In this episode of the podcast, host Shang engages in a deep discussion with Leo, a key player in the Solana ecosystem, covering the factors behind Solana’s success, a technical comparison with Ethereum, how Solana leverages its unique infrastructure and low-cost advantages to attract users and trading volume, particularly in the Memecoin market, where it has seen significant profits. Leo shares insights into Solana’s innovative mechanisms, such as Proof of History (POH) and Solana’s Layer 2 solution, Sonic, and how these are driving the future development of gaming and DeFi. Additionally, Leo elaborates on key infrastructure in the Solana ecosystem, such as Jito and RPC service providers, explaining how they profit through Liquid Staking (LST) and Maximum Extractable Value (MEV), and how they use network effects to improve transaction efficiency and lower costs.

Please note: The views of the guest do not represent those of WuBlockchain, and WuBlockchain does not endorse any products or tokens. Readers are advised to strictly adhere to the laws and regulations of their respective jurisdictions.

The audio record was generated by GPT and may contain some errors. Please listen to the full podcast:

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Leo’s Introduction and Early Experience with the Solana Ecosystem

Shang:

Hello everyone, and welcome to this episode of the WuBlockchain podcast. I’m your host, Shang. The recent hot topic, as you all know, is the surge in Memecoins on-chain. In particular, almost all of the recent meme tokens have emerged on Solana. This made me think: many of our listeners are probably curious about which participants and projects are quietly making big profits behind the scenes. Why is all this happening on Solana? What makes Solana stand out? What features does it have compared to Ethereum that have made it the blockchain with the most users and the highest trading volume during this cycle?

Today, I’m honored to invite Leo, who has been deeply involved in the Solana ecosystem for years and is an active participant and builder. Leo, please say hello to our listeners.

Leo:

Thanks, Shang. Hi everyone, I’m Leo, also known as IQX. I’ve been part of the Solana ecosystem since I entered the space in 2021. When I first got into crypto, I experienced both Ethereum and Solana. From a newcomer’s perspective, I found Solana’s user experience to be excellent, so I started paying close attention to some of its Alpha projects.

In 2022, when Solana was impacted by the FTX collapse, I had a significant amount of assets on the Solana chain. During that period, I participated in many community spaces and AMAs. I noticed that the core builders of the Solana ecosystem didn’t leave; instead, they were encouraging each other. The community atmosphere left a deep impression on me, especially in January 2023. As many of you know, Solana hosted an event called Super Team, which is open to builders. Despite Solana’s token price having dropped by 95%, the atmosphere at the event was extremely positive. Over a hundred people attended, and we introduced our projects to each other and shared Alpha insights.

That’s when I realized that the core strength of Solana hadn’t dissipated, and the community remained very united. Another reason I decided to stay in the Solana ecosystem was because some of my friends, who are also involved in technical development, gave very high praise to Solana’s technology. Most of them are full-stack engineers from Web2 industries, and they believe that the Rust language used by Solana has clear advantages in terms of security. While Rust may have a steeper learning curve, which might make it harder for developers to get started, this is also what sets Solana apart. So, I decided to continue deepening my involvement in the Solana ecosystem.

In April 2023, Solana’s network launched the Mad Labs NFT project. Within the first month, its trading volume surpassed that of Ethereum’s leading blue-chip projects, successfully drawing a lot of attention back to Solana. I also began building the Chinese community for Mad Labs and gradually became more involved in Solana’s ecosystem. Currently, I’m still a contributor to the Chinese community at Jito, Solana’s largest LST and MEV provider. If anyone has questions about Jito, feel free to reach out to me. Thanks, everyone.

Solana’s Success Factors and Technical Comparison with Ethereum

Shang:

Thanks, Leo. I think we can divide this podcast into two parts. In the first part, many listeners may know that Solana has risen significantly and that it has a large trading volume, but they might not fully understand its uniqueness — how it handles MEV and trading volume, and its moat. Even I haven’t paid much attention to these aspects. So, for the first part, let’s discuss why you think Solana has been so successful. Why does Solana now have such high trading volume and so many users? What do you believe are the main reasons behind this?

