The rise of the Solana Ecological Perpetual Agreement

Solana received a lot of investor attention in the last quarter. SOL has risen by 50% in the past 30 days and nearly 500% against the US dollar in the past 90 days (up by 24% and 249% against ETH, respectively). In many respects, price discovery has received a healthy boost in various fields-announced the establishment of a $100 million gaming fund, Brave announced native integration in web3, Reddit invested $100 million in social media, and Neon Labs raised 40 million After the U.S. dollar was used to introduce the EVM infrastructure, pppleasr launched NFT on Solana, FTX built NFT integration, and of course, Solana’s DeFi ecosystem, which has achieved 4 times the TVL expansion since September.

Although Solana has certainly developed many growth catalysts recently, how does the ecosystem perform according to the narrative earlier this year? One of them is Solana’s potential as a network that can support a large number of trading activities. It may be professionally influenced by some of the largest investors in the ecosystem, including Alameda and Jump Capital. Compared with other ecosystems, Solana now has a relatively high degree of concentration of derivatives-focused agreements.

Let’s go back and look at the Solana agreement, focusing on providing one of Crypto’s favorite trading products-perpetual contracts.

For some simple background, a perpetual contract is a futures derivative product that does not require contract extension, but a single product provides continuous future exposure to a specific market. For traders, this is an easy way to obtain leveraged futures exposure for assets without the inefficiency of actually purchasing the underlying asset. Therefore, it is by far the most traded product among cryptocurrencies. In October, the permanent nominal trading volume of centralized exchanges (CEX) in the BTC and ETH markets reached 2.7T USD, while the trading volume of all CEX spot markets reached 1.25T USD.

The decentralized exchange (DEX) perpetual market still lags behind the spot trading volume. For example, in the past 24 hours, the trading volume of the leading DEX perpetual agreement dYdX was close to $3B, while the trading volume of all DEX spot markets exceeded $7.5B. The biggest agreements in this field are dYdX (starkware), Perpetual Protocol (xDAI-soon to be Arbitrum), MCDEX (Arbitrum and BSC), and of course the Solana ecosystem: Mango Markets, Drift Protocol and Bonfida all provide perpetual contract products.

The rise of the Solana Ecological Perpetual Agreement

dYdX currently dominates the DEX market trading volume with more than 97% of the 7-day trading volume. If you have a magnifying glass at hand, you might see the 0.8% collective share that the Solana ecosystem has received so far. No kidding, it is important to understand this chart and how quickly dYdX can attract a large number of users after launching its tokens and incentive rewards. At the beginning of August, Perpetual Protocol was the main agreement, accounting for 74% of the daily transaction volume between 100 million and 150 million US dollars. Once dYdX announced their tokens on August 3, the rules of the game changed. The daily DEX trading volume in August more than doubled immediately, reaching US$300 million to US$500 million, and dYdX found that it contributed an average of 78% of the transaction volume in the second half of the month. When the token and liquidity incentives came into effect in early September.

All in all, to put it simply, the market structure is constantly changing, and change is defined on the margin. So, who is the fastest growing? What catalyst might accelerate or hinder this growth?

The rise of the Solana Ecological Perpetual Agreement

Pulling out dYdX to better understand the potential growth of non-market leaders, we can see that the Solana ecosystem has grown significantly in the last month. At the beginning of October, Solana accounted for approximately 5% of non-dYdX DEX perpetual trading volume. Fast forward to the beginning of November, and the 7-day market share has only increased by 30%. Since late October, most of the growth has occurred in an environment where Solana’s transaction volume has increased while other protocols (such as Perpetual Protocol) have contracted within the same time frame.

So, while the overall Solana permanent ecosystem is growing, what specific agreements are driving this? How is each person’s growth? What catalysts and structures each exist that may continue to accelerate the Solana ecosystem?

Decompose Solana Perpetual Agreement

Mango Markets

Mango Markets is currently the leader of the ring. It operates as a margin trading agreement, perpetual trading agreement and money market (borrowing). Mango’s permanent market accounts for 93% of the total Solana ecosystem, and Mango provides traders with the most market participation. BTC was the first permanent market added in late August, followed by the SOL market in September. Approximately one-third of Mango’s recent 7-day growth came from various new markets announced in early November: MNGO, ETH, SRM, RAY, ADA, and FTT.

