Behind the Boom: Has Solana's Trading Kingdom Been Taken Over by Bots?

Reprinted from PANews: Investigation into the Authenticity of Solana's Prosperity: Robots Account for 70% of Trades, Serious Decline in Meme Data
Author: Frank, PANews

As Solana's on-chain data is surpassing Ethereum comprehensively, discussions about Solana surpassing Ethereum are gradually heating up. At the same time, discussions about the true prosperity of Solana have also attracted a lot of attention on social media. Recently, many Key Opinion Leaders (KOLs) have argued that Solana's data prosperity is not real. In summary, the controversies surrounding Solana on social media are mainly focused on the following points: 1. Proliferation of bots 2. Inflated trading volume data 3. MEV issues 4. Financial losses 5. Issues with the issuance of SOL tokens.

Due to the long-term attention to the Solana ecosystem, PANews has also conducted some data investigations into the authenticity of Solana's prosperity.

「關於 Solana 真實繁榮度的討論在社交媒體上也引發諸多關注，基於長期對 Solana 生態的關注，PANews 針對 Solana 的真假繁榮也做了一些數據調查。」

Robots Rampant, Nearly 70% of Trades Come from Robots

Concerning the issue of rampant on-chain robots in Solana. Recently, several Key Opinion Leaders (KOL) have expressed on social media that Solana's on-chain transactions are filled with robots. Researcher Dan Smith released data on July 29 showing that Solana's weekly transaction fees and MEV revenue have exceeded Ethereum for the first time.

If you frequently trade MEME coins, you will find this situation is very severe on pump.fun. Randomly opening a token trading page on pump.fun, you will find as shown in the following figure (tokens with exclamation marks at the end are robot trades), where robot trades have taken over the majority of transactions.

However, identifying robot trades and data is not easy, and the official information is lacking in this area.

Flip Research believes this ratio is as high as 93%: "Considering the abnormally high ratio of transactions to users, as well as the amount of money laundering transactions on-chain, it seems that the vast majority of transactions are unnatural. On the main Ethereum L2, the highest daily transaction-to-user ratio is 15.0 times on Blast (the platform's fees are also very low, and users are all using Blast S2). As a rough comparison, if we assume that the real SOL transaction-to-user ratio is similar to Blast, this would mean that over 93% of transactions on Solana and the associated fees are unnatural."

However, this data may not be accurate. PANews randomly analyzed the recent 1,000 transactions of 10 relatively active tokens on Pump.fun and found that out of a total of 8,268 transactions in these 10 tokens, 80.85% of the transactions came from robot trading, with less than 20% from real users. The token with the highest robot ratio reached 99.5%, with an average of 159 transactions per robot in this interval, while the average for real users was 1.99.

But this does not mean that all trades on Solana are in this situation. Subsequently, PANews analyzed the most active 10 tokens in terms of market value in the last 10,000 transactions. These tokens such as $WIF, JUP, POPCAT, BOME, MEW, among others, showed a significant decrease in robot trading ratio, with a ratio of 50.73%. The higher ratios were $WIF (81.6%), POPCAT (87.5%), MEW (88%), all of which are MEME coins, while JUP (Jupiter governance token) had a robot trading ratio of 51%, and KAMA had a robot ratio of only 27.3%.

Tokens with incomplete liquidity curves are still trading on Pump.fun, while tokens with completed liquidity curves will be listed on Raydium. Therefore, these two comparison methods can also be seen as a comparison between tokens newly listed on Pump.fun and DEX tokens such as Raydium with completed liquidity curves. From the current token trading volume distribution, the number of transactions on pump.fun accounts for about 53% of Solana DEX transactions (data as of August 8), and based on this ratio, approximately 66% of Solana's daily trading volume is from robot trading. It seems that real users currently prefer tokens with higher market value and price stability, rather than new tokens.

Subsequently, PANews analyzed the trading data of the top three tokens on Pump.fun when they were initially created and found that about two months ago, the robot ratio on Pump.fun was only around 35%, with real user transaction volume and number significantly higher than the current stage.

Real Users' Daily Average Transaction Volume is about 16, Not Far from Ethereum L2

What is the daily average transaction volume of users on Solana? Flip Research points out that the daily transaction volume per user on Solana is as high as 217 times, much higher compared to other public chains.

In fact, Solana's transactions are divided into voting transactions and non-voting transactions. The data source taken by Flip Research from tokenterminal includes both voting and non-voting transactions, with normal user transactions mainly concentrated in non-voting transactions, where the data magnitude of the two usually differs by about 10 times.

As of August 6, there were 34.8 million non-voting transactions, 987,000 active users, with an average of 35 transactions per user.

In addition, according to PANews' estimated data, about 13% of active addresses are robot addresses, and 86% are real users.

