The crypto summer of 2020/21 saw most alternative layer 1 protocols skyrocket to insane valuations and numerous projects in their respective ecosystems. This period has become known across the industry as “DeFi Summer.” With stimulus checks being distributed across the West and looming uncertainty over whether COVID lockdowns will be lifted, the economic problems of the time unleashed a tornado of wealth with seemingly exponential potential/possibility.
This six-month period of prosperity, which lasted until May 2021, was followed by a long bear market, which may now be coming to an end, as recent market activity suggests.
This sparked rumors in the crypto sphere of a DeFi Summer 2.0. Several factors, including a recent increase in TVL, suggest that this cycle will not start on Ethereum but on the Solana blockchain – what sparked these whispers and what are the chances of following through?
Overcoming Ethereum Obstacles: Democratizing DeFi Integration
The continued negative factors surrounding Ethereum are perhaps the strongest signs of the arrival of a Solana-led DeFi Summer. The Ethereum chain has been experiencing ongoing issues with high activity leading to inflated fees and gas prices, deterring many people from using it. This particular problem was evident during the last DeFi Summer. Solutions have emerged to help solve this problem since in the form of Layer 2 (Arbitrum, Optimism, Loopring, Base, ZkSync + others).
The economic barrier presented by Ethereum’s high usage costs, combined with the complex nature of understanding and using Layer 2 solutions, makes Ethereum less accessible to the average person. In contrast, Solana offers a less expensive and more user-friendly platform for crypto engagement.
Solana is an Ethereum-adjacent blockchain that defines itself in terms of ease of use for new consumers and potential for mass adoption.
Solana’s “native” crypto wallet is Phantom, an intuitive and easy-to-use wallet also available on mobile. In Phantom, users can store coins and NFTs and stake natively on the Solana token. Phantom is synonymous with Solana in the same way MetaMask is with Ethereum, the flagship blockchain wallet. Phantom grew from 40,000 users to 1.8 million in July-December 2021, which has since doubled to 3 million users, aiming for an end goal of 10 million weekly active users.
With crypto adoption traditionally hampered by difficult setup and onboarding processes due to the complexity of wallets and security, Phantom’s UI/UX makes it easy for newcomers to learn the ins and outs. outs of crypto and quickly begin their journey in the Solana ecosystem.
Own 1 SOL or own 1 ETH
Another advantage of Solana is the SOL cryptocurrency itself: $SOL currently stands at $57. Owning 1 Solana is feasible for most people, while owning 1 Ethereum is not. This removes a huge psychological price barrier for a new user of the channel.
If an amateur crypto investor sees that he can start experimenting with $50 and get used to the low gas fees, fast transaction speeds, and the ability to switch between protocols without hesitation, then transferring to Ethereum would seem foreign.
The two blockchains will of course coexist; However, given the current status of Ethereum (not counting layer 2s and future upgrades), most people cannot afford $30 to make 1 transaction on their first $100 to test crypto.
Paying $0.0003 in fees to move the same $100 will have broader appeal.
Is Solana Ready for a DeFi Boom?
Data from DeFiLlama reveals that at the height of the DeFi summer, Solana reached a total value locked (TVL) of $9.9 billion across 55.1 million transactions, with significantly less infrastructure than Today.
Recent and expected airdrops from various Solana projects have shifted the focus back to the platform. As more people enter the crypto world, Solana is increasingly becoming their first choice due to its affordability, speed, and user-friendliness, a deal sweetened by the prospect of receiving airdrops . With free tokens offered by an accessible platform, why would new users need to look anywhere else?
Potential airdrops are another incentive that will attract users to Solana. While most of Ethereum’s major DApps have already conducted airdrops, only a few of Solana’s dapps have done so.
As market conditions improve daily, signaling a potential bull market on the horizon, these platforms will expand and attract more capital. This should, in turn, lead to more frequent airdrops. Consider a scenario where person A informs person B about the opportunity to receive easy value from an airdrop into the crypto world. Naturally, person B’s curiosity will be piqued and they will likely imitate person A’s actions in hopes of benefiting from such opportunities. Such chain reactions will be easily facilitated by Solana.
The chain’s infrastructure has advanced significantly, rapidly expanding the surrounding community. The success of the recent Breakpoint conference at such a critical time places Solana at the forefront of these exciting developments.
While it seems likely that Solana will spearhead a potential DeFi Summer 2.0, it is important to note that the chain itself will not be the sole catalyst and render Ethereum obsolete. It is the knowledge of Solana’s user-friendly and profitable features that makes it the leading cryptocurrency for newcomers to the industry.
As more people engage, incentives will increase, leading to higher transaction volumes and a self-sustaining growth cycle in motion. We can expect projects that will enable further expansion and a new opportunity for decentralized financial freedom.
If these developments align, the coincidence of a Solana-driven DeFi Summer with summer 2024 could be a truly exhilarating experience.