Solana has recently gained attention for surpassing Ethereum in key metrics, such as daily transactions and decentralized exchange volumes. However, a new report by the pseudonymous researcher Flip Research suggests that much of Solana’s impressive performance may be driven by bot activity rather than genuine user engagement. Flip Research’s report, published on July 30, reveals that a high transaction-to-user ratio on Solana indicates potential manipulation within the ecosystem, with activities like wash trading and rug pulls inflating transaction volumes.
The report points out that Solana recorded a staggering 217 daily transactions per user on average, compared to Ethereum’s 2.92 transactions per user daily. This discrepancy is attributed to a high amount of miner extractable value (MEV) and fraudulent activities within Solana’s decentralized exchange (DEX) ecosystem. For example, the report highlights over 50 rug pulls on the Raydium DEX in the last 24 hours alone, totaling more than $200 million in volume. These activities have not only skewed Solana’s metrics but also impacted the network’s functionality, leading to network congestion and failed transactions.
Despite efforts by developers to address network congestion through mainnet updates, bot activity remains rampant on Solana. Network congestion in February saw Solana’s monthly stablecoin volume surpass $643 billion, mostly driven by bot transactions on the Phoenix DEX. The report raises concerns about the impact of bot spam on legitimate user transactions, leading to widespread criticism within the cryptocurrency community. Helis CEO Mert Mumtaz emphasized that raising transaction priority fees alone would not resolve the issue, as bots spam the network before the scheduling process.
In response to the bot activity and network congestion, Solana’s native token, SOL, witnessed a 4% price drop to $178 in the past 24 hours. This decline was partly influenced by external factors, such as the SEC’s decision to amend its legal complaint against Binance, impacting the broader cryptocurrency market. Additionally, the recent dramatic price drops in the Celebrity Solana meme coin market contributed to investor losses, with half of the 30 celebrity meme coins launched in June plummeting by 99% and others experiencing significant declines.
The report’s findings shed light on the challenges facing Solana as it seeks to maintain its position in the cryptocurrency market. While the platform has demonstrated impressive transaction volumes and user numbers, the prevalence of bot activity and fraudulent projects raise concerns about the ecosystem’s credibility. As Solana strives to address network congestion and combat manipulation, investors and users will be closely monitoring developments to assess the platform’s long-term viability and sustainability.
