While #Solana's outperformance has waned in the past month, it is still the best-performing network in the past 12–18 months by a country mile. Do the fundamentals justify the outperformance, or is it just a result of market hype and speculation?
🧵on Solana's network health and frameworks for valuing #blockchain assets.
🧵on Solana's network health and frameworks for valuing #blockchain assets.
While narratives and information asymmetry still have primacy in #crypto markets, the nascent field of blockchain fundamentals provides investors with a framework to cut through some of the noise and evaluate asset performance and relative valuation within the ecosystem.
Network Value:
🔍While the price is 35% below 2021 peak, the market cap has already reached new ATHs this cycle. This is important when we start to look at valuation metrics for the asset on a standalone basis and vs. history.
🔍While the price is 35% below 2021 peak, the market cap has already reached new ATHs this cycle. This is important when we start to look at valuation metrics for the asset on a standalone basis and vs. history.
Network Health:
🔍Daily Active Users (DAUs) is +400% in 9mths
🔍Solana one of only 5 networks have > 1m DAUs
🔍DAUs remain below 2021 high, which was most likely inflated by fake activity (FTX)
🔍quality of engagement in this cycle is markedly different - AI, DePin, consumer plus ofc meme/NFT degen activity
🔍Daily Active Users (DAUs) is +400% in 9mths
🔍Solana one of only 5 networks have > 1m DAUs
🔍DAUs remain below 2021 high, which was most likely inflated by fake activity (FTX)
🔍quality of engagement in this cycle is markedly different - AI, DePin, consumer plus ofc meme/NFT degen activity
🔍 Skepticism is warranted when interpreting on-chain data. With growing awareness, the risk of manipulation by insiders and Sybil users—who create fake identities to exploit airdrops—increases, distorting real user activity metrics.
🔓Key Insight: Judgement aside, Sybil attacks end up generating real revenue, boosting the network economics crucial to the development and expansion of blockchain technology.
🔓Key Insight: Judgement aside, Sybil attacks end up generating real revenue, boosting the network economics crucial to the development and expansion of blockchain technology.
Network Health: DAU Momentum
🔍User momentum is an indispensable metric for understanding the dynamics of blockchains, serving as a fundamental anchor that complements price action analysis.
🔍Observing strong user growth from period to period signals robust ‘network effects,’ indicating a network’s increasing value and appeal.
🔍User momentum is an indispensable metric for understanding the dynamics of blockchains, serving as a fundamental anchor that complements price action analysis.
🔍Observing strong user growth from period to period signals robust ‘network effects,’ indicating a network’s increasing value and appeal.
🔓Key Insight: Tracking the user momentum over multiple timeframes provides a better sense of the network effects and relative performance which can inform asset selection decisions.
Network Value to User (NVU) Ratio
🔍Amid significant asset appreciation, only a few networks saw user growth match token price increases.
🔍Solana's NVU has moderated to a range of 50-100, reflecting a more balanced growth/value dynamic
🔍Amid significant asset appreciation, only a few networks saw user growth match token price increases.
🔍Solana's NVU has moderated to a range of 50-100, reflecting a more balanced growth/value dynamic
Relative NVU Analysis
🔍When compared to its peers, Solana’s current NVU of 77 places it in the second cheapest quartile of networks in the ecosystem.
🔍When compared to its peers, Solana’s current NVU of 77 places it in the second cheapest quartile of networks in the ecosystem.
Network Health: Fees/Blockhain Revenue
1️⃣ Solana's fee revenue surge highlights its robust usage, justifying its impressive price performance amid debates on use cases.
2️⃣ Despite not reaching 2021 DAU peaks, fee income has shattered previous records, up 6x, indicating a strong financial underpinning to price gains.
3️⃣ Current daily fees average $1.8M, a 40x increase from 9 months ago, showing continued financial growth.
1️⃣ Solana's fee revenue surge highlights its robust usage, justifying its impressive price performance amid debates on use cases.
2️⃣ Despite not reaching 2021 DAU peaks, fee income has shattered previous records, up 6x, indicating a strong financial underpinning to price gains.
3️⃣ Current daily fees average $1.8M, a 40x increase from 9 months ago, showing continued financial growth.
