The airdrop season of Solana may be the beginning of the rebirth of its DeFi ecosystem.
Written by: Jack Inabinet
Translated by: TechFlow
Solana's airdrop season has arrived.
Earlier this month, Oracle network Pyth and DEX aggregator Jupiter launched airdrop programs, and Jito, Solana's largest non-token protocol and liquidity staking platform, also announced its token on Monday.
These airdrop programs provide wealth to Solana's DeFi ecosystem, aiming to reinvigorate the Total Value Locked (TVL) of the Solana ecosystem.
Today, we will discuss the impact of these airdrops and explore whether this is just the beginning of the Solana airdrop frenzy.
Underperforming TVL
Despite SOL's price increase of 500% this year, Solana's TVL has shown relatively weak performance.
Solana's USD-denominated TVL has increased by 200%, which may seem impressive, but it is still lower than the level before the FTX crash and has decreased by 45% compared to the TVL denominated in SOL.
Solana's Next Chapter
Top Solana protocols will distribute tokens to the most active on-chain users through airdrops. The injection of newly acquired token liquidity into the entire Solana ecosystem is expected to contribute to the valuation of the entire Solana ecosystem.
The arrival of airdrops may not surpass the price increase in TVL, as these two metrics are positively correlated, but it should provide upward momentum for both figures and may be the force that actually drives the TVL denominated in SOL to grow in 2024.
The ability of airdrops to attract TVL has been demonstrated in the rise of Blast, which surpassed Solana's TVL shortly after its launch.
The arrival of airdrops is a key component of initiating the Solana Supercycle and one of the easiest ways to onboard users onto the chain.
Users of EVM chains are eligible to participate in Pyth's airdrop. However, to claim it, they must download the Solana native wallet to receive their Solana native assets, which can then be used in Solana native DeFi protocols. The EVM recipients of the PYTH airdrop may represent new users for Solana.
Airdropped tokens also help to attract project attention, reminding users and developers of the excellent applications on the chain. This is very helpful in positioning Solana as a viable ecosystem and an alternative to Ethereum.
Key Points
Solana's airdrop season may be the beginning of the rebirth of its DeFi ecosystem, but this outcome is far from certain. While top projects may be preparing for large-scale airdrops, the number of successful and innovative Solana protocols eligible for airdrops is very limited.
Currently, liquidity still remains on Ethereum, and protocols like Blast are able to attract billions of TVL simply through vague promises of an airdrop and questionable innovation, incentivizing developers to build there. Therefore, Solana will face a tough battle in terms of protocols, liquidity, and user acquisition.
With its low-cost environment, global state machine, and the ability to achieve consensus at the speed of light, Solana is poised to open up new application areas that Ethereum cannot achieve.
While the hype cycle of airdrops and the wealth effect it brings may be enough to attract new ecosystem participants to join Solana and support key statistics, for airdrops to be successful, Solana must nurture its own DeFi ecosystem and be ready for various protocols to airdrop tokens.
Perhaps airdrops will be the driving force for another wave of Solana protocols; however, unfortunately, the depth of non-token protocols on the network is currently quite limited, greatly diminishing the potential benefits that airdrops could bring to the Solana ecosystem.
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