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Solana's All Time High Chain Activity | Weekly Roundup

By Lightspeed

Published on 2024-01-22

Explore how Solana handled record-breaking transaction volumes during the Trump meme coin launch, the impact of Jito, and what it means for crypto's future.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Solana's Record-Breaking Weekend

Solana, the high-performance blockchain, experienced an unprecedented surge in activity over the weekend following the launch of a meme coin associated with former U.S. President Donald Trump. This event not only tested the limits of Solana's infrastructure but also sparked discussions about the future of cryptocurrency regulation and the role of meme coins in the broader crypto ecosystem.

The Trump Meme Coin Launch

On Friday night, the crypto world was taken by surprise when Donald Trump tweeted a link to a meme coin bearing his name. This was quickly followed by a similar token launch from his wife, Melania Trump. The sudden appearance of these tokens, particularly from such high-profile figures, sent shockwaves through the crypto community and led to a frenzy of trading activity.

Solana's Performance Under Pressure

Despite the enormous influx of transactions, Solana's blockchain continued to produce blocks without experiencing any downtime. This resilience in the face of extreme demand is a testament to the network's robustness and scalability. However, the event did expose some areas where improvements could be made, particularly in how different components of the Solana ecosystem handle high-stress situations.

Breaking On-Chain Records

The launch of the Trump meme coins led to Solana breaking several of its own records. According to data from the Blockworks research Solana dashboard:

  • On January 17th (Friday), Solana processed $6.4 billion in transaction volume.
  • Saturday saw this figure skyrocket to $28 billion.
  • Sunday reached an all-time high of $39 billion.
  • Monday maintained high activity with $33 billion in volume.

These numbers represent not just records for Solana, but potentially for the entire crypto industry, showcasing the network's ability to handle massive transaction loads.

Stablecoin Supply Surge

Another significant metric that highlighted the intensity of the trading activity was the change in stablecoin supply on Solana:

  • On Friday, the stablecoin supply on Solana was $5.8 billion.
  • By Monday, this had surged to $8.8 billion, representing a $3 billion increase in just three days.

This rapid influx of stablecoins demonstrates the massive liquidity that flowed into the Solana ecosystem to facilitate trading of the new meme coins.

The Jito Factor

Jito, a key component of Solana's infrastructure, played a crucial role during this high-demand period. Jito offers a service that allows traders to bid for top-of-block placement, which is particularly valuable for arbitrage opportunities and other time-sensitive transactions.

However, during the peak of the meme coin trading frenzy, Jito experienced performance degradation. This led to a cascading effect on the broader Solana network, as transactions that would typically use Jito's services were forced to compete for space on the main Solana scheduler.

Impact on Transaction Fees

The degradation of Jito's service had a significant impact on transaction fees across the Solana network. According to a chart shared by Dan Smith, priority fees increased by up to 5,000 times their normal levels when Jito was not functioning optimally. This spike in fees created challenges for users trying to execute transactions during this period.

Scheduler Inefficiencies Exposed

The extreme demand also highlighted inefficiencies in Solana's main transaction scheduler. Mert Muntaz, one of the podcast hosts, pointed out that the scheduler was operating at only about 7% of its potential capacity. This inefficiency became more apparent as the demand increased, with the compute units packed per block actually decreasing under higher loads – a counterintuitive result that underscores the need for optimization.

App Integration Challenges

Many applications within the Solana ecosystem faced difficulties during this period of extreme activity. Some apps, in an attempt to protect their users from high fees, set maximum fee caps that were too low given the network conditions. This resulted in transactions failing to execute, leading to user frustration and misconceptions about Solana's performance.

Mert emphasized the importance of proper fee setting:

"The thing that I set about the apps blocking their own users out of competing for these markets is actually kind of crazy because Solana is a bit more opinionated on products, especially Solana teams, meaning, so Jupiter lets you set fees manually yourself. And I did that. I just wanted to test this theory out. So during this moment, during that moment, I was just going on Jupiter and setting the manual fees myself and my transactions were landing."

The Role of Education

A key takeaway from this event is the need for better education and integration support for developers building on Solana. Many of the issues faced by users stemmed from applications not properly utilizing Solana's fee markets or misunderstanding how to set compute unit limits effectively.

Mert noted:

"It's generally that we have an education problem or an integration problem where it's on us to help these developers understand what's going on better so that they can utilize the chain better, right?"