Solana vs. Ethereum
In March Solana’s fee income rose to around 20% of Ethereum’s, a feat it has not accomplished before. Based on fee metric alone — and providing these levels can be sustained — Solana’s current valuation, which is approximately 20% of Ethereum, seems reasonable.
In March Solana’s fee income rose to around 20% of Ethereum’s, a feat it has not accomplished before. Based on fee metric alone — and providing these levels can be sustained — Solana’s current valuation, which is approximately 20% of Ethereum, seems reasonable.
Whats Driving Solana’s Exploding Fee Growth?
1️⃣ Solana's fee revenue boost was largely driven by airdrops and meme coins, with significant on-chain value shifts in NFTs, stablecoins, and gaming sectors.
2️⃣ Similar growth trends are seen across major blockchains like Ethereum, suggesting these patterns may be common while sustainability remains debated.
3️⃣ Meme coin culture, while often seen as speculative, is a significant force among younger generations and is reshaping tech adoption and digital asset investment.
1️⃣ Solana's fee revenue boost was largely driven by airdrops and meme coins, with significant on-chain value shifts in NFTs, stablecoins, and gaming sectors.
2️⃣ Similar growth trends are seen across major blockchains like Ethereum, suggesting these patterns may be common while sustainability remains debated.
3️⃣ Meme coin culture, while often seen as speculative, is a significant force among younger generations and is reshaping tech adoption and digital asset investment.
Revenue per dApps
1️⃣ Despite having fewer dApps (134) compared to Ethereum (2,702) and BNB (760), Solana shows a strong economic presence.
2️⃣ Solana's high dApp cashflow intensity, calculated by dividing daily fees by the number of dApps, ranks second only to Ethereum.
3️⃣ With competitive transaction costs, Solana has established itself as an economic powerhouse in the crypto ecosystem.
1️⃣ Despite having fewer dApps (134) compared to Ethereum (2,702) and BNB (760), Solana shows a strong economic presence.
2️⃣ Solana's high dApp cashflow intensity, calculated by dividing daily fees by the number of dApps, ranks second only to Ethereum.
3️⃣ With competitive transaction costs, Solana has established itself as an economic powerhouse in the crypto ecosystem.
Network-Value-to-Fees (NVF) Ratio
🔍Providing more fundamental rationale for the price outperformance, the surge in activity since last year has ended up driving the NVF ratio to a record low of 46.48x.
🔍Solana on an absolute basis is the cheapest its been relative to its history
🔍Providing more fundamental rationale for the price outperformance, the surge in activity since last year has ended up driving the NVF ratio to a record low of 46.48x.
🔍Solana on an absolute basis is the cheapest its been relative to its history
Relative Valuation
🔍Solana leads large networks with top-quartile fee growth over the past year and v low NVF ratio (46x), showcasing its fundamental strength and justifying its outstanding performance
🔍Solana leads large networks with top-quartile fee growth over the past year and v low NVF ratio (46x), showcasing its fundamental strength and justifying its outstanding performance
Solana Tops All Networks in Adjusted Fee Growth
1️⃣ Solana's 'Adjusted Fee Growth' metric removes price growth effects to show real economic activity changes.
2️⃣ This adjustment reveals Solana has the highest real fee growth among all chains at 3,259.7%.
3️⃣ This metric underscores Solana's genuine economic performance, not just price increases.
1️⃣ Solana's 'Adjusted Fee Growth' metric removes price growth effects to show real economic activity changes.
2️⃣ This adjustment reveals Solana has the highest real fee growth among all chains at 3,259.7%.
3️⃣ This metric underscores Solana's genuine economic performance, not just price increases.
🔓Key Insight: Solana’s fee growth on both a relative and absolute basis remains the strongest out of any rival network. And whilst, some of the underlying activity is dubious, highly mercenary, and likely fleeting, in the virtual world of blockchains,
increasing and intense usage is proof of viability and utility, with every new user creating network effects that should propagate more growth in the future.🔓
increasing and intense usage is proof of viability and utility, with every new user creating network effects that should propagate more growth in the future.🔓
Final Thoughts: This thread highlights some of the takeways from my report for @realvision Pro crypto subscribers a little over 2 weeks ago. With recent congestion and failed transaction issues, activity onchain has since declined. Pro crypto subscribers should look out for my next Solana report in 2 days, exploring the network issues' effect on price, the liquidity cycle, Solana's price projection and relative strength against other L1/L2 networks.
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