss. I have read a report before that the overall return of LP on Ethereum is negative, because the handling fee cannot make up for the impermanent loss at all. And I think this problem is mainly due to the performance limitations of Ethereum. The trading volume of many tokens on Ethereum is concentrated in CEX (centralized exchange) because the cost of CEX is lower, and the LP on the chain often becomes a tool for CEX arbitrage.
So many people say that AMM (automated market maker) absorbs a lot of "toxic traffic" on Ethereum, that is, others buy low and sell high through CEX, and then sell high and buy low on AMM. This arbitrage model makes most of the AMM's traffic come from arbitrageurs, and good traffic almost all occurs in the exchange, not on the chain.
Shang: It seems that the only trading volume is from arbitrageurs, and regular users have no reason to trade on-chain, especially to pay such high gas fees.
Leo: Yes, why should ordinary users pay hundreds of dollars in gas fees on the chain? If you only want to buy a few hundred dollars of coins, can't you just buy them directly on Binance? In fact, on Ethereum, this high gas fee makes people reluctant to trade. On Solana, the transaction cost of Memecoin is very low. I remember in the first round of Memecoin cycle, around Q1 2023, I saw a person who switched from Ethereum to Solana in a Telegram group. He said that he made a lot of money on Solana because he could make 100 times the profit with Solana, while Ethereum didn't even pay a gas fee.
Indeed, Solana’s transaction costs are much lower, which is why Solana transaction aggregators like Jupiter can succeed on Solana, but have difficulty on Ethereum. On Ethereum, Uniswap dominates the traffic, but even with good transaction routers, such as 1inch, it is difficult to complete transactions with high gas fees. On Solana, gas fees are almost negligible, so transaction slippage is smaller, more liquidity pools can be mobilized, and liquidity is higher.
You can see that Solana’s monthly transaction volume is twice that of Ethereum’s mainnet recently, although Solana’s TVL (total value locked) is still far behind Ethereum, even less than half. But for LP providers, Solana’s low TVL and high transaction volume mean that the transaction fee is relatively high, which can fully cover the cost.
Let me give you the most exaggerated example. Last year, in the Memecoin project MOTHER, I was the first LP within 24 hours and earned a very high return. The initial APR was more than 19,000, and the APY was 36,500%. You can earn 50% of the handling fee in one day. Of course, the income will decrease over time, but during that period of time, I invested one or two thousand dollars and eventually earned nearly 20,000 dollars in handling fees.
Shang: From one or two thousand to 20,000?
Leo: Yes, I made some adjustments to concentrate liquidity in the middle. When the first wave of price rose to 20 cents, I started to sell some, and then added more positions when it fell back, but overall, I earned three or four times the commission. I made these profits in about three weeks.
In addition, I also shared another Memecoin called Gecko in the Mad Labs group. Its community is very active. Although the market value is not large, the trading volume is high. Although the token price does not fluctuate much, it still has good community support. I earned more than double the transaction fee during the test period, and the highest annualized return reached 500% to 1000%.
Shang: So MOTHER’s LPs made more money compared to simply holding coins?
Leo: Yes, I should have doubled my money. If you focus on Solana's Memecoin market, being an LP is very cost-effective. Solana's Memecoin market has many high-frequency trading opportunities. If you are only an LP for a short period of time, such as 12 hours or 48 hours, the transaction fees are difficult to make up for the impermanent loss. Therefore, the best way to be an LP is to hold for a long time to ensure that the transaction fees can cover the losses.
The biggest feature of Solana's Memecoin is its high volatility. The price goes up and then falls, and when it goes back up, it can bring high returns. For bad Memecoins, like the Christmas tree project, it will disappear after a wave of rise. But if the Memecoin community is active, there are frequent updates on Twitter, and the project is continuously managed, then it is very beneficial to be an LP.
At present, I think Solana's Memecoin has entered the second round of the cycle. The first round was from February to April, and the second round attracted more people to participate. The second round of the market is more complicated, but it also gives many VCs and project parties opportunities. They have the resources to enter the market and may earn some profits in the short term.
This makes the market more competitive and riskier. But I am now mainly working as an LP for two Memecoins, WIF and Popcat. Through centralized liquidity trading, my daily income remains at around 0.5% to 3%. This LP income is very ideal on Solana, but it is almost impossible to achieve such a profit on Ethereum.
Memecoin projects on Solana, such as Popcat and other Memecoins, already have many LP pools, which account for a large proportion of the ecosystem. Through these LP pools, you can take advantage of lower transaction costs to earn higher returns.
Shang: I often see that many Memecoin transactions are actually adding two Memecoins together to provide liquidity.