Mango runs on the order book execution model and can be extended to provide traders with a variety of advanced order types, such as limit orders, stop loss, and take profit. Execution through the order book requires market makers to provide execution liquidity, so Mango provides a market-making incentive program. Taker orders charge a fee of 5 basis points, while manufacturer orders do not charge a fee. Mango also does not charge fees for its lending market.

Compared with other perpetual agreements, Mango’s collateral function is unique, which stems from the fact that Mango also acts as a margin transaction and currency market agreement. All functions of Mango use the same collateral. Other agreements only accept stable assets like USDC as collateral, but Mango recognizes all supported borrowed assets, such as WBTC, ETH, MNGO, COPE, etc., as collateral for its perpetual market. Using volatile assets as cross-collateral for leveraged products must have a higher risk curve than other agreements. Therefore, Mango has an insurance fund of USD 10 million to protect traders until social losses begin. Socialized loss means that the agreed depositor accepts the burden of bad debts and deducts the balance proportionally.

The rise of the Solana Ecological Perpetual Agreement

Drift Protocol

The Drift protocol is a new member of Solana’s permanent ecosystem. In late October, Drift released its closed alpha version on the mainnet, which can be accessed with a Drift Alpha ticket NFT. Tickets are rewarded to users who provide value for the agreement during the development of the network. Only 1,500 tickets means that there are fewer than 1,500 users using the mainnet agreement. Although SOL has gated access and only a real-time market, Drift has become the second largest permanent agreement in the Solana ecosystem, with a transaction volume of $10 million in the past 7 days (accounting for 5% of mango’s 7-day transaction volume).

Drift has a significantly different execution model, which leads to creative business models. Transaction execution is done for virtual AMM, similar to other permanent protocols such as Perpetual Protocol, MCDEX, Futureswap. All “virtual” means that the AMM price curve is used for price discovery, but it does not actually hold the underlying asset—the trader’s collateral as the source of settlement. Drift designed a unique vAMM that combines centralized liquidity and related mechanisms for re-adjusting centralized liquidity. Without going into the technical details, it can be said that this transaction execution model is mainly for extending the agreement without the need for market-making incentives.

The interesting part of the vAMM execution engine is the protocol’s ability to capture value during slippage. When a trader defines a slippage tolerance for a transaction that exceeds the slippage provided on the vAMM price curve, the agreement can capture the additional slippage tolerance as a source of income. Co-founder Cindy Leow calls it “market maker extractable value” because this business model draws inspiration from the more common MEV (miner extractable value) on the live AMM. In addition to this source of income, in addition to the liquidation fee, the agreement also charges a fee of 1bps (0.01).

Drift plans to open the alpha version of the agreement to all users later in the fourth quarter and add additional trading markets because it currently only offers a single SOL-USDC market. Obviously, opening Drift to more users and larger deposits will become a catalyst to further accelerate Solana’s permanent transaction volume. Speaking of catalysts, the agreement has not yet launched a token. According to the design, the token event may attract a lot of use to the platform (dYdX is the most successful case).


Bonfida is the third and smallest agreement to provide perpetual. Although it is the first agreement to provide a perpetual contract on Solana, it has lagged behind Mango with only $5 million in transaction volume on its three real-time markets in the past 7 days. It uses vAMM to provide transaction execution and only provides simple order types. Since most of the project’s attention is focused on Bonfida’s other business lines, such as its name service, messaging, etc., it is difficult to foresee an important catalyst that will cause the agreement to surpass Mango or Drift in terms of permanent transaction volume.

market structure

Under the background of understanding the micro-level of the agreement and the catalyst of each agreement, let us decompose the current permanent market structure of Solana compared with other markets to understand user preferences and potential strongholds of the ecosystem.

The rise of the Solana Ecological Perpetual Agreement

Compared with traders on CEX and other DEXs, permanent traders in the Solana ecosystem are significantly different. The BTC and ETH markets are the vast majority of the trading volume of dYdX, MCDEX and CEX, and Solana traders (perhaps not surprisingly) prefer to trade SOL. It’s a bit speculative, but it shows that the community of traders on Solana is local and more enthusiastic about the Solana ecosystem, rather than traders who migrate from the existing platform to Solana’s cheaper trading network.