Leo:

I think that, while I’m not a developer myself — I know some programming, but I’m not an expert — based on my experience as an average user on the blockchain, the biggest difference between Solana and Ethereum is that Solana introduced the concept of time, specifically through Proof of History (POH). In traditional systems like Ethereum and Bitcoin, transactions are processed through a shared memory pool, while Solana doesn’t use a memory pool. Solana’s transactions are referenced by time as the central axis, while Ethereum doesn’t have this concept of time, and transactions are processed sequentially.

In Ethereum’s network, this gave rise to the concept of MEV (Maximum Extractable Value), and a classic example is the sandwich attack. When your transaction hasn’t been processed yet, someone else can jump in by increasing the gas fee, execute their transaction first, and then sell it at a profit by exploiting the price difference.

This is a typical example of MEV. Solana’s MEV, however, is somewhat different, because Solana uses time as a core concept, and the competition between transactions is actually about speed and the network’s low latency. If your transaction isn’t processed in the current time slot, it simply moves to the next slot without waiting for others. This is also one of the reasons why Solana has experienced network outages a few times.

A significant instance was when there was a discrepancy in time synchronization between nodes, which caused issues. Another reason for downtime was due to spam attacks (DDoS), where massive transactions overloaded Solana’s validators, causing the network to crash. However, after each downtime, Solana has managed to fix the issues, and the system gradually becomes more robust. From my personal perspective, I believe these problems are typical for software companies, and I can tolerate such bugs. The key is to identify the cause of the bugs and figure out how to improve. On the other hand, although I haven’t deeply studied Ethereum’s upgrades, I feel that Ethereum’s improvements require very complex work. Didn’t we recently see the Devcon conference, which launched the major Beam Chain project? Ethereum relies heavily on a five-year plan, using code upgrades to continually increase complexity.

Solana, as I mentioned earlier, scales through hardware. The operational cost of nodes is indeed high right now, and many people say Solana’s node costs are too expensive, which is true. But from a long-term perspective, hardware costs will continue to drop, and network maintenance costs should decrease over time. In contrast, if you look at Ethereum’s five-year plan, you might wonder if Ethereum’s network maintenance costs will rise and become more complex, increasing the probability of bugs. From a technical standpoint, this is the fundamental difference between Solana and Ethereum. Another thing I like is the concept that Solana is the “Nasdaq on-chain.” I think, as history progresses, human development focuses on standardizing goods and increasing the speed of information exchange.

Solana has always said that it’s a global real-time information exchange, and I really think this is the future trend. However, Solana will still face many challenges. For example, in April of this year, Solana faced a problem that wasn’t really an outage, but I remember that it was triggered by the launch of a token called ORE, which was mined using Proof of Work (PoW) on Solana. This token generated 60 tokens per second, leading to a rush to mine, causing network congestion. You could think of it as a DDoS attack because Solana’s transaction fees are very low and the network is fast, making it vulnerable to certain types of attacks.

Later, Solana added a feature called QWSOD in the mainnet upgrade 1.18. In simple terms, Solana’s nodes are divided into two types: validator nodes that can vote, about 1,500 nodes, and non-voting nodes, which are the RPC nodes that help transmit transactions to validators. In the early days, the cost of setting up a node on Solana was low, so many people set up their own nodes to mine ORE. However, with the 1.18 upgrade, the RPC node mechanism became more efficient. If RPC nodes hold more staked tokens, they can process more transactions, effectively mitigating network attack issues.

Of course, some may criticize this mechanism for making the network more centralized. I agree with that, but I believe it is currently an effective solution. I believe that public chains like Aptos will face similar problems when striving for speed and low cost. As the competition in the supply chain intensifies, DDoS attacks will inevitably occur. I think Solana has been a pioneer in this regard, providing a relatively good solution. I hope other public chains will learn from Solana’s experience and further optimize their networks.

Infrastructure and MEV Profit Models in the Solana Ecosystem

Shang:

Got it. Could you briefly summarize how some of the infrastructure in the Solana ecosystem, like nodes, Jito, and RPC service providers, are profiting during the Memecoin boom? Who is quietly making big profits in this “gold rush”?

Leo:

First, we can take a look at DeFiLlama’s revenue rankings. You’ll notice that Solana, Jito, and Raydium are almost always in the top five, and many times their revenue exceeds that of Ethereum’s mainnet gas fees. These three are the main players quietly making big profits, and their token performances have been quite strong.