Leo: Yes, if you like these two Memecoins very much, although some people may think that LP is a loss, in fact, during the holding process, you don’t know whether it will rise or fall. My philosophy is that if I like these two Memecoins very much, I will put them together as LPs and earn handling fees. I will be happy with whichever earns more. In the end, one will definitely perform better than the other, but as a holder, as long as I like these two Memecoins, the goal is to make them more and more. Therefore, if you make this kind of blue-chip Memecoin as an LP, it is actually a very stable choice. I have been an LP for about a month or two because I think these Memecoins are more stable, especially BONK and WIF, which are no longer the "leading" Memecoins.
Yes, we used to think that WIF represents dogs and Popcat represents cats, and the price fluctuations of these two Memecoins are also somewhat correlated. Therefore, the impermanent loss when doing LP will not be too large, which actually makes the entire ecosystem more robust. In the past, people who speculated on Memecoin may only make money by "buying and holding", and you still have to sell it in the end. But in Solana, you can earn fees through LP, and you can make money just by fees, which provides another profit model for the Memecoin ecosystem.
This also allows more people like me to participate. I am not the kind of person who can do high-risk transactions every day, but I believe in Memecoin culture. As for the "super cycle" of Memecoin, I think only the top Memecoins have real culture, and the others are actually junk coins. In this case, I can indirectly support the price of these Memecoins by buying these blue-chip Memecoins as LPs. The price of blue-chip Memecoins will help boost the prices of second- and third-tier Memecoins because their prices are related.
This basically makes Solana's Memecoin ecosystem more robust, and also explains why Solana stands out in this round. Although other chains will also have hot spots, and even new competitors may emerge, the most popular Memecoin will still be on the Solana ecosystem. I think this is a very important reason.
Shang: Thanks for sharing the wealth code, haha.
Memecoin is the future trend of combining social networking + e-sports
Leo: I think Memecoin is a future trend that combines social interaction and e-sports. You know Roblox, right? It’s an American gaming platform, and the company has made a lot of money. Although I tried it, I didn’t find it attractive and the graphics were poor. Many people say that our token is also very big, but it doesn’t matter because it’s the concept of “Minecraft”.
Shang: Can this be understood as a commercial competitor to Minecraft, where people can create their own games with almost no code?
Leo: Yes, Roblox was launched by Microsoft, and it makes money by taking commissions. I think projects like PumpFun may be a way for post-2010s young people to socialize and compete. I think the evolution of social interaction from SMS, QQ to WeChat, and now to TikTok shows that electronic social interaction requires more and more attention. The next generation may be children who stare at PumpFun all day, watching live broadcasts and charging tokens.
I have asked many friends, especially those in the community, and many of them feel that after the age of 25, it is difficult to adapt to this high-intensity PVP gameplay. For many young people, although they don’t have much money, this model is very suitable for them to make their first pot of gold. You see, some time ago, a kid issued a token called QUANT when he was 12 or 13 years old. As a result, he made tens of thousands of dollars, and later it was pushed up to a market value of 40 million by the big guys. I think there are bad sides to this, but it also has its unique value and is worthy of attention. Moreover, all this happened on Solana because its network performance is very high.
My ideal blockchain is this: In the past, Ethereum's bigwigs analyzed the importance of blockspace. Blockspace is actually Ethereum's auction mechanism, which makes money by auctioning blockspace. But I think that as an infrastructure (INFA) provider, it should carry higher value at a lower cost. Whether it is trading $1,000 or trading on Nasdaq, Solana's cost is much lower. I believe that in the future Solana can become a "Nasdaq on the chain", where everyone trades on it 24 hours a day, 7 days a week. But from my point of view, this market is essentially a casino business. I have no objection, but you have to choose which assets and which tokens can be bankers. Tokens like Sol, Jito and Raydium, if you are optimistic about the casino business, then go ahead and participate, but understand that if you don't participate, you may be miserable, so it's better to extract a small part of the water.
Shang: Got it. As you learn more about this space, the ways for ordinary people to participate in this gold rush become clearer, especially for investors who are unwilling to take too much risk. For example, they can choose to hold Sol, Raydium, Jito tokens, or participate in LP.
Leo: Yes, LPs like SOL and WIF, or SOL and GOAT are also very profitable. I checked today and I have earned 30% in fees, which feels great. Young people always exchange time and energy for money, but in the end, you still have to learn to use money to make money. The tokens and strategies we just discussed are all good ways to help you make more money with your own money.
Shang: I totally agree, especially for those old hands who are anxious in the cryptocurrency world. Many previously familiar areas, such as altcoins and Ethereum, do not seem to be picking up in this cycle. New areas, like Memecoin, are gaining more and more attention, and the market narrative is becoming bigger and bigger.
Leo: I agree with this very much. It is true that many participants have turned to Solana from the traditional market. Especially for investors who are unwilling to take too much risk, participating in Memecoin's LP is a relatively safe way. Moreover, the liquidity pool of DeFi on Solana is not large compared to Ethereum, but the income from participating in Solana's staking is much higher than that of Ethereum.
