Solana (SOL) is making significant strides in the smart contract platform (SCP) market, currently holding 15% of the market capitalization. Projections suggest that this figure could rise to 22% by the end of 2025, potentially driving SOL’s price to $520, as per a recent report by VanEck.
The growth in Solana’s market cap can be attributed to several factors, including its strong developer community, increasing share of decentralized exchange (DEX) volumes, rising revenue, and a growing active user base. VanEck’s valuation model connects Solana’s expected SCP market share to the U.S. M2 money supply growth, which historically correlates with crypto market capitalization.
The M2 money supply is forecasted to reach $22.3 trillion by the end of 2025, maintaining a 3.2% annualized growth rate since October 2023. Regression analysis indicates that the total SCP market capitalization is set to grow by 43% to $1.1 trillion by the end of 2025, surpassing its previous peak of $989 billion in 2021.
By utilizing an autoregressive (AR) model, VanEck estimates that Solana’s market capitalization could reach around $250 billion, translating to a SOL price target of $520 based on the 486 million floating tokens available.
Solana’s revenue is on an upward trajectory, with the network leading in DEX volumes, chain revenues, and daily active wallets as of January 2024. VanEck projects that Solana’s revenue could hit an annualized rate of $6 billion if the current trend persists. The network’s revenue sources include base fees, priority fees, and maximal extractable value (MEV).
MEV represents a significant portion of Solana’s revenue, with block builders capturing 60% of its value and validators retaining the remaining 40%. VanEck suggests that if validators were to capture 80% of the MEV, similar to Ethereum’s structure, revenue derived from MEV could double to $6.8 billion, boosting SOL’s validator revenue by 56%.
To enhance MEV capture, improvements to Solana’s Jito system, protocol enhancements, and the implementation of Firedancer are recommended. However, current inefficiencies like private mempools and insider advantages hinder optimal revenue capture. Addressing these issues through validator whitelists, application-level MEV protections, RFQ systems, and software patches could boost Solana’s MEV revenue potential.
Solana’s dapp ecosystem has been flourishing, surpassing Ethereum in decentralized application revenue. The network has seen a surge in dapp revenue from $4 million in 2022 to $1.25 billion in 2024, attracting a growing number of developers.
In conclusion, with successful MEV optimizations and continued growth in revenue, Solana is poised to see an increase in demand for SOL, potentially driving its price over $500 by the end of the year. The network’s innovative solutions and expanding ecosystem position it as a key player in the SCP market.
