Solana Faces Battle as $55M TVL Flows Back to Ethereum (ETH)

Michael Nadeau, founder of The DeFi Report, recently shared insights about Solana and its financial flows. He noted that while Solana has attracted some value from other blockchains, a significant amount of the total value locked (TVL) is returning to Ethereum.

In a post on X, he emphasized that Solana needs to capture total value locked (TVL) from Ethereum and its layer-2 networks. Nadeau explained that the key for Solana is to draw TVL away from Ethereum and these layer-2 solutions.

No. Adding some context (and data) changes the story regarding flows to Solana from other chains

Over the last month, @base is #1 in terms of net flows ($463m). @solana is #2 with $197m of net flows. @SuiNetwork #3 with $120m.

If we zoom out to Year-to-Date, @arbitrum... https://t.co/FXd7kqJ2YD pic.twitter.com/mqqfRnGxpc

- Michael Nadeau | The DeFi Report (@JustDeauIt) October 30, 2024

Solana Struggles to Pull TVL from Ethereum and L2 Rivals

According to Nadeau, The only thing that really matters for Solana is pulling TVL from Ethereum (and the L2s)," as most of the value is currently locked there.

However, he expressed concern that this is not happening as expected. Solana still struggles to pull enough TVL from Ethereum and its layer-2 networks.

Michael Nadeau used data from a crypto data platform called Artemis. He pointed out that, so far this year, Solana has lost around $55 million in total value locked. This loss was mainly to other platforms like Base, Optimism, and Arbitrum. These are all layer-2 solutions that help improve transaction speed and reduce costs.

Nadeaus's mention of this data shows that Solana is facing tough competition. Many investors are moving their funds away from Solana and into these other platforms. This trend raises concerns about Solana's ability to attract and retain value in the future.

Also, Nadeau reported that Solana received $2.36 billion from Ethereum this year. This amount shows that Solana is attracting some investment. However, over $1 billion of that money went back to Ethereum. This means that 42% of the total inflow returned to Ethereum.

Nadeau described the money coming into Solana from Ethereum as Modest." He said it only comprised 2.7% of Solana's total value locked. This low percentage suggests that while Solana is gaining some funds, it is not enough to significantly increase its overall value.

Ethereum Maintains $50 Billion in Value Despite $6 Billion Outflow to Layer-2 Chains

DefiLlamareportsthat Ethereum has over $50 billion in total value locked. This number shows that Ethereum remains a strong player in the market.

Nadeau mentioned that Ethereum has experienced $6 billion in net outflows this year. This means that more money has left Ethereum than has come in. However, he pointed out that 83% of this outflow went to Ethereum layer-2 chains.

He believes these assets will continue adding value to Ethereum's layer-1 network. He explains that most of the money leaving Ethereum is being used within its own ecosystem.

Raydium Boosts Solana's Fees, Making It the Fifth-Largest Protocol as Ethereum Faces Outflows

SolanasurpassedEthereum in daily fees. During that day, Solana made over $2.54 million in fees. This amount was more than Ethereum's fees, which were $2.07 million.

Due to this achievement, Solana became the fifth-largest fee-generating protocol on that day, according to DefiLlama. The increase in Solana's fees was connected to increased activity in Raydium. Raydium is a decentralized exchange (DEX) and automated market maker built on the Solana blockchain.

This surge in activity on Raydium helped boost Solana's overall fees. It shows that more users are trading and using the platform, leading to higher revenue from fees.

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