Although Solana has a high inflation rate, as long as the number of new wallet addresses on the network grows by more than 5.8% annually, in theory, the token price will continue to rise. For big players, participating in staking is not only about maintaining the security of the Solana network, but also about making profits through MEV income. This model is very good.
Solana's future directions include payment, Layer 2, and gaming.
Shang: We mentioned earlier that Solana’s focus and narrative is now mainly on the casino business, but over time, the focus may rotate. What do you think of Solana’s future development trend? Will a new supply chain or public chain emerge, gradually becoming the next Ethereum competitor?
Leo: At present, I am still optimistic about Solana, although I also agree with some people's criticism of Memecoin. Memecoin is indeed more of an emotional hype, but it also shows the advantages of Solana's infrastructure. A partner of Placeholder mentioned before that Solana is like Apple, while Ethereum is like Angel. Ethereum's current infrastructure structure has led to liquidity fragmentation and affected the development of the ecosystem. Solana can unify the entire ecosystem and bring liquidity together through the POH (Proof of History) verification method. I think this is a breakthrough in Solana's infrastructure, reaching a new height.
I hope that more high-performance public chains will emerge in the future, so that more ordinary people can enter the crypto field. Solana is currently progressing very fast, but some new public chains, such as the MOVE system and EVM parallel execution systems such as Monad, although the white paper is written perfectly, it may take several years for actual application to be truly implemented. Recently, the Sui network was down, and I saw some bigwigs in the Solana community celebrating and congratulating it on being on the right track. It is not shameful to be down, the important thing is to find the problem and optimize it. In fact, Solana has not had frequent downtime in the past year. The release of the inscription at the beginning of the year and the short claim of Jupiter were very smooth, showing Solana's progress in network stability.
Next, as Lily mentioned, in the payment field and stable currency application space, I think Solana will have great development potential. What Solana lacks most in some professional institutions is stability, and now the stability of this network has been greatly improved, which will attract more projects to enter the Solana ecosystem in the future.
The FTX incident did have an impact on the Solana ecosystem, but new good projects and excellent developers are still working quietly. I think that excellent projects usually take two to three years to mature. Projects like Jito, Jupiter, Raydium, and even Camel lending platforms, which I like, existed before the FTX incident and have a history of two to three years. In the future, I will pay close attention to some emerging projects, such as the taxi-hailing protocol through the Solana network, similar to the Uber project. This project has a history of two years and is now in trial operation in the United States, with very good data performance. In addition, DePIN also has great potential in the Solana ecosystem.
The biggest connection between DePIN and blockchain is payment. My physical equipment needs to operate, and I need to reward users through tokens. On Ethereum, if I want to issue a token worth $5, I may have to pay a $3 gas fee, which makes this model unsustainable. On Solana, DePIN can be settled in real time, which makes Solana an ideal choice for hardware mining and various end-user payments. As more and more hardware projects develop on Solana, they can pay end users at a lower cost and higher efficiency. I think that although the overall failure rate may be high, as long as one or two explosive projects emerge, it will drive a sharp rise in the price of Solana tokens. I believe that Solana (SOL) will usher in greater value increases in future cycles.
Shang: In addition to the current MEV, there may be emerging areas such as DePIN in the future. What do you think of the future development of Solana, especially the possibilities in the gaming field? Recently, it seems that some new teams and projects have begun to pay attention to Solana, but they have not yet gained large-scale attention.
Leo: Yes, that's true. For example, Solana recently launched its first Layer 2 project, called Sonic. Sonic is a Layer 2 specifically designed for games, using Solana's technology to optimize game operations. What it can do is that many games hope to be able to implement on-chain services, but game interactions that are completely on-chain often have no economic value. For example, for some gambling games, their goal may be fairness rather than direct profit. Traditionally, such games would incur higher costs if they were run on the mainnet.
Sonic can put the underlying rules of the game on its own network. If the game has token incentives, such as when a player completes a task and gets a token, Sonic can set these tokens directly to the Solana mainnet for Layer 2 operations. This design is very suitable for the development of future games. Look at Layer 2 like IMX. Although it puts the game on the chain, liquidity is not well solved. One of the core problems of Crypto games is price support. If there is no liquidity, no one is willing to play.
Sonic’s design is clever because it allows game developers to continue to gain liquidity on Solana’s mainnet and enjoy the benefits of the Solana network. This design can help game developers operate more efficiently and avoid the difficulty of building an independent ecosystem on their own. You can’t build a Layer 2 and decentralized exchange ecosystem like DEX, Raydium, Orca, and Meteora alone. Solana’s mainnet liquidity is the underlying support for these games.
I think once Sonic is launched, it may drive the development of GameFi and attract more traffic to Solana. I heard that they have signed some game projects. Although game projects are not as popular as Memecoin in the Crypto ecosystem, I believe that the potential of games is still huge, and more developers and teams will enter the Solana ecosystem in the future.