Solana's Resilience

Despite the challenges, it's important to note that Solana continued to produce blocks throughout the entire event without any downtime. This is a significant achievement given the unprecedented levels of activity the network was handling.

Mert shared an interesting insight:

"We have several tests internally, actually they're external. You can see that, let me link you, ping.helios-rpc.com. And it's a ping test. And basically what we do is, we set a hard-coded minimum fee. It was roughly $0.001 during all this. And it landed at 100% rate, meaning when everybody was saying they can't land transactions. Yeah, correct. They were not able to land transactions. But for simple soul transfers, we were able to land every single transaction at a hundredth of a dollar, right?"

This demonstrates that while complex transactions and certain applications faced difficulties, the core functionality of Solana remained intact and accessible.

Implications for Crypto Regulation

The launch of meme coins by such high-profile figures as Donald and Melania Trump has significant implications for the regulatory landscape of cryptocurrencies. Some view this event as potentially bullish for the crypto industry, as it may signal a more relaxed regulatory environment under a potential future Trump administration.

Mert expressed optimism about this development:

"I think from that perspective, it's a net good. In the short term, obviously it tends to say, it's a very simple way to think, right? You can just say, 'Oh, while he took this money, he didn't really do anything. Therefore, it's a good gift.' But what's the second order of thinking of that? In my view, it's that the regulation will become [more favorable]."

The Meme Coin Debate

The launch of these high-profile meme coins has reignited debates about the role and impact of such tokens in the crypto ecosystem. While some criticize meme coins as mere cash grabs or grifts, others argue that they serve a purpose in onboarding new users to crypto and testing network capabilities.

Jack Cubanak, the other podcast host, offered a nuanced perspective:

"I think that why that's different from something like the ICO boom was back then people would say, hey, we're launching we wrote this whole white paper and we're launching a coin that dentists are gonna use or whatever. And people would buy it thinking that dentists were gonna use the coin. And then if they didn't, they were misled and they lost a bunch of money based on that. Meme coins, it's in the name. It's a meme you're gambling."

Coinbase's Struggles

Amidst the frenzy, major U.S. cryptocurrency exchange Coinbase faced significant issues processing Solana transactions. Users reported waiting times ranging from 100 to 1000 minutes, with some still unable to access their crypto after a day.

Mert explained the technical reasons behind Coinbase's struggles:

"Their internal ingestors, okay, so like indexing and perhaps maybe indexing and then updating their internal ledger cannot handle the speed of Solana. And by the way, that is, in my view, extremely embarrassing, because not only can every other exchange do it, but that is a web to problem."

This situation highlighted the need for major exchanges to keep pace with the rapid developments in blockchain technology, particularly when it comes to high-performance networks like Solana.

The Future of Decentralized Exchanges

The difficulties faced by Coinbase during this event have reignited discussions about the potential for decentralized exchanges (DEXs) to compete with centralized platforms. Many in the crypto community have long advocated for a shift towards DEXs, arguing that they offer better security, transparency, and resistance to single points of failure.

Mert challenged the crypto community:

"Everybody talks about this since the second I enter this industry about, well, we don't need centralized exchanges. Everything should be done decentralized exchanges, self custody, all these things. And I'll hear like 500 pitches a year from some DeFi protocol that says, well, we want to compete with Binance. We want to take over Binance. We're going to be Binance with decentralized. Everybody says, well, let's do it then, right? I mean, shit, the biggest exchange is not working. So let's do it right now."

Solana's Path Forward

The events of the past weekend have provided valuable insights into areas where Solana can improve. The team behind Solana and various ecosystem projects are already working on solutions to address the inefficiencies exposed during this high-stress period.

Some of the improvements in the pipeline include:

  1. Optimizing the transaction scheduler to handle high loads more efficiently.
  2. Improving Jito's capacity to handle extreme demand.
  3. Developing better tools and documentation to help developers integrate Solana's fee markets effectively.
  4. Exploring ways to make the blockchain even more resilient under extreme conditions.

The Broader Implications for Crypto

The launch of the Trump meme coins and the subsequent activity on Solana have broader implications for the cryptocurrency industry as a whole. It demonstrates the growing mainstream interest in crypto assets, even if that interest is initially channeled through meme coins.

Moreover, it highlights the need for blockchain networks to be prepared for sudden spikes in demand, as the crypto market can be highly unpredictable and influenced by external factors such as celebrity endorsements or world events.

