Solana's Competitive Advantage in On-Chain Trading

Introduction

Solana has become one of the largest venues for on-chain financial activity, supporting trading across spot assets, derivatives, stablecoins, and an expanding range of tokenized assets. At the same time, ongoing improvements in network performance and trade execution quality continue to reshape the user experience and economics of the platform.

This article evaluates Solana's position as a trading platform by analyzing its scale, performance, and expanding asset base, and what these developments may imply for SOL’s long-term investment thesis.

Key Takeaways:

• Solana can support trading volumes comparable to traditional exchanges.
• Solana has proven its ability to sustain reliably low transaction costs and competitive asset pricing.
• Tokenized assets and perpetual futures may provide Solana users the opportunity to express their full range of market views within a single shared ecosystem.
• Solana generates value primarily from competition for transaction ordering rather than competition for limited blockspace, helping keep basic transactions inexpensive while charging a premium only to time-sensitive market participants.
• Solana’s future value accrual remains heavily dependent on sustained trading activity, which has historically been cyclical and highly competitive.

Financial Market Scale

Scale is a foundational characteristic of any trading venue. While scale alone does not determine market quality, it provides insight into a platform’s ability to support meaningful economic activity. Solana has experienced substantial growth in transactions, trading activity, and user participation, placing it among the largest blockchain-based financial networks.  Through 2026, Solana averaged roughly 15% of all exchange trades, briefly eclipsing the New York Stock Exchange in weekly trades executed. While the composition of activity on Solana differs substantially from traditional exchanges, with much of the volume concentrated in crypto-native assets, the network’s core function remains the facilitation of trades. 

Activity within these markets is naturally cyclical, as shown in the chart “Number of Spot DEX Trades vs. Traditional Exchanges.” However, the infrastructure required to process a digital assets trade is not fundamentally different than that required to process a trade in equities, currencies, or other financial assets. As discussed in later sections, ongoing improvements in network performance and liquidity formation could enable Solana to support trading volumes comparable to some of the world's largest financial marketplaces.   

While Solana's transaction capacity and trade count compare favorably with many of the world's largest exchanges, a meaningful share of traditional trading activity remains concentrated within alternative trading systems, dark pools, and other off-exchange venues. According to Nasdaq, roughly 50% of all equities volume occurred through off-exchange venues in 2025.¹ Privacy, information leakage, and execution considerations that drive activity toward these venues today may limit the degree to which public blockchains can capture all trading activity without further advances in market structure and privacy.

A trading venue's competitiveness is largely determined by its ability to facilitate trades quickly, reliably, and at low cost. Solana's architecture was designed with these objectives in mind, and recent upgrades continue to improve the network's performance across each dimension. Collectively, these efforts seek to reduce latency, increase transaction capacity, and improve execution reliability, characteristics that are particularly important for market makers, traders, and other latency-sensitive participants.

Reducing Latency

Execution latency, the time it takes a trade to be executed once an order is submitted, is a critical consideration for financial markets. Faster data propagation and transaction processing allows market makers to update quotes more frequently, reduces exposure to adverse price movements, and increases the number of trading opportunities that can be captured over a given period.

One of Solana's most significant recent improvements in latency has been its reduction in slot times. A slot represents a block of transactions, and the network's slot times have historically exhibited meaningful variability. In decentralized finance, variability impacts predictability. When slot times fluctuate wildly, time-sensitive financial operations become riskier or break completely. Since 2025, however, slot times have stabilized near 400 milliseconds and have begun trending toward the network's long-term goal of approximately 200 milliseconds as a result of targeted upgrades.  

More consistent and frequent block production could have several downstream benefits for network participants and SOL holders:

• More consistent and frequent block production improves market efficiency by reducing uncertainty surrounding transaction execution. 
• Tighter quotes, improved capital efficiency, and enhanced execution quality could benefit liquidity providers and traders alike.
• Creating a greater number of economic opportunities within a given time frame may increase network revenue and, by extension, value accrual for SOL holders.
   

However, transaction speed alone is insufficient if the network cannot handle surges in activity. As trading activity increases, reliability and surplus scale become increasingly important determinants of network performance.

Increasing Transaction Capacity 

Solana measures the computational resources required to execute transactions using compute units (CUs). Each block is allocated a maximum CU budget, which determines how much activity the network can process before producing the next block. Solana developers have steadily increased these limits over time, most recently raising block capacity from 60 million to 100 million CUs, a 66% increase.² 

Higher CU limits allow more transactions to be processed within each slot, expanding network throughput, providing additional capacity during periods of elevated demand, and reducing the likelihood that growing usage leads to congestion.

