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Will $SOL Reach $3,000 by 2030? VanEck Analyst Discusses Solana's Future

By Unlayered

Published on 2023-12-15

VanEck senior analyst Patrick Bush discusses Solana's long-term prospects, valuation methodology, and the future of decentralized finance in this in-depth podcast.

Will Solana Reach $3,000 by 2030? VanEck Analyst Weighs In

In a recent episode of the Unlayered podcast, hosts Saul and Dave sat down with Patrick Bush, senior investment analyst in digital assets at VanEck, to discuss the firm's viral report on Solana's potential valuation by 2030. The report, which sparked widespread interest in the Solana community, provides a comprehensive analysis of the blockchain's long-term prospects and potential price targets.

VanEck's Approach to Analyzing Digital Assets

Patrick Bush began by explaining VanEck's methodology for analyzing digital assets, drawing parallels to traditional capital structures. He emphasized the importance of understanding how tokens accrue value within their respective ecosystems:

"The first way to think about it is I liken it to traditional capital structure in a company. Tokens are like the next type of iteration. They're the thing that accrues at least amount of value and is the most speculative."

Bush highlighted the need to examine the economic system design of each project, focusing on incentive structures and utility. This approach allows VanEck to assess the potential value accrual for tokens within their respective ecosystems.

The Evolution of VanEck's Crypto Thesis

VanEck's interest in cryptocurrencies dates back to 2017, initially driven by the "Boomer Rock thesis" that compared Bitcoin to gold as a potential disruptor. Bush explained how the firm's perspective has evolved:

"The original thesis of the firm was like, okay, we're going to move off of the gold standard. We're going to move to more fiat based system. We think gold is under value. And then from there, once you started seeing this use case for this new base economic system that was outside of the financial system of all the major countries in the world, you had suddenly an asset that was potentially like parallel to gold with digital, right?"

This evolution in thinking led VanEck to explore various investment opportunities in the crypto space, including exchanges and smart contract platforms.

Valuation Methodology for Layer 1 Blockchains

Bush detailed the process of valuing layer 1 blockchains, emphasizing the platform-like nature of these ecosystems:

"There's going to be some sort of take rate of that activity by that layer one protocol. And so the big question is like, how much will that be? One, the activity on there. What will the take rate be? Why will it be a take rate? How will that work in practice?"

VanEck's approach involves projecting potential revenue for various end markets by 2030, estimating the percentage that could migrate to blockchain systems, and then calculating the potential take rate for the layer 1 protocol.

Solana's Unique Value Proposition

When discussing Solana specifically, Bush highlighted the blockchain's lower take rate compared to Ethereum:

"Solana's like take rate when we approximated it. It's been like Orca was one and a half percent. So one and a half percent of the entire cost of the transaction with the Solana. And that's just because the abundance, because the ability to have cheaper state."

This lower take rate is seen as a potential advantage for Solana in attracting users and developers to its ecosystem.

The Role of Speculation in Crypto Adoption

Bush acknowledged the significant role that speculation plays in driving adoption and interest in cryptocurrency projects:

"It's a system that premises on speculation. And that's the clue that that's the core. Everything's the clue today. Sorry, out of vocab words. But that's the fuel. That's the fuel that makes it run, right?"

He compared this speculative nature to other technological and economic paradigms, suggesting that the belief in future value can become a self-fulfilling prophecy to some extent.

Institutional Interest in Cryptocurrencies

The conversation turned to the growing institutional interest in cryptocurrencies. Bush noted an increase in institutional experimentation and pilot programs:

"Increasingly, you're seeing more programs, more pilots, more things that are showing that they're experimenting in the space. And they're starting to get a lot of so much for ways in which they could save money or attract new customers or whatever else."

However, he cautioned that institutional adoption might not always translate directly to increased value for public blockchain tokens, as some institutions may opt for private blockchain solutions.

The Importance of Credible Neutrality

Bush emphasized the concept of "credible neutrality" as a crucial factor in the long-term success of cryptocurrency projects:

"I think BlackRock understands tangibly that you're violating the incredible neutrality of the US based system is going to have some effects down the road. And they might want to kind of diversify their offering to looking at things that people might want to invest in outside of it."

This focus on credible neutrality aligns with the core principles of decentralization and censorship resistance that underpin many cryptocurrency projects.

Regulatory Challenges and KYC Solutions

The podcast discussion touched on the regulatory hurdles facing cryptocurrency adoption, particularly for institutional players. Bush highlighted the challenges of corporate structures holding volatile crypto assets and managing associated risks.

He noted the potential solutions emerging in the space:

"For the financial, you start to see the solve, the solution case, like decentralized identity or like a KYC list, very, very, very beast. So I think something like Coinbase having like apparently 108 million verify users is huge."

These developments in KYC (Know Your Customer) and identity solutions could pave the way for increased institutional participation in the crypto ecosystem.