Regulatory Outlook

The involvement of high-profile political figures in meme coin launches may have significant implications for future crypto regulation. There's speculation that a potential future Trump administration might adopt a more crypto-friendly stance, which could lead to clearer guidelines and potentially more innovation in the space.

Jack noted:

"Obviously, multiple things can be true at the same time. It tells you exactly what you want to hear all the time. I think you can say that, look, that the Trump coin was a cash grab that personally enriched Donald Trump. And arguably, there are negative impacts of that as far as the public perception of crypto. However, you have to pair that with Paul Atkins, presumably, coming in to lead the SEC. And the SEC under Gensler has been to everyone in crypto. And I think just if you look at it, very unfair."

The Role of Meme Coins in Crypto Adoption

While meme coins are often criticized for their lack of fundamental value, they have undeniably played a role in bringing new users into the crypto ecosystem. The Trump meme coin launch, despite its controversial nature, exposed a large number of people to cryptocurrency transactions and the Solana network.

Mert estimated:

"I don't think I would say if I'm to just make up a number, probably 5% retention is what I would guess out of 500,000 people or something like that, very small retention for sure. But some retention."

Even if only a small percentage of these new users stick around and explore other aspects of crypto and blockchain technology, it could still represent a significant influx of new participants in the ecosystem.

Balancing Innovation and Regulation

The events surrounding the Trump meme coin launch highlight the ongoing challenge of balancing innovation in the crypto space with the need for consumer protection and regulatory compliance. While the lack of stringent regulation allowed for the rapid launch and trading of these meme coins, it also exposed investors to significant risks.

Jack reflected on this balance:

"I think if you're the SEC, you have a duty to let the market decide whether things fail or don't fail. And when you treat an industry writ large, everything is a scam. You don't actually let good actors flourish. You create short-term thinking where you make hay while the sun shines and you let people trade meme coins and you never really build anything."

The Need for Robust Infrastructure

The stress test provided by the meme coin frenzy underscores the critical importance of robust blockchain infrastructure. As crypto continues to gain mainstream attention, networks need to be prepared to handle sudden spikes in activity without compromising on performance or user experience.

Solana's ability to continue producing blocks throughout the event, despite some challenges, demonstrates the potential of high-performance blockchains to meet this growing demand. However, it also highlights areas where further optimization and development are needed.

Education and User Experience

One of the key takeaways from this event is the need for better education and improved user experiences in the crypto space. Many of the issues faced by users during the meme coin trading frenzy were not due to fundamental problems with the Solana network, but rather stemmed from misunderstandings about how to set fees or interact with the blockchain during periods of high congestion.

Improving documentation, providing better tools for developers, and creating more intuitive interfaces for end-users will be crucial in ensuring that future high-demand events can be navigated more smoothly by all participants in the ecosystem.

Conclusion: A Turning Point for Solana and Crypto

The launch of the Trump meme coins and the subsequent activity on the Solana network represent a significant moment in the evolution of both Solana and the broader cryptocurrency ecosystem. While it exposed some areas for improvement, it also demonstrated the incredible potential of high-performance blockchains to handle massive transaction volumes.

As the crypto industry continues to mature, events like these serve as valuable learning experiences, pushing the boundaries of what's possible and highlighting areas where further development is needed. For Solana, this weekend's activity has provided a wealth of data and insights that will undoubtedly inform future optimizations and improvements to the network.

Ultimately, the ability of Solana to withstand such an intense stress test without experiencing downtime is a testament to its robust design and the hard work of its development team. As the blockchain continues to evolve and address the challenges highlighted by this event, it is well-positioned to play a central role in the future of decentralized finance and blockchain technology.

The coming months and years will likely see continued innovation in the Solana ecosystem, as developers and project teams work to build more resilient and user-friendly applications on top of this high-performance blockchain. With lessons learned from the Trump meme coin launch and a renewed focus on scalability and user experience, Solana is poised to continue its growth as a leading platform for decentralized applications and financial services.

