Standard Chartered report: Is Solana becoming a "Meme chain" and falling into a rise dilemma?

Solana may be evolving into a "single-function platform" that focuses solely on generating and trading Meme coins. As the trading volume of Meme coins declines, Solana may struggle to maintain its growth momentum.

Written by: Adrian Zmudzinski

Compiled by: Tim, PANews

According to a recent report released by Standard Chartered Bank, the Layer 1 blockchain Solana may be evolving into a "single-function platform" focused solely on generating and trading Meme coins.

According to a research report on May 27, Solana dominates the public chain field with high volume and low transaction costs, thanks to its design architecture that enables fast and low-cost transaction confirmations. This technological advantage has led to an unexpected consequence: so far, it has mainly focused on Meme coin trading, which accounts for a large portion of the activity on Solana (measured by "GDP", or application revenue).

Standard Chartered Bank stated that the meme coin craze posed a stress test for Solana's scalability, but the volatility and speculative nature of such assets also brought drawbacks. With the decline in meme coin volume, the bank warned that Solana may struggle to maintain its growth momentum.

The meme frenzy has peaked.

The report points out that the frenzy for Meme coins based on Solana has passed its peak, and the decline in usage combined with "cheap" transactions is not an ideal combination. The bank suggests that Solana should expand into other areas that require a large number of low-cost, fast transaction processing, such as financial settlement, decentralized cloud computing, or real-time data exchange in emerging fields, which align well with the high throughput characteristics of its blockchain.

Solana decentralized exchange volume. Source: Standard Chartered Bank

According to the report, these areas may include traditional consumer applications such as high-throughput financial applications and social media. However, the bank pointed out that the scaling of such applications may take years, which could have serious consequences for Solana. If progress does not meet expectations, its market competitiveness, developer ecosystem, and platform reputation may suffer severely, and its valuation could face significant downward pressure.

"Therefore, we expect Solana's performance to lag behind Ethereum in the next two to three years, before catching up, at least in terms of actual value."

Cryptocurrency target price of Standard Chartered Bank. Source: Standard Chartered

The advantages of Solana are gradually disappearing

Solana has long positioned itself as a fast, low-cost L1 public chain that supports smart contracts, competing directly with Ethereum. However, this advantage may be gradually diminishing.

Average transaction fees for Solana and Arbitrum. Source: Standard Chartered Bank

Since the Dencun network upgrade in March 2024, Ethereum's Layer 2 platform has overtaken Solana in terms of average transaction costs. This shift puts pressure on Solana's value proposition as the "cheapest high-throughput blockchain." Standard Chartered noted that Ethereum has achieved more efficient scaling while maintaining decentralization by layering data availability, execution, and consensus through a modular design: "The modular approach allows Ethereum to scale transaction processing at a low cost (after the Dencun upgrade) while maintaining the security benefits of a highly decentralized mainnet."