The Future of Decentralized Finance (DeFi)

Bush expressed optimism about the potential for decentralized finance to disrupt traditional financial systems:

"You have these structures that like are just seem unfair to people. Like, why is it we're taking 40% of the driver's money? Like that does seem fair. That seems absurd. Because they own a network because they have a network effect. Okay. Like what's supposed to be better than that treats him more equitably that puts more money in the worker's pocket or whatever, like anti-capitalist slogan you want to adopt crypto enables that."

This perspective highlights the potential for blockchain technology to create more equitable financial systems and redistribute value to users and participants.

Solana's Competitive Advantage in Payments

When discussing potential use cases for Solana, Bush highlighted payments as a particularly promising area:

"I think like the most interesting one is payments. That's everyone's been talking about that since, you know, 2009 when Toshi wrote his paper. But I think this is a really interesting, and I think like, to me, it's like payments and then repo."

He emphasized Solana's ability to process transactions cheaply and efficiently, potentially disrupting traditional payment systems and reducing costs for users.

The Role of Community in Crypto Success

Bush stressed the importance of strong communities in the success of cryptocurrency projects, particularly in the face of market challenges:

"Everyone talks about some honest community now, the cockroaches in crypto because they survived, right? Like they had like they had the they went into the extinction event and came out strong."

This resilience and community support can be crucial factors in a project's long-term success and ability to weather market volatility.

Challenges in Valuing Cryptocurrency Projects

The podcast highlighted the difficulties in applying traditional valuation methods to cryptocurrency projects. Bush explained:

"It's almost like the underpants known paradigm where you're just like the first case of Ethereum is useful. And then there's a bunch of question marks. And then the next case is it's all, it's valuable, right? Like there's no real certainty how it gets there."

This uncertainty underscores the speculative nature of many cryptocurrency investments and the need for investors to carefully consider the underlying value propositions of different projects.

The Potential for Decentralized Social Media

Bush discussed the potential for blockchain technology to disrupt social media platforms, proposing innovative ideas for decentralized social applications:

"A really cool app and be like, imagine social fi where you're gambling on people's profiles, you get to talk to them for a bit. But what if it wasn't just that? What if it was like cameo where you could talk to like a celebrity for a bit?"

These concepts highlight the potential for blockchain technology to create new forms of social interaction and value exchange online.

The Balance Between Centralization and Decentralization

The discussion touched on the ongoing debate between centralization and decentralization in blockchain projects. Bush acknowledged the value that centralized platforms like YouTube provide in content curation and discovery:

"I think both things are true. It's unclear what that final product vision will be. But yeah, I mean, it's an interesting point for sure."

This nuanced perspective suggests that the future of blockchain technology may involve finding an optimal balance between centralized and decentralized elements.

The Impact of Political Factors on Crypto Markets

Looking ahead to the future of the crypto market, Bush cautioned about the potential impact of political factors:

"I think the political situation in the United States is going to dictate what happens next to an extent. I think I think there's a lot of sidewinders that can happen for both the market that we haven't thought about yet."

This reminder highlights the importance of considering broader economic and political contexts when evaluating cryptocurrency investments.

Advice for Cryptocurrency Investors

Bush offered practical advice for those considering investments in the cryptocurrency space:

"Make sure that like when you're looking at make sense. And then you set some sort of point where like you have max pain, you get out, you don't let it go, you don't lose more than you can spend. You don't put your mom's money on things that go down only up, right?"

He emphasized the importance of thorough research, understanding token economics, and setting clear risk management strategies.

The Future of Blockchain Adoption

While expressing optimism about the long-term potential of blockchain technology, Bush remained cautious about short-term predictions:

"I think it's going to be a bumpy ride. I think the political situation in the United States is going to dictate what happens next to an extent."

This balanced perspective acknowledges both the transformative potential of blockchain technology and the challenges it faces in achieving widespread adoption.

Solana's Position in the Layer 1 Landscape

Throughout the discussion, Bush highlighted Solana's unique attributes that position it favorably in the competitive layer 1 blockchain landscape. Its high throughput and low transaction costs were repeatedly emphasized as key advantages:

"Solana's like take rate when we approximated it. It's been like Orca was one and a half percent. So one and a half percent of the entire cost of the transaction with the Solana. And that's just because the abundance, because the ability to have cheaper state."

This efficiency could make Solana particularly well-suited for applications requiring high transaction volumes and low costs, such as payments and decentralized finance.

The Importance of Use Cases in Driving Adoption

Bush stressed the significance of real-world use cases in driving cryptocurrency adoption:

"What gets adoption? The size of usage stuff is this sovereign money thesis really coming into play."

This focus on practical applications and solving real-world problems aligns with Solana's emphasis on performance and user experience.

