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Solana DeFi Ecosystem: A look at 2022

Solana, the biggest competitor to Ethereum’s dominance over DeFi, has exploded in popularity this year. The platform has raced past some prominent blockchains to secure itself the fifth slot in the top ten global cryptocurrencies by market cap. 

In the meantime, the market capitalization of Solana has crossed $52 billion as the platform’s native token, SOL, surges. From its all-time low of $0.5052 in May 2020, SOL rallied throughout 2021, reaching an all-time high of $260.06 in November 2021. 

As a highly versatile open-source blockchain project, Solana has quickly positioned itself as the newest favorite of the DeFi ecosystem. This third-generation layer-1 blockchain can facilitate a wide array of dApps, DeFi solutions, and smart contracts. Unlike other existing chains, Solana uses the hybrid consensus of proof-of-history (PoH) and proof-of-stake (PoS) mechanisms, which allows it to process up to 50,000 TPS and 400ms block time.

Amidst Ethereum’s problems related to scalability and gas costs rising at an alarming rate, Solana proved its worth, as hundreds of developers, both veterans and beginners, lined up to build on its infrastructure. A flurry of promising projects, spanning across DeFi, NFT, lending, and blockchain games, were quickly onboarded to the platform, helping SOL’s value grow spectacularly throughout 2021. 

At present, the Solana ecosystem boasts more than 500 dApps, including DeFi projects like Serum, Mango, Drift Protocol, Raydium, and Saber, lending protocols like Apricot Finance, Jet Protocol, Francium, Solend, and more, NFT marketplaces like Metaplex, Magic Eden, Solanart, and Solanalysis, as well as Web3 apps like Audius, Wum.bo, Brave Browser, Squads, and a lot more.

The Solana protocol’s total value locked (TVL) crossed $11 billion in the fourth quarter of 2021, with Raydium contributing the most, followed closely by Serum. One of the core reasons behind the exponential growth of Solana is its dynamic ecosystem. At a time when most layer-1 chains are becoming increasingly dependent on layer-2 scaling solutions, Solana presents itself as a layer-1 chain that offers the fastest-ever transaction speeds in the blockchain ecosystem. 

Furthermore, the platform ensures that transaction fees for both developers and users will always remain less than $0.01, which is the lowest to date. Other than this, the Solana blockchain is censorship-resistant, allowing dApps to run freely forever without ever pausing transactions.

Soda Protocol Aims To Expand Solana’s DeFi Dominance

While many promising projects are using Solana, let’s take a quick look at a project that aims to redefine on-chain lending. 

Soda Protocol is a DeFi lending protocol with a built-in on-chain credit system on the Solana network. It is the first project to introduce the credit rating system on the blockchain, thus opening a world of new opportunities for the evolving DeFi market.

Founded by a team that entered the blockchain industry at its earliest days, Soda Protocol seamlessly merges DeFi with its proprietary Sol ID credit ranking system while ensuring the highest levels of scalability. The platform offers three core services, including lending, composability modules, and the on-chain credit ranking system Sol ID.

As part of its lending service, Soda Protocol offers services quite similar to that of Aave and Compound. However, it also adds a few more products under its lending service, including Flash Loan, Flash Liquidation, Easy Repay, and more. 

Through the Sol ID credit system, Soda Protocol aims to open more possibilities for DeFi. The Sol ID is designed to collect and analyze different types of on-chain behavioral data. Credit scores of individual users are generated based on time-related weight functions and then issued as NFTs. These NFTs (Sol IDs) can be used across different services, including but not limited to other partner platforms, governance, IDO allocations, and more. The Sol ID will be launched alongside Soda Protocol’s mainnet release.

Finally, Soda Protocol also offers composability modules. These modules empower partner projects to seamlessly acquire Sol ID data to verify a user’s credit rating to better allocate utilities, such as under-collateralized loans, lower interest rates, and more. All of these activities will reference the user’s corresponding credit score, similar to traditional finance.

Hubble Protocol Aims To Boost DeFi On Solana

DeFi and stablecoin project, Hubble Protocol, is leveraging Solana’s infrastructure to offer interest rate products. With Hubble, users can earn returns just by holding tokens.

In terms of products, Hubble offers a multi-asset borrowing service with zero interest. It mints the USDH stablecoin for a one-time fee of 0.5% while offering users a yield of up to 7% on SOL and several other cryptocurrencies.

The platform will be rolled out on the Solana ecosystem in three phases, with the first already complete following the launch of the USDH stablecoin. The remaining two phases will introduce structured products and uncollateralized lending features.

To further accelerate the DeFi ecosystem on Solana, Hubble Protocol has raised $3.6 million from its private seed round from some of the leading names in the cryptoverse, including Jump Capital, Three Arrows Capital, DeFi Alliance, and several others.

Solana’s core vision is to help grow DeFi and Web3 while lowering entry barriers. Platforms like Soda Protocol and Hubble Protocol will play a critical role in helping turn this vision into a reality.  With Ethereum’s problems on the rise, Solana has established itself as the go-to platform for the booming DeFi space, indicating further growth in the future.

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