Now, about RPC. RPC actually serves as the infrastructure for many Telegram (TG) bots. As we know, many people use TG bots for high-frequency trading. These bots are fast because they use a wallet’s private key for custodial purposes. Recently, there was a security incident with a DEX’s TG bot, which needed to store users’ private keys in order to control their trade orders. These bots frequently send information to validators across the network.

These transactions are typically sent to the top 30% of validators because Solana’s validation mechanism assigns a leader to each slot, who is responsible for sorting transactions, while the remaining validators perform validation. The unsorted transactions are sent via RPC to the leader, who sorts and processes them before broadcasting to the rest of the network and other RPC nodes.

As for Jito, it’s the largest Liquid Staking Provider (LST) on Solana, with around 43% of the market share. What people might not know is that about 80% of Solana’s validators are using Jito’s client software for validation. Jito has a block engine that packages and sorts transactions before sending them to leaders using Jito clients to process. This involves a concept called Jito Bundle, which is essentially a tip for validators.

For regular users, Jito’s functionality directly impacts their trading experience. For example, Jupiter, one of Solana’s largest DEXs, has a feature on Jito called MEV Protection. When using Jupiter, if you want to avoid being front-run by other transactions, you simply add a small tip to your transaction. This way, Jito’s block engine will prioritize processing your transaction and ensure it doesn’t get stuck between others.

Shang:

So, infrastructure plays a very important role behind the scenes in Solana, right? I remember you mentioned before that Solana’s validation method also has some flaws, especially in terms of MEV and transaction ordering. Then, Jito plays a key role by improving the economic efficiency and performance of Solana. I may not have explained it fully — could you add anything?

Leo:

You’re absolutely right. Solana’s parallel network does have its advantages, but it also has problems, especially with unprocessed transaction buildup. Each Solana slot lasts about 0.4 to 0.6 seconds. If you manage to submit your transaction during that time, it gets on-chain; if not, you’ll have to wait for the next slot. Before Jito was introduced, many people used DDoS-style attacks to overwhelm the network, causing delays in transaction processing.

One of the earliest I remember was a project that was doing IDO. Everyone was rushing to participate, and the network crashed. After Jito’s block engine was introduced, the issue was alleviated. Jito’s block engine essentially serves as a core engine, requiring all validators to use this mechanism for it to function. For example, if 300 validators are using Jito’s client as the leader, and the next batch of slots doesn’t have a Jito node, Jito can’t relay the transaction information properly. Validators using Jito’s client effectively manage transaction ordering, solving congestion issues.

Through Jito, MEV and arbitrage opportunities are more accessible to validators. According to the current economic model, most MEV earnings are distributed to stakers — over 90% of the revenue goes to them.

Shang:

Got it. So that’s why validator node operators like you are willing to install Jito — to earn more revenue.

Leo:

Exactly. We operate a community node, and of course, we’ve installed Jito’s client. This allows us to earn some MEV revenue. The MEV income comes from users paying us tips via Jito’s bundle service to prioritize their transactions. If a validator with a Jito client

is the leader in a slot, they’ll process those tip-paying transactions first. Jito’s block engine sorts the transactions, and we just need to execute them as they are.

Shang:

Got it. I’m sure everyone is curious about how much MEV income that generates. Could you share some figures?

Leo:

Based on a report I saw yesterday, the current inflation rate of Solana’s network is about 5.8%. But since not all SOL is staked, the staking rewards are about 7.6%. On top of that, MEV revenue accounts for about 3% of the network’s total income. Specifically, as a validator, we can decide how much of the MEV income we share with stakers. Currently, we distribute around 90% of the MEV income to stakers. So this means Solana’s staking rewards are about 7.6% base returns, and MEV income is an additional bonus. Simply put, the more active the network, the higher the MEV income. A few months ago, MEV revenue was only about 1%.

Jito’s Profit Model and Solana MEV Bot Arbitrage Opportunities

Shang:

Has Jito, as a project, profited from MEV or similar network growth and transaction volume increases?

Leo:

Yes, it seems so. About 5% of the revenue goes to Jito’s main foundation, while the rest is distributed to LST holders. Jito, as Solana’s largest LST, offers B2B services, and about 80% of users rely on Jito’s client software, which is actually free. However, Jito’s main source of profit comes from users holding JitoSOL.

