Coinbase Report Suggests Solana Has a Strong Chance of Making a Comeback

On February 22nd, the US cryptocurrency exchange Coinbase released a report on Solana (SOL), which has a differentiated technical infrastructure and healthy network activity indicators, evaluating its potential to re-establish its position as a competitor to Ethereum.

The report mentions the impact that Solana suffered from the collapse of the major cryptocurrency exchange FTX and related investment company Alameda Research last November, pointing out that the market capitalization decreased by about 87%, and the total value of staked assets (TVL) decreased by 97%.

Due to the FTX shock, Solana experienced accelerated capital outflows and a price collapse. Major NFT projects such as “Degods” and “Y00ts” announced their withdrawal from Solana and their migration to other chains, and there were concerns about the survival of the chain itself.

Solana founder Anatoly Yakovenko claims that the relationship between Solana and FTX has been historically exaggerated. He explained that the development of the decentralized order book Serum, which was contributed by FTX, was forked and has been replaced by the community-driven OpenBook. Coinbase acknowledged that this point had a significant impact on market sentiment and caused a decline in value, but emphasized that Solana is an “optimized blockchain for high throughput, minimal costs, and native scalability”, and its differentiated technological aspect is the foundation for future value propositions.

Solana was launched in March 2020 and recorded a market capitalization of $77 billion in November 2021, attracting attention overnight. Solana, which allows for inexpensive and fast transactions, gained many new users as an alternative to the Ethereum blockchain, whose transaction fees “skyrocketed” during the bullish market of 2021.

The report argues that Solana’s activity on the network, measured by transactions and active users, is “comparable to Ethereum’s current activity”. Specifically, Solana’s current market capitalization is only about 4.3% of Ethereum’s, but the number of daily active users on the network is equivalent to 43.7% of Ethereum’s (Solana: ~150,000 people, Ethereum: ~344,000 people).

The rolling 30-day average of market capitalization to daily transaction ratio

The rolling 30-day average of market capitalization to daily active users

In addition, when comparing daily transaction volumes, Solana processes 17 times more transactions than Ethereum, with 17.7 million transactions compared to Ethereum’s 1 million. Coinbase sees Solana’s clear low fees as a factor that promotes user activity and attributes this to the technical merits of the protocol.

Solana’s potential is not only measured by network activity but also by developer activity across the ecosystem. According to data from Github, Solana’s developer activity exceeded that of Ethereum in late 2021 and early 2022. However, Solana’s developer activity subsequently declined below that of Ethereum in May 2022. Currently, there are 63 active developers working on Solana, compared to 133 active developers on Ethereum. However, Solana has disputed this data, claiming that the number of active developers working on Solana full-time is actually 120. They also noted that certain repositories and organizations on Github are private and thus not captured by these metrics.

Developer activity trends (Solana versus Ethereum)

Electric Capital released a recent developer activity report that takes a broader approach and suggests higher totals for both networks. According to the report, there are 383 full-time developers for Solana versus 1,873 for Ethereum as of mid-December. Full-time is defined as developers who commit code 10+ days of a month. Nevertheless, even the conservative lower bound of 63 active developers for Solana would suggest relative strength versus Ethereum after adjusting for the large discrepancy in market capitalization of the networks.

Another notable initiative for Solana is their forthcoming mobile phone, Solana Saga, which will provide users with a secure platform for storing private keys and accessing decentralized applications. This crypto-specific mobile stack will also allow developers to build applications outside the control of existing web2 platforms, offering more opportunities for innovation. The device was sent to developers for testing in mid-December, and the public release is scheduled for the first quarter of 2023.


In 2022, the broader decline in the crypto markets also affected Solana, particularly due to the collapse of FTX which had a significant impact on market sentiment. Despite this, Solana’s technical value proposition remains intact as a blockchain that is optimized for high throughput, minimal costs, and native scalability. It represents a unique approach within the layer-1 space. With strong network activity in terms of transactions, users, and development, Coinbase sees Solana as a strong competitor in the layer-1 landscape, according to the report.

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