The Role of Tokenomics in Project Success

The podcast highlighted the importance of well-designed tokenomics in the success of cryptocurrency projects. Bush explained:

"You have to pair it with like how many stable coins are on chain. And then to the other point that people talk about capital efficiency."

This nuanced approach to evaluating token ecosystems underscores the complexity of cryptocurrency valuation and the need for comprehensive analysis.

The Potential for Blockchain to Disrupt Traditional Finance

Throughout the discussion, Bush emphasized the disruptive potential of blockchain technology in traditional finance:

"You have these structures that like are just seem unfair to people. Like, why is it we're taking 40% of the driver's money? Like that does seem fair. That seems absurd."

This perspective aligns with Solana's focus on creating more efficient and equitable financial systems through blockchain technology.

The Evolution of Institutional Interest in Crypto

Bush noted the gradual increase in institutional interest and experimentation with blockchain technology:

"Increasingly, you're seeing more programs, more pilots, more things that are showing that they're experimenting in the space. And they're starting to get a lot of so much for ways in which they could save money or attract new customers or whatever else."

This growing institutional adoption could provide significant tailwinds for projects like Solana that offer scalable, efficient blockchain solutions.

The Importance of Community in Crypto Success

The podcast emphasized the crucial role that strong communities play in the success of cryptocurrency projects:

"Everyone talks about some honest community now, the cockroaches in crypto because they survived, right? Like they had like they had the they went into the extinction event and came out strong."

Solana's resilient and engaged community has been a key factor in its ability to weather market challenges and continue growing its ecosystem.

The Future of Decentralized Applications

Bush expressed optimism about the potential for decentralized applications to create new forms of value and interaction:

"A really cool app and be like, imagine social fi where you're gambling on people's profiles, you get to talk to them for a bit. But what if it wasn't just that? What if it was like cameo where you could talk to like a celebrity for a bit?"

Solana's high-performance blockchain could provide an ideal platform for building these next-generation decentralized applications.

The Balance Between Speculation and Utility

The discussion highlighted the ongoing tension between speculation and utility in the cryptocurrency space:

"It's a system that premises on speculation. And that's the clue that that's the core. Everything's the clue today. Sorry, out of vocab words. But that's the fuel. That's the fuel that makes it run, right?"

While speculation plays a crucial role in driving interest and adoption, the long-term success of projects like Solana will likely depend on their ability to deliver real-world utility and value.

The Importance of Regulatory Clarity

Bush noted the challenges that regulatory uncertainty poses for institutional adoption of cryptocurrencies:

"It definitely is. It's a huge, huge hurdle, like talking to someone like a cash. A cash is doing like GPU compute stuff, right? And their biggest issue, things issue for a lot of stuff in general is that entities they want to build there, they can't hold a token."

As regulatory frameworks evolve, projects like Solana that prioritize compliance and work towards regulatory clarity may be well-positioned to benefit from increased institutional participation.

The Potential for Blockchain to Enhance Privacy and Data Ownership

The podcast touched on the potential for blockchain technology to create new paradigms for privacy and data ownership:

"I think like that could be another massive use case for crypto is this big marketing tracking. So what is where people start opting in using their wallet to be tracked, then getting paid or like by, you know, some in similarly similar to demo where all the all the user data somewhere."

Solana's efficient and scalable infrastructure could provide a solid foundation for building these next-generation privacy and data management solutions.

Conclusion: Solana's Promising Future

While the podcast covered a wide range of topics related to cryptocurrency and blockchain technology, the discussion consistently highlighted Solana's unique attributes and potential for long-term success. Its high-performance, low-cost infrastructure positions it well to capitalize on emerging trends in decentralized finance, payments, and next-generation applications.

As the cryptocurrency market continues to evolve, Solana's focus on scalability, efficiency, and user experience could drive significant adoption and value creation. While the path to widespread blockchain adoption may be "bumpy," as Bush cautioned, Solana appears well-equipped to navigate these challenges and emerge as a leading platform in the decentralized future.

Investors and enthusiasts should continue to monitor Solana's progress in expanding its ecosystem, attracting institutional interest, and delivering real-world utility. While the $3,000 price target discussed in VanEck's report represents a highly optimistic scenario, the analysis underscores Solana's significant potential for growth and innovation in the years ahead.

