DeFi, Analysis

Is Solana Airdrop Season Here?

New airdrops could pump some life into Solana's TVL
Jack Inabinet Jack Inabinet Nov 29, 20233 min read
Is Solana Airdrop Season Here?

Solana stimmy szn has arrived!

Oracle network Pyth and DEX aggregator Jupiter unveiled airdrop programs at the start of the month and Solana’s largest tokenless protocol, liquid staking platform Jito, announced its token on Monday.

With three major projects committed to airdropping tokens to users, is a flood of wealth to ecosystem participants going to be enough to rehydrate Solana's DeFi ecosystem, whose TVL is drier than the Sahara?

Today, we're discussing the implications of these airdrops and asking whether this is only the beginning of airdrop mania on Solana 👀

🧐 Underperforming TVL

Market participants have been eager to scoop up SOL throughout 2023, yet their insatiable appetite to bid the token up has not developed into a desire to participate in Solana's DeFi ecosystem.

While SOL has rallied 500% year-to-date, price growth has vastly outpaced TVL growth. 

Source: DefiLlama

The 200% rally in Solana's USD-denominated TVL may appear impressive, but it remains below the pre-FTX collapse low watermark of $1B and is a band-aid on SOL-denominated TVL, which is down 45% on the year!

📖 Solana's Next Chapter

Top Solana protocols are set to distribute tokens to their most active onchain users via airdrop. As newly acquired tokens are injected across Solana, the resulting TVL infusion will help increase the valuation of the entire Solana ecosystem.

The arrival of airdrops on Solana may not allow TVL to outperform price, as the two are positively correlated metrics, but it should place upward pressure on both numbers and could be the force that actually allows SOL-denominated TVL to grow in 2024!

Demonstrating the ability of airdrops to attract TVL is the abrupt rise of Blast, an L2 offering "points" to those who deposit funds into a multi-sig prior to the project's February mainnet launch. Despite launching last week and not having a product, Blast's TVL managed to briefly surpass that of Solana.

 The arrival of airdrops is a key component in kicking off a potential Solana supercycle and is one of the easiest ways to onboard users to the chain!

Users of EVM chains are eligible for the Pyth airdrop. To claim it, however, they had to download a Solana native wallet to receive their Solana native asset, which could then be used within Solana native DeFi protocols. EVM recipients of the PYTH airdrop may represent net new users for Solana!

Airdropping tokens also helps get eyes on projects, and coverage of Solana airdrops alerts users and developers that cool applications exist on the chain. This goes a long way in representing Solana as a viable ecosystem and alternative to Ethereum.

⏭️ Takeaways

The arrival of "Solana Stimmy Szn" may herald the rebirth of Solana's DeFi ecosystem, but this outcome is far from assured, and while top-tier projects may be gearing up for large airdrops, the number of successful and innovative Solana protocols that can airdrop tokens is few and far between.

Liquidity remains on Ethereum, referenced by the ability of protocols like Blast to attract hundreds of millions in TVL with little more than a vague promise of an airdrop and questionable innovation, incentivizing developers to build there. As a result, Solana will be fighting an uphill battle for protocols, liquidity, and users.

Thanks to its low-fee environment, global state machine, and ability to provide consensus at the speed of light, Solana promises to unlock a new frontier of applications not possible on Ethereum; hopefully, they will come soon!

While the hype cycle of airdrops and their resulting wealth effect will likely be enough to attract new ecosystem participants to Solana and bolster key stats, to realize success from airdrops, Solana must nurture its own DeFi ecosystem and have a wide array of protocols ready to airdrop tokens.

Perhaps airdrops will be the fuel to incept another wave of Solana protocols; however, tragically, the current depth of tokenless protocols on the network of size is less than impressive, greatly diminishing the benefit that airdrops could have on the Solana ecosystem.

Jack Inabinet

Written by Jack Inabinet

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Jack Inabinet is a Senior Analyst with a passion for exploring the bleeding edge of crypto and finance. Prior to joining Bankless, Jack worked as an analyst at HAL Real Estate where he conducted market research and financial analysis for commercial apartment development and acquisition activities in the Seattle region. He graduated from the University of Washington’s Michael G. Foster School of Business and remains based out of the Seattle area.

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