For JitoSOL holders, they convert their SOL into JitoSOL, not using native staking, but staking through JitoSOL’s network. JitoSOL automatically delegates these SOL to the top 200 validators, who usually provide the highest yields. We are also working on improving our ranking; currently, we’re around the 300th spot. To enter the top 200, a validator’s voting rate must exceed 99% and offer sufficiently high yields.

So, the income from JitoSOL is actually the largest revenue source in the entire Jito protocol. Currently, almost all of this revenue is distributed to JitoSOL holders. There’s a recent proposal to allocate 0.15% of this income to Jito token holders, which has led to an increase in Jito’s token price.

In reality, the dividends are still quite small if you look at the numbers, but I think it’s a good demonstration. The proportion of this payout may increase in the future, but it’s not certain yet. Since the new CEO came on board, many regulatory issues are starting to loosen up, and people are testing the waters. If dividends are implemented, the token could potentially be considered a security.

Shang:

So, it sounds like Jito tokens are also a way for ordinary people to profit from Solana or Memecoin’s transaction volume. Can we understand it this way?

Leo:

Yes, from the current perspective, JitoSOL is the best option because it directly generates returns.

Shang:

How do you see the future of Jito as a whole? What are its prospects?

Leo:

If you’re optimistic about Jito, its current infrastructure is free. Essentially, it profits by providing staking services for users. Users send their SOL to Jito, and Jito helps them earn money by delegating to top-performing validators, while Jito takes a small fee in the process.

Of course, Jito’s restaking features are also performing very well, and that’s just getting started — we can talk more about that later. But if you’re bullish on Jito long-term, buying Jito tokens is a good choice. Based on today’s discussion, if you’re looking into Memecoin, I think JitoSOL is a very solid investment.

Shang:

Got it. Actually, I also want to discuss another topic. You mentioned earlier that Solana has a clock, which is very different from Ethereum’s memory pool. Can we delve into the differences between MEV bots on Solana and Ethereum? This seems like a pretty interesting topic that many people might not fully realize.

Leo:

Sure. Ethereum’s MEV mostly comes from knowing about unprocessed transactions and arbitraging them. In Solana, because there’s no shared memory pool, it’s difficult to access this information. That said, Solana does have similar situations. Let me give a simple explanation: if I’m a validator, I can know which transactions haven’t been processed during a round. At that point, as a validator, I could also perform a “sandwich attack” like in Ethereum, but this information is private — it’s only known to me, and the other 1,499 validators are unaware.

This kind of situation does exist, but because of Solana’s permission control mechanisms, many validators follow ethical guidelines. For instance, both Solana Foundation and Jito maintain blacklists. If you’re a validator who engages in unethical transactions, you won’t receive delegation support from Jito. Solana Foundation also has its own delegation program, and if you engage in such “bad trades,” they won’t delegate SOL to you. This part is similar to Ethereum.

Shang:

Got it. From the perspective of an on-chain trader, would you say Solana doesn’t have the same slippage or front-running issues as Ethereum? In Ethereum, we often see MEV bots front-running transactions to earn profits. But because Solana has this clock mechanism, it means that if you submit your order in the first second, the bots can’t jump in front of you. Is that the right understanding?

Leo:

Yes, Solana indeed weakens traditional MEV. Ethereum’s mainnet can process only about 60 transactions per second, while Solana can process more and faster. This means that Solana’s transaction queue is relatively shorter, and the arbitrage space for MEV bots is reduced. In Ethereum, bots just need to increase gas fees to front-run transactions, while in Solana, bots require higher hardware standards.

On Solana, the role of MEV is minimized because of the clock mechanism, which prevents the typical front-running issues in Ethereum. MEV in Solana mostly happens after transaction processing. Solana’s blockchain structure is permissionless, meaning there are many different transaction pools. For instance, when a large transaction is submitted, there might be price discrepancies between different pools, which bots can exploit for arbitrage by monitoring transaction information.

Solana’s information transmission structure is like a tree. The more SOL you stake, the earlier you know about the transaction, with very little time lag. For some bots, this tiny time difference is crucial to their profitability. Jito also offers a service where, because it controls 80% of Solana’s validators, you can subscribe to Jito’s service to spot arbitrage opportunities.