Facts + Figures

  • VanEck has been interested in crypto since 2017, initially focusing on Bitcoin as a potential gold disruptor
  • VanEck launched a managed L1 fund in February 2022 and later expanded to a hedge fund
  • Solana's take rate was approximated at 1.5% of transaction costs, compared to higher rates on other platforms
  • VanEck's valuation model for 2030 assumes about 5% of revenues from various financial markets could be on blockchain
  • The ratio of monolithic (e.g., Solana, Aptos) to modular (Ethereum + L2s) blockchain valuations has increased from about 5% to 10-11% recently
  • Coinbase reportedly has 108 million verified users, which could be significant for KYC solutions in crypto
  • Patrick Bush went "all in" on Chainlink in July 2020, which led the bull market but underperformed compared to ETH
  • The podcast mentions a potential $3,000 price target for Solana by 2030, though this is presented as a highly optimistic scenario
  • Institutional interest in crypto is growing, with more pilot programs and experiments being conducted
  • Regulatory hurdles remain a significant challenge for institutional adoption of cryptocurrencies
  • The concept of "credible neutrality" is emphasized as crucial for the long-term success of cryptocurrency projects
  • The podcast highlights the potential for blockchain to disrupt traditional finance, particularly in areas like payments and social media
  • Community resilience is noted as a key factor in Solana's ability to weather market challenges
  • The discussion touches on the balance between centralization and decentralization in blockchain projects
  • Political factors in the United States are identified as potential influences on the future of the crypto market

Questions Answered

What is VanEck's approach to analyzing digital assets?

VanEck analyzes digital assets by examining their economic system design, focusing on incentive structures and utility. They look at how tokens accrue value within their ecosystems, similar to traditional capital structures in companies. This approach allows them to assess the potential value accrual for tokens and understand the underlying economics of different blockchain projects.

How does Solana's take rate compare to other blockchains?

Solana's take rate is estimated to be around 1.5% of transaction costs, which is significantly lower than some other blockchain platforms. This lower take rate is due to Solana's ability to provide cheaper state and higher transaction throughput. The lower costs could make Solana more attractive for certain applications, particularly those requiring high volume and low-cost transactions.

What role does speculation play in cryptocurrency adoption?

Speculation plays a significant role in driving cryptocurrency adoption and interest. Patrick Bush describes it as the "fuel" that makes the system run. While speculation can drive initial interest and investment, the long-term success of cryptocurrency projects ultimately depends on their ability to deliver real-world utility and value. The belief in future value can become a self-fulfilling prophecy to some extent, driving development and adoption.

How are institutions approaching cryptocurrency investments?

Institutions are increasingly showing interest in cryptocurrencies, with more programs, pilots, and experiments being conducted. However, regulatory challenges and the volatility of crypto assets remain significant hurdles. Some institutions may opt for private blockchain solutions rather than investing directly in public blockchain tokens. The growing institutional adoption could provide significant support for projects that offer scalable, efficient blockchain solutions.

What is the importance of "credible neutrality" in cryptocurrency projects?

Credible neutrality is crucial for the long-term success of cryptocurrency projects. It refers to the idea that a blockchain or cryptocurrency should be impartial and resistant to censorship or control by any single entity. This principle aligns with the core values of decentralization and censorship resistance that underpin many cryptocurrency projects. Credible neutrality is seen as essential for building trust and ensuring the long-term viability of a cryptocurrency as a global, neutral financial system.

How might blockchain technology disrupt traditional finance?

Blockchain technology has the potential to disrupt traditional finance by creating more efficient and equitable systems. It could reduce intermediary costs, increase transparency, and enable new financial products and services. Areas like payments, lending, and asset tokenization are particularly ripe for disruption. The podcast highlights the potential for blockchain to create fairer systems that put more money back into users' pockets, challenging existing structures that extract high fees from transactions.

What are the challenges in valuing cryptocurrency projects?

Valuing cryptocurrency projects is challenging due to the speculative nature of the market and the lack of traditional valuation metrics. The podcast describes it as an "underpants gnome paradigm" where there's a clear starting point (the project exists) and an end goal (it becomes valuable), but the path between these points is unclear. Factors like token economics, community strength, and potential use cases all play a role in valuation, making it a complex and often subjective process.

How important is community in the success of a cryptocurrency project?

Community is crucial to the success of cryptocurrency projects. Strong communities provide resilience during market downturns, contribute to development and adoption, and help create a network effect. The podcast specifically mentions Solana's community as a key factor in its ability to survive and thrive through challenging market conditions. A engaged and supportive community can be a significant competitive advantage for a blockchain project.

What potential does blockchain have for disrupting social media?

Blockchain technology has the potential to disrupt social media by enabling new forms of value exchange and interaction. The podcast discusses ideas like decentralized social platforms where users could interact directly with celebrities or experts, or systems where users are compensated for their data and attention. These concepts could challenge existing social media models by giving users more control over their data and enabling new economic models for content creation and consumption.

What advice is given for cryptocurrency investors?

The podcast offers several pieces of advice for cryptocurrency investors. These include: doing thorough research to understand how tokens generate value, setting clear risk management strategies, not investing more than you can afford to lose, and being aware of the speculative nature of the market. The importance of understanding token economics and the potential use cases for different projects is emphasized. Investors are also advised to be prepared for market volatility and to have a long-term perspective when investing in cryptocurrency projects.

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