Solana's Blockchain GDP

Solana’s Blockchain GDP is $7.8 billion.?

Blockchain GDP is a valuable framework for understanding the economic activity of a network. It is more insightful than Total Value Locked, active addresses, number of transactions, or other KPIs and vanity metrics.?

Blockchain GDP is the sum of Protocol GDP and Application GDP.?

Let’s dive deeper into the composition of Solana's GDP

The first component of Blockchain GDP is Protocol GDP. Solana’s Protocol GDP is $6.1bn.

Protocol GDP includes base fees, vote fees, priority fees, Jito tips, and SOL emissions.?

Solana's 5% emission rate distributes $4.3 billion of SOL to validators annually, representing the largest component of the network's Protocol GDP.

Priority fees and Jito tips have grown 16x and 36x YTD, respectively, as demand for Solana’s block space has grown off the back of memecoin trading.

The next layer of Blockchain GDP is Application GDP.?

Application GDP includes application revenue, imports, and exports. The primary driver of Application GDP is application revenue which includes revenue generated by DeFi protocols, wallets, and infrastructure built on Solana.?

Imports are primarily driven by DAO operating expenses (e.g. a DAO paying a real world legal entity for services). Exports consist of off-chain entities earning a profit from goods and services delivered on-chain. An example of this would be sequencer revenue earned by Solana L2s.?

With highly profitable apps like pump.fun and Raydium, and relatively lean expenditures from protocol teams, Solana’s Application GDP totals $1.7 billion.

What’s driving Solana’s Application GDP??

We can see a significant percentage of application revenue is tied to memecoins.?

The top 3 categories of revenue-generating protocols are telegram bots, launchpads, and decentralized trading platforms, which collectively account for 87% of revenue generated by Solana applications.?

Telegram bots including Photon, BONKbot, and Maestro along with token launchpads such as pump.fun and Metaplex account for 69% of Solana’s total application revenue.?

Of the top 10 revenue-generating protocols, 5 are Telegram Bots, 2 are DEXs, and the number one revenue generator is pump.fun.

As a whole, we estimate Solana’s Blockchain GDP to be $7.8 billion, as a combination of Protocol and Application GDP.?

Unsurprisingly, memecoin creation and token trading have been the primary drivers of economic activity on Solana YTD. As the ecosystem continues to scale and diversify, we expect payments, AI, and DePIN to become larger drivers of economic activity.?

Moving forward, we expect to focus on a few areas:?

• We can compare Blockchain GDP across different networks. A network’s fully diluted valuation divided by GDP can reveal a blockchain’s valuation relative to the underlying activity.?
• The split between protocol GDP and application GDP will be important to monitor. Over time, applications may internalize MEV and increase fee capture, driving application GDP’s share of total GDP higher.?
• Not all GDP is equal. The quality of the underlying activity may differ based on the type of applications and users on the blockchain.?

Disclaimers:?

The above thread is provided for informational purposes only. It should not be construed as investment, legal, or tax advice. ParaFi has positions in SOL and other related positions. Please see https://parafi.com/disclosure for more information.

Thank you to the Solana Foundation team for their help and feedback on this!