In Jito, there’s a service called searcher, which helps you quickly find arbitrage chances in the network. By subscribing to Jito’s service, you can identify arbitrage opportunities and use Jito’s bundle service to pay tips, ensuring your transactions are processed first. This whole process creates arbitrage space between processed transactions and the ecosystem.

A few weeks ago, someone reached out to me after making $4 to $5 million by listening to transaction addresses. Their arbitrage strategy involved listening to a developer releasing a new token, buying in immediately, and using the bonding curve model. Later users would push up the price, and the early buyers made a profit.

Interestingly, these arbitrage bots don’t care about the narrative; they just buy when others do, and sell for profit. The person paid very low tips but still managed to front-run the transactions. Later, another team tried to replicate their strategy but was always a slot or two behind. This is Solana’s advantage — only machines within the same physical data center can get the transaction information and react quickly. This is why high-frequency traders care so much about physical location.

Shang:

It’s just like high-frequency trading on Wall Street. In the movies, you often hear that traders lay down cables just to get a slight edge, and that small difference can lead to huge profits.

Leo:

Exactly. It’s because of this physical location gap — machines in the same data center can access transaction information faster and react earlier, while others across the network will always be a couple of slots behind, even if they pay higher tips.

Shang:

Right, and the profits earned by these MEV bots could be considered as “unwarranted losses” for LPs. For regular traders, they don’t need to be overly greedy. Do you think Solana’s mechanism, or rather its functionality, could become its moat? Is this one of the key reasons why Solana will continue to thrive?

Leo:

I believe so. Solana’s innovative mechanisms, especially in terms of MEV and transaction processing improvements, definitely give it a competitive edge. Additionally, Raydium’s income is also very high, and I’m also an LP enthusiast for Memecoin.

Shang:

Memecoin LPs are definitely a very interesting area.

Leo:

Yes, absolutely.

Memecoin and LP Profit Opportunities in the Solana Ecosystem

Shang:

Many people think that providing liquidity (LP) is a losing game, but it seems that in the Raydium and Memecoin markets, LP can actually be quite profitable. I’d love to hear about your experiences in this area.

Leo:

It really depends on whether your transaction fees can cover the impermanent loss. I’ve seen a report before that discussed how LPing on Ethereum is generally unprofitable because the transaction fees don’t even come close to covering the impermanent loss. I think the main reason for this is Ethereum’s performance limitations. A lot of token trading on Ethereum happens on centralized exchanges (CEX) because the costs there are lower, and on-chain LPs often end up being tools for arbitrage between CEXs.

So, many people say that AMMs (Automated Market Makers) on Ethereum have absorbed a lot of “toxic liquidity,” meaning that people buy low on CEXs and sell high on AMMs, or the other way around, making the traffic on AMMs mostly come from arbitrage traders. Good traffic mainly happens on centralized exchanges, not on-chain.

Shang:

It seems like the only real trading volume comes from arbitrageurs, and regular users have no reason to trade on-chain, especially with such high gas fees.

Leo:

Exactly. Why would regular users pay hundreds of dollars in gas fees on-chain? If you just want to buy a few hundred dollars’ worth of tokens, why not just do it on Binance? In fact, high gas fees on Ethereum discourage people from trading. But on Solana, the transaction costs for Memecoins are very low. I remember in the first Memecoin cycle, around Q1 2023, I saw someone in a Telegram group talking about how they made a lot of money after moving from Ethereum to Solana. They said they could earn 100x on Solana, while on Ethereum wouldn’t even cover the gas fees.

That’s really the case. Solana’s transaction costs are much lower, which is why Solana trading aggregators like Jupiter can succeed, while on Ethereum, it’s much harder. On Ethereum, Uniswap dominates the flow, but even with good routers like 1inch, high gas fees make trading difficult. On Solana, the gas fees are practically negligible, so slippage is much smaller, liquidity pools are more accessible, and liquidity is higher.

You can see that recently, Solana’s monthly transaction volume has even surpassed Ethereum’s mainnet, even though Solana’s TVL (Total Value Locked) is still much smaller — less than half of Ethereum’s. But for LP providers, Solana’s low TVL and high transaction volume mean higher fees, which more than cover the costs.