Facts + Figures

  • Solana processed a record $39 billion in transaction volume on Sunday, following the Trump meme coin launch.
  • The stablecoin supply on Solana increased from $5.8 billion to $8.8 billion over a three-day period.
  • Jito, a key component of Solana's infrastructure, experienced performance degradation during peak trading.
  • Priority fees on Solana increased by up to 5,000 times their normal levels when Jito was not functioning optimally.
  • Solana's main transaction scheduler was operating at only about 7% of its potential capacity during the high-demand period.
  • Simple SOL transfers were still able to land at a fee of $0.001 throughout the event, despite reports of transaction difficulties.
  • Coinbase users reported waiting times of 100 to 1000 minutes for Solana transactions during the peak of activity.
  • The Trump meme coin briefly reached a market cap worth billions, although this was largely on paper and not realizable.
  • Mert estimated a potential 5% retention rate of new users brought in by the meme coin launch, out of possibly 500,000 people.
  • Solana continued to produce blocks without experiencing any downtime throughout the entire high-demand event.
  • The compute units packed per block on Solana actually decreased under higher loads, indicating inefficiencies in the scheduler.
  • Many Solana ecosystem apps set maximum fee caps that were too low given the network conditions, leading to failed transactions.
  • The Phantom wallet app reached the number one position on the App Store's finance category during the meme coin frenzy.
  • Solana's performance during this event demonstrated its ability to handle transaction volumes potentially unseen in crypto history.
  • The launch of the Trump meme coins has potential implications for future crypto regulation, especially under a possible future Trump administration.

Questions Answered

What caused the recent surge in Solana's network activity?

The recent surge in Solana's network activity was primarily caused by the launch of meme coins associated with former U.S. President Donal Trump and his wife Melania Trump. This unexpected event led to a frenzy of trading activity, pushing Solana's transaction volumes to unprecedented levels and testing the network's capacity to handle extreme demand.

How did Solana perform under the stress of record-breaking transaction volumes?

Solana demonstrated remarkable resilience during the period of record-breaking transaction volumes. The network continued to produce blocks without experiencing any downtime, processing up to $39 billion in daily transaction volume. However, the event did expose some inefficiencies in the network's transaction scheduler and highlighted areas where improvements could be made to handle such extreme loads more effectively.

What role did Jito play during the high-demand period on Solana?

Jito, a key component of Solana's infrastructure that allows traders to bid for top-of-block placement, experienced performance degradation during the peak of the meme coin trading frenzy. This led to a cascading effect on the broader Solana network, as transactions that would typically use Jito's services were forced to compete for space on the main Solana scheduler, resulting in significantly higher fees and some transaction difficulties for users.

How did the Trump meme coin launch affect stablecoin supply on Solana?

The launch of the Trump meme coins led to a significant increase in stablecoin supply on Solana. Over a three-day period, the stablecoin supply on the network grew from $5.8 billion to $8.8 billion, representing a $3 billion increase. This rapid influx of stablecoins demonstrates the massive liquidity that flowed into the Solana ecosystem to facilitate trading of the new meme coins.

What challenges did users face when trying to trade during the high-demand period?

Users faced several challenges during the high-demand period, including higher than normal transaction fees, failed transactions due to inadequate fee settings, and difficulties with some ecosystem applications that were not prepared for the extreme network conditions. Additionally, some major exchanges like Coinbase experienced significant delays in processing Solana transactions, with users reporting wait times of up to 1000 minutes.

What implications does the Trump meme coin launch have for crypto regulation?

The launch of meme coins by high-profile political figures like Donald Trump may have significant implications for future crypto regulation. Some speculate that it could signal a more relaxed regulatory environment under a potential future Trump administration. This event has also reignited debates about the balance between innovation in the crypto space and the need for consumer protection and regulatory compliance.

How did Coinbase perform during the Solana transaction surge?

Coinbase struggled to handle the surge in Solana transactions following the Trump meme coin launch. Users reported extremely long wait times, ranging from 100 to 1000 minutes, with some unable to access their crypto even after a day. These issues were attributed to Coinbase's internal systems being unable to handle the speed and volume of transactions on the Solana network, highlighting the need for major exchanges to improve their infrastructure to keep pace with high-performance blockchains.

What lessons can be learned from this event for the future of Solana and the broader crypto ecosystem?

This event provided valuable insights into areas where Solana and the broader crypto ecosystem can improve. Key lessons include the need for more efficient transaction scheduling, better education and tools for developers to integrate blockchain features effectively, the importance of robust infrastructure to handle sudden spikes in demand, and the ongoing challenge of balancing innovation with regulatory compliance. It also demonstrated the potential for high-performance blockchains to handle massive transaction volumes, setting a new benchmark for the industry.

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