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Step Finance token launch bolsters Solana’s status as an Ethereum DeFi competitor

2021.04.28 Matthew Lam

With its low-cost transactions and high throughput, Solana has quickly emerged as a primary competitor to Ethereum in the DeFi sector — DeFi Digest

The cryptocurrency market recovery fuelled the growth of the decentralized finance ecosystem this week, with the total value locked in DeFi protocols standing around $61.83 billion, as of the time of this writing. Maker led the market with a 15% share of the sector’s total value locked.

The total borrowing volume of DeFi protocols posted 1% growth this week — clocking in at $17.39 billion. The lending market is currently being led by Compound, which has a 42% market share.

Trading activities in decentralized exchanges dropped this week, as the average weekly trading volume dipped by 6% to $4.16 billion. Uniswap regained its leadership with a 27% market share. At the same time, SushiSwap became the largest liquidity pool, with the TVL reaching $2.07 billion.

CategoryKey statisticsAmountWeekly % change
OverallTotal value locked (USD)$61.83 billion14%
Market dominance (%)Maker (15%)
LendingTotal borrowing volume$17.39 billion1%
Market dominance (%)Compound (42%)
DEXsWeekly avg. trading vol.$4.16 billion-6%
Market dominance (%)Uniswap (27%)
Yield farmingLargest liquidity poolSushiSwap ($2.07 billion)
The decentralized finance market is fragmented as the top DeFi protocol only accounts for a 15% TVL share. Source: DeFi Pulse and DeBank

The rise of Solana

The rapid growth of the Solana ecosystem has caught the attention of DeFi enthusiasts in recent weeks.

Solana is a public blockchain aiming to power the DeFi ecosystem through fast and scalable decentralized applications. The protocol’s native coin, SOL, has garnered popularity among DeFi participants — with its price surging over 7,000% since its inception.

The SOL price reached an all-high of $48.46 on April 25. Source: CoinGecko

Fast transactions and low fees fuel Solana’s growth

There are two primary attributes fuelling the rapid growth of Solana’s DeFi ecosystem:

  • Fast transactions through Solana’s scalable infrastructure
  • Relatively low transaction fees when compared to Ethereum

Solana scalability stands out thanks to its novel approach to reaching consensus, which adds proof-of-history to an underlying proof-of-stake mechanism. Proof-of-history is not a consensus protocol, however. Rather, it is a solution that significantly lowers validators’ confirmation times. 

In more-traditional blockchain infrastructures, validators need to communicate with each other in order to confirm the production of a new block. This communication often causes network delays. In contrast, Solana’s proof-of-history enables validators to compute the network state themselves — saving on cross-validator communication and leading to a 400 millisecond block time for four consecutive blocks in Solana. 

Solana’s scalability and performance have helped it emerge as an alternative to Ethereum. The protocol currently processes over 1,000 transactions per second, outpacing Ethereum’s average of 18 TPS. Each Solana transaction costs 0.000005 SOL — equal to $0.0002 at the time of this writing — and is significantly cheaper than Ethereum’s average of $9.78.

Step Finance shines

Solana’s high scalability and low transaction fees are also driving the growth of its ecosystem’s tokens — such as SRM, RAY and FIDA. Over the weekend, Step Finance launched its STEP token, and the protocol has since locked $101 million in liquidity.

The price of STEP surged from $2 to $9.28 in four days. Source: CoinGecko

Step Finance is a data aggregator in the Solana ecosystem that provides analytical dashboards for yield farmers. The Twitter user “Satoshi Nakameowdough” told OKX Insights that Step Finance’s early positioning has contributed to its success, saying:

“Step Finance has the first-mover advantage to become the go-to DeFi aggregator for all tokens launched in the Solana ecosystem. When you think of aggregators, Google is the go-to information platform, whereas Airbnb is the go-to accommodation aggregator. Step Finance is aiming to be that for Solana.

“With the success in STEP, SRM and RAY, the network effects of DApps in the Solana ecosystem cannot be understated. A rising tide lifts all boats.”

George Harrap, a co-founder of Step Finance, told OKX Insights that high-quality teams contributed to the success of Step Finance and the Solana ecosystem. He said:

“We believe DeFi will be multichain and the most liquid and exciting blockchain out there is Solana. Step Finance is aiming to be the focal point for Solana as a portfolio manager. Step Finance integrates with many projects and offers valuable insights from across the ecosystem. 

“We think part of the success of the sale has been the potential Solana has for the DeFi world. Besides, people realize there are quality teams building real value-adding projects on Solana, like Step Finance.”

OKX Insights presents market analyses, in-depth features, original research & curated news from crypto professionals. 

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.