Let me give you an extreme example: last year, during the MOTHER Memecoin project, I did LP for the first time within 24 hours and earned a very high return. Initially, the APR was over 19,000, and the APY was 36,500%. In just one day, I earned 50% in transaction fees. Of course, over time, the returns decreased, but in that period, I invested a couple of thousand dollars and ended up earning almost $20,000 in fees.

Shang:

You made $20,000 from a couple of thousand?

Leo:

Yes, that’s right. I adjusted my concentrated liquidity a bit. When the price hit $0.20, I started selling some, then added more when it pulled back. Overall, I made three to four times the amount in transaction fees. In about three weeks, I earned those profits.

I also shared another Memecoin project called Gecko in the Mad Labs group. Its community is very active, and although its market cap is small, the trading volume is high. The token price doesn’t fluctuate much, but it still has strong community support. During the testing phase, I made over 100% in transaction fees, with annualized returns of 500% to 1000%.

Shang:

So LPing with MOTHER was more profitable than just holding the token?

Leo:

Yes, it was probably double what I would’ve earned by just holding. If you focus on Solana’s Memecoin market, LPing is very profitable. The Solana Memecoin market offers many high-frequency trading opportunities. However, if you’re just doing short-term LPing — say 12 or 48 hours — it’s hard to cover impermanent loss with just transaction fees. So, the best strategy for LPing is long-term holding, to ensure the fees can cover the losses.

The key feature of Solana’s Memecoins is their high volatility. After a price surge, they tend to dip, and when they recover, they can bring high returns. But for weak Memecoins, like projects such as Christmas Tree, a price spike might happen and then fizzle out. However, if a Memecoin’s community is active, with frequent Twitter updates and continuous management, then LPing can be highly profitable.

Currently, I believe Solana’s Memecoin market has entered its second cycle. The first cycle was from February to April, and the second cycle has attracted even more participants. The second cycle is messier, but this also provides opportunities for many VCs and project teams. They have the resources to enter the market and possibly make short-term profits.

This makes the market more competitive and riskier. But right now, I’m mainly doing LP for two Memecoins: WIF and Popcat. Through concentrated liquidity trading, my daily returns stay between 0.5% and 3%, which is a very ideal LP return on Solana, something that would be almost impossible on Ethereum.

Solana’s Memecoin projects, like Popcat and others, already have many LP pools, making up a significant portion of the ecosystem. Through these LP pools, you can take advantage of lower transaction costs to earn higher returns.

Shang:

I often see that many Memecoin trades are actually pairing two Memecoins together for liquidity provision.

Leo:

Yes, exactly. If you really like these two Memecoins, even though some people think LPing is a losing game, the reality is that during the holding period, you don’t really know whether the price will go up or down. My philosophy is: if I like these two Memecoins, I pair them together and provide liquidity, earn transaction fees, and whichever token earns more, I’m happy. Ultimately, one of them will perform better than the other, but as a holder, I’m focused on accumulating more of both Memecoins. So, if you LP with these blue-chip Memecoins, it’s actually a very stable choice. I’ve been doing LP for about one or two months because I believe these Memecoins are relatively stable, especially BONK and WIF, which are no longer “the leading” Memecoins.

Right, we used to think of WIF as representing dogs and Popcat representing cats, and their price fluctuations have some correlation. So, the impermanent loss during LPing won’t be too great, which actually makes the entire ecosystem more stable. In the past, people who speculated on Memecoins could only make money by “buying and holding,” and in the end, they’d have to sell. But in Solana, you can earn transaction fees through LPing, and make money just from the fees. This provides another profit model for the Memecoin ecosystem.

This also allows more people like me to participate. I’m not someone who can do high-risk trades every day, but I believe in Memecoin culture. As for the “super cycles” of Memecoins, I think only the top Memecoins have real culture, while the rest are essentially just junk tokens. In this case, I can buy these blue-chip Memecoins and do LP to indirectly support their price. The prices of these blue-chip Memecoins help lift the prices of second- and third-tier Memecoins because they’re correlated.

This has basically made Solana’s Memecoin ecosystem more robust, and it explains why Solana has emerged as a leader in this cycle. While other chains might have hot trends or even new competitors, the most popular Memecoins will still likely be in the Solana ecosystem. I believe this is a very important reason.

Shang:

Thanks for sharing the secret to wealth, boss! Haha.

