With the successive airdrops of leading protocols such as Pyth and Jito, can the Solana DeFi ecosystem rise to the airdrop boom?

By Jack Inabinet, Bankless

Compilation: Felix, PANews

Oracle project Pyth Network and DEX aggregator Jupiter launched airdrop plans earlier this month. Pyth Network will airdrop PYTH tokens to over 75,000 wallets. 40% of Jupiter Exchange’s upcoming JUP tokens will be airdropped to the Jupiter Exchange community, with approximately 955,000 users qualifying. Jito, the largest token-free protocol and liquid staking platform in the Solana ecosystem, announced the release of its governance token JTO on November 28. 10% will be airdropped to Jito community members.

With three major projects airdropping tokens, can the massive amount of “liquidity” of ecosystem participants turn the Solana DeFi ecosystem with dismal TVL data around? This article will discuss the impact of these airdrops and whether they herald the beginning of the Solana ecosystem airdrop boom.

Underperforming TVL

Throughout 2023, market participants have been hungry for SOL to rise, but their insatiable appetite for SOL price has not developed into a desire to participate in Solana DeFi.

While SOL is up 500% year-to-date, prices are growing much faster than TVL.

Source: DefiLlama

While Solana’s 200% rise in dollar-denominated TVL looks like a good performer, it’s still below the $1 billion level before FTX’s collapse and is just a fig leaf for SOL-denominated TVL to fall 45% year-to-date.

The next chapter for Solana

The head protocol of the Solana ecosystem will distribute tokens to its most active on-chain users via an airdrop. With the newly acquired tokens injected into Solana, the resulting TVL will help increase the valuation of the entire Solana ecosystem.

The arrival of the Solana airdrop may not allow TVL to outperform SOL price performance as there is a positive correlation between the two, but the airdrop should make both numbers perform better and may lead to growth in SOL-denominated TVL in 2024.

Blast’s sudden rise is a testament to the ability of airdrops to attract TVLs. Blast is an L2 platform that offers “credits” to users who deposit funds into multisig before the project’s mainnet launch in February. Although Blast only released last week and has not launched a product, Blast’s TVL has temporarily surpassed Solana.

Airdrops are a key component of launching a potential Solana Super Cycle and one of the easiest ways to get users to join the ecosystem.

Users of the EVM chain are eligible for Pyth airdrops. However, in order to claim the airdrop, users must download the Solana native wallet to receive Solana native assets, which can be used in the Solana native DeFi protocol. Users who receive PYTH airdrops are likely to be new to Solana.

Airdropping tokens also helps the project gain traction. Reports of the Solana airdrop are a reminder to users and developers that there are “cool” apps on the chain. This goes a long way in promoting Solana as a viable ecosystem and alternative to Ethereum.

Essentials

It is unclear whether the arrival of “Solana Stimmy Szn” heralds the rebirth of the Solana DeFi ecosystem. While top projects may be preparing for large-scale airdrops, there are very few successful and innovative Solana protocols that have achieved success through airdrops.

Ethereum’s liquidity remains strong, as protocols like Blast can attract hundreds of millions of dollars in TVL with just a vague airdrop promise and dubious innovation, which in turn incentivizes developers to build there. As a result, Solana will face a tough game in terms of protocols, liquidity, and users.

Thanks to the Solana’s low fees, global state machines, and ability to provide consensus quickly, Solana is poised to unlock new applications that are not possible on Ethereum.

While the hype cycle of the airdrop and the resulting wealth effect may attract new participants to join Solana, making key data metrics perform better. But to rise to the top with airdrops, Solana must nurture its own DeFi ecosystem and prepare a range of protocol tokens available for airdrops.

Perhaps the airdrop will fuel a new explosion of the Solana protocol, but unfortunately, the current tokenless protocol is not as good as it could be at the network scale, which greatly undermines the potential benefits of the airdrop to the Solana ecosystem.

Related reading: Large-scale Solana airdrop season is coming?This article reviews seven potential protocols and interaction strategies