Based on the August 8 trading volume of 34.26 million transactions, with 822,000 DAUs, the number of transactions by real users is about 11.31 million, with approximately 706,900 real users, and an average of about 16 transactions per real user. This data is significantly higher than Ethereum's average of about 3.37 transactions and Base's 6.18 transactions, but closer to Arbitrum's 12.39 transactions, and lower than Blast's 30.8 transactions (data as of August 6). From this perspective, excluding robot transactions, the real user activity on Solana does not show a significant difference compared to other Ethereum L2 solutions.

MEME Data Decline Severely

Another data also indirectly illustrates the surface prosperity on Solana. Looking at the daily issuance of tokens, the number of new SPL tokens issued on Solana has not seen a significant decline, remaining at around 20,000 tokens issued daily. However, in detail, at the beginning of July, pump.fun issued a total of 71,000 tokens, with 5,187 tokens listed on Raydium that week (pump.fun will automatically list on Raydium after meeting liquidity requirements). By the week of August 5, pump.fun issued a total of 55,000 tokens, while Raydium had only 1,850 new tokens listed during the same period. This data indicates that the number of tokens issued on Pump.fun has not decreased significantly, but the success rate of listing on Raydium is decreasing, with the current rate not exceeding 3%, compared to around 7.3% at the beginning of July. On August 12, according to Dune Analytics, Pump.fun issued 11,796 Meme tokens in the past 24 hours, of which only 157 tokens were ultimately listed on Raydium, accounting for only 1.33%.

In addition, the data on New Token Accounts on Solana has seen a significant decline recently, with the number dropping from 1.224 million on July 20 to 667,000 on August 8, nearly halving. This data can be understood as the total number of holding addresses for new tokens created on that day. The daily number of new tokens created on Solana has not decreased, but the total number of holding addresses is decreasing, indicating a significant decrease in the number of holders for each new token. With robots occupying the trading pool, real users are leaving new MEME coins.

Validators Becoming Beneficiaries of False Transactions

Meanwhile, Solana validators are earning handsomely from robot trading, as Dan Smith revealed that on July 29, the total amount of fees generated was $5.5 million, the highest in the past three months. 58% of the value comes from MEV fees, and 37% comes from priority transaction fees. He believes: "MEV only occurs when profitable, meaning as long as retailers continue to chase MEME, MEV will occur. Once MEME cools down, MEV fee income will collapse as well."

On a website specializing in tracking sandwich attacks, PANews roughly calculated that the identified sandwich attacks within a minute are about 16 to 20 times. Translated into daily figures, this amounts to at least 23,000 sandwich attacks per day. Previously reported, the most notorious address has raked in over $30 million in two months, and now there seem to be even more sandwich attackers than before. To address this situation, 82% of transactions now add priority fees (to avoid sandwich attacks), but this increases the transaction costs for regular users.

No Concrete Evidence of Financial Loss

In addition, the issues of financial losses and inflation rates were raised by KOL bearcookie.eth. He stated: Solana has been losing money, with financial data showing an increase from $143 million in the second quarter of 2023 to $956 million in the second quarter of 2024. Regarding this issue, another KOL, Little Chu, further interpreted, "This is not an increase in losses. This is just a data illusion brought about by the calculation in USD. The average price of SOL in Q2 2023 was around $25, but in Q4, the price increased significantly due to the bull market, calculated at an average price of $50. So, roughly, SOL increased by 6 million coins per quarter. So, simply multiplying, Q2 2023 was $150 million, in Q4 it was $300 million, and by this year's Q2, it's $960 million."

In addition, PANews found in its investigation that the Solana Foundation has not actually disclosed its current holdings and financial data. The only online source for this financial data is Coin98 Analytics, but the company has not disclosed the source of this data either.

Regarding the issue of SOL token issuance, Little Chu's explanation suggests that the data cited by bearcookie.eth from Messari indicates additional liquidity, which could be tokens unlocked by the foundation that usually do not flow into the market.

Regarding SOL's inflation, according to solanacompass data, the current inflation rate of SOL is 5.1%, not 15%.

Discussions about Solana may continue, and overall, the state of the Solana ecosystem is not as dire as some opinions suggest. According to The Funding, some cryptocurrency fund managers are heavily increasing their holdings of Solana. Ryan Watkins, Co-Founder of Syncracy Capital, believes: "Now, Solana can match Ethereum in most meaningful metrics, but its valuation is only one-fifth of Ethereum's."

However, looking at the details, Solana still faces crises, especially as the MEME coin ecosystem, which once elevated Solana to a high position, is experiencing a significant decline. Moreover, the entire industry is still searching for new hot spots. Within the Solana ecosystem, a dark forest-style hunting performance targeting ordinary retail investors is unfolding, and as beneficiaries begin to exploit it to the fullest, one wonders if this is the end of prosperity?