Bankless: Is the Solana Airdrop Frenzy Coming? It May Revive the DeFi Ecosystem

Original Title: "Is Solana Airdrop Season Here?"
Original Author: Jack Inabinet, Bankless
Original Translation: Luccy, BlockBeats

Editor's Note:

On November 28, Jito announced the launch of its governance token JTO, with 100 million tokens in total, of which 90 million will be distributed in this airdrop, and the remaining 10 million will be distributed next year. Jito is a liquid staking service on Solana, where users deposit SOL into Jito's liquid staking pool and receive JitoSOL. In addition to staking rewards, users' JitoSOL will also accumulate MEV rewards.

As of now, Jito's TVL has approached 6.8 million SOL, with over 50,000 stakers. Bankless analyst Jack Inabinet delves into the rise of airdrops in the Solana ecosystem and discusses the potential impact of these airdrops on the Solana DeFi ecosystem, as well as whether this marks the beginning of a new wave of development for Solana.

Additionally, the article presents views on the impact of airdrops on TVL (Total Value Locked) and token protocols, as well as the challenges Solana may face in competing with Ethereum, while highlighting some key questions regarding Solana's future development.

Solana Stimmy Szn has arrived!

Earlier this month, the Oracle network Pyth and DEX aggregator Jupiter announced airdrop plans, while Solana's largest non-token protocol platform, the liquid staking platform Jito, announced its token on Monday.

Three major projects have announced airdrops of tokens to users. Will this influx of wealth be enough to invigorate Solana's DeFi ecosystem, especially when its total locked value (TVL) is drier than the Sahara Desert?

Today, we will explore the impact of these airdrops and discuss whether this is just the beginning of the Solana airdrop frenzy.

Underperforming TVL

Since 2023, market participants have been eager to buy SOL; however, their greedy desire to raise token prices has not translated into a wish to participate in Solana's DeFi ecosystem.

Despite SOL rising 500% year-to-date, its price growth far exceeds the growth of TVL.

Solana's TVL in USD has increased by 200%, which seems impressive, but it still falls short of the pre-FTX collapse baseline of $1 billion, and it is merely a stopgap for the TVL measured in SOL, which has decreased by 45% this year!

The Next Chapter for Solana

Top Solana protocols plan to distribute tokens to their most active on-chain users through airdrops. As the newly acquired tokens circulate on Solana, the resulting TVL injection will help enhance the valuation of the entire Solana ecosystem.

The arrival of airdrops on Solana may not lead to outstanding price performance for TVL, as these two are positively correlated indicators, but it should exert upward pressure on both figures and may be the actual force driving the growth of SOL-denominated TVL in 2024!

The sudden rise of Blast demonstrates the ability of airdrops to attract TVL. This is an L2 project that offered "points" rewards to users who deposited funds into a multi-signature account before its mainnet launch in February. Despite just launching last week and not having a product yet, Blast's TVL briefly surpassed Solana's TVL.

The arrival of airdrops is a key component in initiating a potential Solana supercycle and is one of the simplest ways to attract users to the chain!

EVM chain users are eligible to participate in Pyth's airdrop. However, to claim the airdrop, they must download a Solana-native wallet to receive their Solana-native assets, which can then be used in Solana-native DeFi protocols. EVM recipients of the PYTH airdrop may represent net new users for Solana!

Airdrop tokens also help attract attention to projects, and reports on Solana airdrops remind users and developers that there are cool applications on-chain. This has gone a long way in establishing Solana as a viable ecosystem and an alternative to Ethereum.

Key Takeaways

The arrival of "Solana Stimmy Szn" may signal a revival of the Solana DeFi ecosystem, but this outcome is not guaranteed. While some top projects may be preparing for large-scale airdrops, the number of successful and innovative Solana protocols capable of conducting airdrops is quite limited.

Liquidity remains concentrated on Ethereum, as protocols like Blast can attract hundreds of millions of TVL solely based on vague promises of airdrops and questionable innovations, incentivizing developers to build there. Thus, Solana will face tough competition in terms of protocols, liquidity, and users.

With its low-fee environment, global state machine, and ability to provide consensus at lightning speed, Solana promises to unlock new application domains that are impossible on Ethereum, hoping they will arrive soon!

While the hype cycle of airdrops and the wealth effect they generate are likely sufficient to attract new ecosystem participants to Solana and support key statistics, for Solana to succeed from airdrops, it must nurture its own DeFi ecosystem and prepare various protocols for airdrops.

Perhaps airdrops will become the catalyst for another wave of Solana protocols. However, unfortunately, the current depth of non-token protocols on the network is impressive, significantly diminishing the potential benefits that airdrops could bring to the Solana ecosystem.