Compared with mercenary users seeking the lowest-cost alternative, it is much more beneficial to have a user base that is closely integrated with the ecosystem. From a business perspective and a competitive perspective, this enables the Solana perpetual agreement to gain a huge share of transaction volume on the Solana native market (such as Solana DeFi tokens). In fact, we can already see this happening.

The rise of the Solana Ecological Perpetual Agreement

Recalling the first picture, compared with dYdX, the volume of the Solana ecosystem is almost invisible, and we now see a different and more subtle landscape emerge. Solana DEX has accounted for 16% of all perpetual SOL market trading volume of all DEX (including dYdX) and 100% of the perpetual contract Solana DeFi token trading volume in the past few weeks. Most of these are promoted by Mango because it is the only DEX with a permanent market for Solana DeFi tokens.

Therefore, although Solana controls less than 1% of the total permanent DEX market, it occupies a significant market share in the most important market for its users. If the Solana ecosystem continues to expand, this will be the dangerous secret of success. Solana DEX is likely to be the first agreement to market Solana ecosystem tokens, and it will continue to attract funds from a closely united user base. This growth in the number of seeds and liquidity, at this point, these agreements become strong competitors and become the preferred agreements in certain markets. This is a flywheel effect that has appeared in the relative growth data.

The rise of the Solana Ecological Perpetual Agreement

In an environment where the weekly trading volume of other top permanent DEXs has shrunk considerably, the Solana ecosystem is the only ecosystem where the trading volume has increased. Part of the reason is the continued interest in Mango’s new Solana Defi market (MNGO, SRM, RAY, COPE). However, most of the growth came from accelerating interest in the existing SOL market, which was up 56% from the previous week. Compared with the weekly negative growth of dYdX, MCDEX and Perpetual Protocol, other markets such as ETH and BTC also showed positive growth.

The 7-day growth is a small sample, but the Solana ecosystem has the fastest growing decentralized permanent agreement. Then ask the question; how much of this growth is implied in the Solana ecosystem token valuation?

Valuation comparison

Actually quite a lot. MNGO tokens account for 93% of the Solana ecosystem’s transaction volume, and the current transaction volume is twice its 7-day transaction volume (US$426 million CMC and US$206 million weekly transaction volume). However, the trading price of dYdX is 0.06 times its 7-day trading volume, which is clearly the lowest valuation multiple in the industry. This means that Mango’s transaction valuation is 37 times higher than dYdX’s transaction volume (this is directly related to transaction agreement revenue).

Now, it is not entirely fair to isolate Mango’s permanent market from the rest of the agreement. We can assume that over time, Mango’s perpetual market will cannibalize its margin trading business. This is a fairly large operation, about 50% larger than Mango’s permanent transaction volume. As for money market operations, the assumption of reduced margin trading leads to a decline in utilization, and Mango does not charge borrowing fees. We can deduct this part from the valuation. Therefore, combining Mango’s margin trading volume and perpetual trading volume, CMC estimates the 7-day trading volume to be 0.9 times. This is still about 15 times higher than dYdX and 4 times higher than the circulating valuation of MCDEX.

All in all, although the Solana permanent ecosystem is the fastest growing in the industry, in the current state, the valuation assumption of the token has a considerable growth.


Solana has various catalysts and narratives in various fields, and it has become one of the destinations of traders. It is also what we saw first and achieved certain success. The overall indicators and transaction volume are far from the industry leader dYdX, but the ecosystem’s consistent emotional investment user base is gratifying. Not to mention that one of the most anticipated protocols in the field-Drift Protocol-has not yet opened mainnet access to all Solana’s user base. This is a growing user base—especially a major catalyst like the Brave browser, which brings its 42 million active users to Solana. It is worth keeping an eye on the growth of the ecosystem in the coming weeks to track Solana’s permanent DEX to keep up with the recent growth rate.

The information provided in this article is for general guidance and information purposes only. The content of this article should not be considered investment, business, legal or tax advice under any circumstances. We do not take any responsibility for personal decisions made based on this article, and we strongly recommend that you conduct your own research before taking any action. Although every effort has been made to ensure that all information provided here is accurate and up-to-date, omissions or errors may occur.

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