In a surprising turn of events, the Solana blockchain overtook its long-standing rival, Ethereum, in terms of weekly total fees for the first time in July 2024. This milestone, reported by Blockworks Research, highlights the growing adoption of Solana, particularly fueled by a recent surge in memecoin activity.
Solana’s Rise: Fees and Rewards
Solana’s impressive week saw it generate roughly $25 million in total fees, surpassing Ethereum’s $21 million. This surge coincides with a period of intense activity on Solana-based memecoin platforms like Pump.fun and Moonshot. The popularity of these memecoins, with a combined market capitalization exceeding $50 billion, has significantly contributed to the network’s transaction volume and fee generation.
Furthermore, data from DeFiLlama reveals that the total value locked (TVL) on Solana has tripled since the beginning of 2024, currently sitting at around $5.5 billion. The high daily fees on July 28th, reaching $5.5 million, further solidify Solana’s growth. This translates to significant rewards for validators and stakers on the network. According to Blockworks data, 58% of fee revenue comes from MEV tips, with priority transaction fees contributing the remaining 37%. Dan Smith, Blockworks data analytics manager, aptly described the situation as “Solana validators and stakers absolutely eating this cycle,” indicating the profitability of participating in the network.
Staking Yields: Solana vs. Ethereum
Data from 21.co’s Dune Analytics paints a favorable picture for Solana stakers. Currently, Solana (SOL) stakers are earning yields of approximately 7%, significantly higher than Ethereum’s (ETH) 3.3% APR as reported by StakingRewards.com. This higher yield is a major advantage for Solana, potentially attracting more users to participate in securing the network.
Ethereum Maintains Dominance (For Now)
Despite Solana’s recent success in terms of fees, Ethereum remains the undisputed leader in terms of total value locked (TVL). DefiLlama data shows that Ethereum boasts a TVL of roughly $60 billion, dwarfing Solana’s $5.5 billion. Additionally, Ethereum enjoys a significantly larger developer ecosystem, with over 1,135 protocols currently built on its platform compared to Solana’s fledgling ecosystem.
Memecoin Mania: A Double-Edged Sword
The recent launch of celebrity-backed memecoins on Solana has undoubtedly contributed to the network’s growth in fees and activity. However, it’s crucial to acknowledge the inherent risks associated with these highly speculative assets. As highlighted by cryptocurrency analyst Slorg, many of these memecoins have experienced massive losses exceeding 99% within a month of their launch. While some coins managed to perform slightly better, even the “best performers” have dropped by over 70%. This volatility underscores the importance of caution for investors venturing into the memecoin space.
Solana’s Future: A Potential Contender
Solana’s recent surge in fees and user activity represents a significant milestone in its journey as a competitor to Ethereum. While Ethereum maintains its lead in terms of TVL and established protocols, Solana’s scalability and attractive staking yields could prove to be strong selling points. As the cryptocurrency market evolves, it will be fascinating to see whether Solana can maintain its momentum and continue to challenge Ethereum’s dominance. However, investors should remain cautious when engaging with highly volatile memecoins, despite their contribution to the network’s current activity.