Memecoin: The Future Trend Combining Social + E-sports

Leo:

I think Memecoins are really the future trend that combines social media and e-sports. Have you heard of Roblox? It’s that American gaming platform that made a lot of money. I tried it, but I didn’t find it appealing, and the graphics aren’t great. People say our token is doing well, but it doesn’t really matter because it’s based on the “Minecraft” concept.

Shang:

So, could we consider it a commercial competitor to “Minecraft”? The idea is that almost anyone can create their own game without needing to code.

Leo:

Yes, Roblox is launched by Microsoft, and it makes money through commissions. I believe projects like PumpFun are what the younger generation, especially kids born after 2010, will find appealing — social media combined with gaming. The evolution of social media, from early SMS, QQ, to WeChat, and now Douyin, shows that electronic social platforms are increasingly focused on attention. The next generation will probably spend their days on PumpFun, watching live streams and earning tokens.

I’ve asked many friends, especially people in the community, and many say that after the age of 25, it’s hard to keep up with this intense PVP gameplay. For many young people, though, even though they don’t have much money, this model is perfect for them to earn their first pot of gold. For example, a kid released a token called QUANT when he was 12 or 13, and then rug-pulled it, making tens of thousands of dollars. Later, a big player promoted it, and it hit a $40 million market cap. I think there’s a downside to this, but it also has its unique value and deserves attention. And all of this happened on Solana, precisely because its network efficiency is so high.

My ideal blockchain is like this: Previously, Ethereum’s big players analyzed the importance of blockspace. Blockspace is essentially Ethereum’s auction model, where they make money by auctioning blockspace. But I believe that as an infrastructure provider, the goal should be to offer higher value at lower costs. Whether it’s a $1,000 trade or a Nasdaq transaction, Solana’s costs are much lower. I believe in the future, Solana can become a “Nasdaq-like” platform where people trade 24/7. But from my perspective, this market is essentially a casino business. I don’t oppose it, but you must choose which assets or tokens you want to bet on. If you believe in the casino business, go ahead and participate, but understand that if you don’t, you might miss out, and it’s better to just take a small cut.

Shang:

Got it. With your deeper understanding of this field, it’s become clearer for regular people how they can participate in this gold rush, especially for those who don’t want to take too much risk. For example, they can choose to hold tokens like Sol, Raydium, Jito, or participate in LP.

Leo:

Exactly. LPing with tokens like SOL and WIF, or SOL and GOAT, is also very profitable. I checked today and I’ve already earned 30% in fees — feels really great. Young people often trade their time and energy for money, but ultimately, you need to learn how to make money with your money. The tokens and strategies we discussed earlier are all good ways to use your money to earn more.

Shang:

I completely agree, especially for veteran traders who feel anxious about the market. Many familiar sectors, like altcoins and Ethereum, seem stagnant in this cycle, while new fields like Memecoin are gaining more and more attention, and the market narrative is growing bigger.

Leo:

I totally agree with you. Many participants have already shifted from traditional markets to Solana, especially for investors who don’t want to take big risks. For them, participating in Memecoin LP is a relatively safe approach. Also, Solana’s DeFi, compared to Ethereum, has smaller liquidity pools, but the staking rewards on Solana are much higher than on Ethereum.

While Solana’s inflation rate is higher, as long as the number of new wallet addresses grows by more than 5.8% annually, theoretically, the token price will continue to rise. For big players, staking not only secures the Solana network but also generates profits through MEV revenue. This model works quite well.

Future Directions for Solana: Payments, Layer 2, and Gaming

Shang:

Earlier, we discussed how Solana’s hot topics and narratives are currently centered around the casino business, but as time goes on, the focus might shift. How do you see the future development trend of Solana? Could new supply chains or public chains emerge to gradually become Ethereum’s competitors?

Leo:

At the moment, I’m still very optimistic about Solana, although I acknowledge some of the criticisms surrounding Memecoins. Memecoins are indeed mostly driven by hype, but they also showcase the advantages of Solana’s infrastructure. The partner of Placeholder once said that Solana is like Apple, while Ethereum is like Android. Ethereum’s current infrastructure leads to fragmented liquidity, which hampers ecosystem development. Solana, through its POH (Proof of History) consensus, can unify the entire ecosystem, bringing liquidity together. I believe this is a breakthrough for Solana’s infrastructure, taking it to a new level.

