Although the SOL token has performed well this year, the TVL data is bleak. Can large-scale airdrops truly make Solana a "replacement" for Ethereum?

Author: Jack Inabinet, Bankless

Translator: Felix, PANews

The oracle project Pyth Network and the DEX aggregator Jupiter launched an airdrop plan earlier this month. Pyth Network will airdrop PYTH tokens to over 75,000 wallets. Jupiter Exchange will airdrop 40% of the upcoming JUP tokens to the Jupiter Exchange community, with approximately 955,000 eligible users. Jito, the largest tokenless protocol and liquidity staking platform in the Solana ecosystem, announced the governance token JTO on November 28. 10% will be airdropped to Jito community members.

With the airdrop of tokens from three important projects, can the significant "liquidity" of ecosystem participants reverse the bleak TVL data of the Solana DeFi ecosystem? This article will discuss the impact of these airdrops and whether they herald the beginning of an airdrop frenzy in the Solana ecosystem.

Poor TVL Performance

Throughout 2023, market participants have been eager for SOL to rise, but their insatiable desire for SOL price growth has not translated into participation in Solana DeFi.

Although SOL has risen by 500% so far this year, the pace of price growth far exceeds the growth rate of TVL.

Source: DefiLlama

While the 200% increase in Solana's TVL in USD terms may seem decent, it is still lower than the $1 billion level before the FTX collapse, and the 45% decline in TVL in SOL terms since the beginning of the year is just a fig leaf.

The Next Chapter for Solana

The top protocols in the Solana ecosystem will distribute tokens to its most active on-chain users through airdrops. As newly acquired tokens are injected into Solana, the resulting TVL will help increase the overall valuation of the entire Solana ecosystem.

The arrival of Solana airdrops may not surpass the performance of SOL price in terms of TVL, as the two are positively correlated, but airdrops should improve the performance of both data and may prompt an increase in TVL in SOL terms in 2024.

The sudden rise of Blast proves the ability of airdrops to attract TVL. Blast is an L2 platform that provides "points" to users who deposit funds into multi-signature before the project's mainnet launch in February. Despite being launched just last week and without a product, Blast's TVL has temporarily exceeded that of Solana.

Airdrops are a key component of initiating a potential super cycle for Solana and one of the simplest ways for users to join the ecosystem.

EVM chain users are eligible for the Pyth airdrop. However, to receive the airdrop, users must download the Solana native wallet to receive Solana native assets, which can be used in Solana native DeFi protocols. Users receiving the PYTH airdrop are likely to be new to Solana.

Airdropped tokens also help projects gain attention. Reports of Solana airdrops remind users and developers that there are "cool" applications on the chain. This is beneficial for promoting Solana as a viable ecosystem and an alternative to Ethereum.

Key Points

The arrival of "Solana Stimmy Szn" does not necessarily indicate a rebirth of the Solana DeFi ecosystem. While leading projects may be preparing for large-scale airdrops, the number of successful airdropped tokens and innovative Solana protocols is few.

The liquidity of Ethereum is still strong, as protocols like Blast can attract hundreds of millions of TVL with just a vague airdrop promise and questionable innovation, thereby incentivizing developers to build there. Therefore, Solana will face a tough game in terms of protocols, liquidity, and users.

With its low fees, global state machine, and the ability to provide consensus quickly, Solana is poised to unlock new application areas that are impossible on Ethereum.

While the hype cycle of airdrops and the wealth effect they generate may attract new participants to join Solana and improve key data metrics, for a complete rise through airdrops, Solana must cultivate its own DeFi ecosystem and prepare a series of protocol tokens available for airdrops.

Perhaps airdrops will help propel a new wave of Solana protocols, but unfortunately, the lack of tokenized protocols on the network greatly diminishes the potential benefits that airdrops could bring to the Solana ecosystem.

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