Article reposted from: Tim
Author: Adrian Zmudzinski
Compiled by: Tim, PANews
According to a recent report from Standard Chartered, the Layer 1 blockchain Solana may be evolving into a "single-function platform" that focuses solely on generating and trading Meme coins.
According to a research report from May 27, Solana dominates the public chain sector with high trading volume and low trading costs, thanks to its design architecture that allows for fast and low-cost transaction confirmations. This technological advantage has led to an unexpected consequence: so far, it has mainly focused on Meme coin trading, which occupies most of the activity on Solana (measured by "GDP", i.e., application revenue).
Standard Chartered stated that the Meme coin craze has posed a stress test for Solana's scalability, but the volatility and speculative nature of such assets also bring drawbacks. With the decline in Meme coin trading volume, the bank warns that Solana may struggle to maintain its momentum.
The Meme frenzy has passed its peak
The report pointed out that the frenzy for Solana-based Meme coins has passed its peak, and a decline in usage combined with "cheap" transactions is not an ideal combination. The bank suggests that Solana should expand into other areas that require a large number of low-cost, fast transaction processing, such as financial settlement, decentralized cloud computing, or real-time data exchange, as these emerging fields align closely with its blockchain's high throughput characteristics.
Solana decentralized exchange trading volume. Source: Standard Chartered
According to the report, these areas may include traditional consumer applications such as high-throughput financial applications and social media. However, the bank pointed out that scaling these applications may take years, which could have serious consequences for Solana. If progress falls short of expectations, its market competitiveness, developer ecosystem, and platform reputation may suffer severe blows, and its valuation may face significant downward pressure.
Therefore, we expect Solana's performance to lag behind Ethereum in the next two to three years, before catching up, at least in terms of actual value.
Standard Chartered's cryptocurrency target price. Source: Standard Chartered
Solana's advantage is gradually fading
Solana has long positioned itself as a fast, low-cost L1 public chain that supports smart contracts, directly competing with Ethereum. However, this advantage may be gradually diminishing.
Average transaction fees for Solana and Arbitrum. Source: Standard Chartered
Since the Dencun network upgrade in March 2024, Ethereum's second-layer platform has surpassed Solana in average transaction costs. This shift puts pressure on Solana's value proposition as "the cheapest high-throughput blockchain." Standard Chartered noted that Ethereum has achieved more efficient scaling while maintaining decentralization by modularizing data availability, execution, and consensus: "The modular approach allows Ethereum to scale transaction processing at low costs (after the Dencun upgrade) while maintaining the highly decentralized security advantages of the mainnet."