I hope to see more high-performance public chains emerging in the future, allowing more ordinary people to enter the crypto space. Solana has made great progress, but new chains, like MOVE systems and Monad’s EVM parallel execution systems, although their white papers look perfect, may take a few years to become truly operational. Recently, the Sui network experienced a downtime, and I saw some big players in the Solana community celebrating, saying, “Congratulations, you’re on the right path.” Downtime is not shameful; what matters is finding the issues and optimizing from them. In fact, Solana hasn’t experienced frequent downtime over the past year, and things like the early inscription release and Jupiter’s airdrop claim went very smoothly, showing Solana’s progress in network stability.

Looking ahead, as Lily mentioned, the payment field and stablecoin applications present huge growth potential for Solana. Stability has always been a major challenge for Solana among professional institutions, but now its network stability has greatly improved, which will attract more projects into the Solana ecosystem.

The FTX incident certainly impacted Solana, but new and great projects and talented developers are still quietly working hard. I believe that great projects typically take two to three years to mature. Projects like Jito, Jupiter, Raydium, and even platforms like Camel, which I like, existed before the FTX incident and have a two-to-three-year history. Looking forward, I’m really interested in emerging projects, such as ride-hailing protocols on the Solana network, similar to Uber. This project has been in operation for two years and is currently being trialed in the US, with very promising data. Additionally, DePIN has huge potential within the Solana ecosystem.

DePIN’s biggest link to blockchain is payments. My physical devices need to operate, and I need to reward users with tokens. On Ethereum, if I want to issue a $5 token, I might need to pay $3 in gas fees, which makes this model unsustainable. But on Solana, DePIN can settle payments in real-time, making Solana an ideal choice for hardware mining and various terminal user payments. As more hardware projects develop on Solana, they will be able to pay terminal users with lower costs and higher efficiency. I believe that although the overall failure rate may be high, if one or two breakout projects emerge, they can push Solana’s token price up significantly. I’m confident that Solana (SOL) will see a major value increase in the next cycle.

Shang:

In addition to the current MEV, new fields like DePIN might emerge. How do you see Solana’s future development, especially in the gaming sector? Recently, it seems some new teams and projects have started focusing on Solana, but they haven’t gained widespread attention yet.

Leo:

Yes, that’s true. For example, Solana recently launched its first Layer 2 project, called Sonic. Sonic is a Layer 2 designed specifically for gaming, optimizing game operations using Solana’s technology. What it does is, many games want to implement on-chain services, but fully on-chain game interactions usually don’t have economic value. For instance, some gambling games may focus on fairness rather than direct profit. Traditionally, if such games ran on the mainnet, they would incur high costs.

Sonic can host the game’s underlying rules on its own network. If the game offers token incentives, such as rewarding players with a token upon completing a task, Sonic can process these tokens directly on Solana’s mainnet via Layer 2. This design is perfect for the future of gaming. Look at Layer 2 systems like IMX — though it puts games on-chain, liquidity hasn’t been well solved. One of crypto gaming’s core problems is price support — without liquidity, no one wants to play.

Sonic’s design is smart because it allows game developers to continue leveraging Solana’s mainnet liquidity while benefiting from the network’s advantages. This helps game developers operate more efficiently, avoiding the complexities of building an independent ecosystem. You can’t just build a Layer 2 and rely solely on decentralized exchanges like DEXs, Raydium, Orca, and Meteora — Solana’s mainnet liquidity is the foundation that supports these games.

I believe once Sonic is fully launched, it could drive the growth of GameFi, attracting more traffic to Solana. I’ve heard they’ve signed deals with several game projects. Although gaming projects haven’t had the same hype in the crypto ecosystem as Memecoins, I believe the potential is still huge, and in the future, more developers and teams will enter Solana’s ecosystem.

If everyone found this episode helpful, feel free to join our Mad Labs Chinese community. A lot of my Alpha insights come from the “big players” in the community. Of course, our community is NFT token-gated, meaning you need to buy a Mad Labs NFT to join. Although our community might not be as famous as some bigger ones, I always think it’s one of the highest-quality communities in the Chinese crypto space. Thanks for the support!

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