Supporting larger blocks requires validators to process and propagate more data across the network. As a result, capacity expansions must be accompanied by improvements elsewhere in the protocol to ensure performance remains sustainable. Alpenglow, a recent change to Solana’s consensus mechanism, provides the efficiency and data optimizations required to support continued growth in the network’s trading capacity.

Optimizing for Global Markets

In addition to speed and capacity, sophisticated trading firms require predictable transaction inclusion. A venue may offer low latency, but execution quality can suffer if transactions are inconsistently processed by the network or if access advantages become concentrated among participants located near specific infrastructure providers.

Multiple Concurrent Proposers (MCP), an active area of research, may offer an approach to limiting latency and improving transaction guarantees globally. Rather than relying on a single block producer, MCP would allow multiple geographically distributed proposers to accept transactions and contribute to block construction simultaneously. By reducing the importance of proximity to any single proposer, MCP has the potential to improve transaction inclusion, strengthen execution guarantees, and create a more geographically balanced trading environment.

For global capital markets, these improvements could help reduce latency disparities between participants located in different regions, making market access less dependent on physical proximity to network infrastructure.

Together, these initiatives target three core attributes of a modern trading venue: lower latency, greater transaction capacity, and improved execution reliability. While the pace of protocol development introduces a degree of technical execution risk, the direction of travel is clear. Solana's roadmap remains heavily focused on improving the characteristics that matter most for financial markets, positioning the network to support increasingly sophisticated forms of trading activity.

Execution Quality

Trading costs are a key determinant of adoption for any financial network. Throughout much of its history, Solana has maintained some of the lowest transaction costs among public blockchains, with median fees measured in fractions of a cent even during periods of elevated activity. The network's fee structure combines a fixed base fee with optional prioritization fees, helping keep costs relatively predictable for end users while allowing market participants to compete for transaction ordering when necessary.³

Solana's low-cost design has also proven resilient during periods of extreme demand. Network activity surged during the memecoin-driven trading environment of January 2025, driving record transaction volumes and substantially higher aggregate fees across the network. Despite this increase in demand, individual transaction costs remained low relative to most competing blockchain networks, allowing users to continue transacting during one of the busiest periods in Solana's history.  

Low and predictable transaction costs provide a strong foundation for trading activity, but they represent only one component of execution quality. As digital asset markets mature, traders increasingly care about quoted prices, slippage, transaction inclusion, and overall execution outcomes. Improvements in these areas may ultimately prove more important than marginal differences in network fees to Solana’s long-term competitiveness.

Proprietary Automated Market Makers

Historically, liquidity within decentralized finance has been dominated by automated market makers (AMMs) such as Uniswap and Raydium. These systems allow users to deposit assets into liquidity pools that automatically facilitate trading. While highly effective at bootstrapping liquidity, conventional AMMs often suffer from adverse selection, where sophisticated traders exploit stale prices following market movements.

More recently, a new category of venue has gained traction on Solana: proprietary AMMs, or prop AMMs. Unlike traditional AMMs that primarily rely on passive liquidity pools, prop AMMs are typically operated by professional market makers deploying their own capital and actively managing prices. Prop AMMs are designed specifically to reduce losses incurred by liquidity providers through continuous price updates. 

As a result, prop AMMs have captured a growing share of trading activity as shown in the chart “Prop AMM Market Share of Total DEX Volumes.” Rather than relying on arbitrageurs to reprice liquidity following market movements, professional market makers compete to provide tighter pricing and lower slippage, contributing to improved execution quality for traders.⁴     

More broadly, prop AMMs represent a shift toward more active liquidity provision that more closely resemble modern electronic markets. As a result, Solana's competitive position is being shaped by advances in both market structure and network performance. 

Trading Activity Continues to Broaden

A trading venue's long-term relevance depends not only on the quality of execution but also on the breadth of assets available to trade. Historically, activity on Solana consisted primarily of spot crypto assets, stablecoins, and memecoins. More recently, the range of financial instruments available on the network has expanded considerably, allowing participants to express a wider set of investment views within a single trading environment.

Tokenized Asset Trading

Tokenized assets represent one potential avenue through which Solana's addressable market may continue to expand. Treasury products, private credit funds, equities, commodities, and other financial instruments are increasingly trading on public blockchains as shown in the chart “Tokenized Asset Trading Volume on Solana.” While adoption remains in its early stages, tokenization has the potential to bring a broader range of financial assets into the same settlement and trading environment as digital assets.  

For market participants, the significance is less about any individual tokenized product and more about the expansion of available asset classes. As coverage of tokenized assets grows, the range of instruments that can be traded, collateralized, and settled within a single ecosystem expands as well.

Important limitations remain, however. Regulatory requirements, transfer restrictions, and privacy considerations continue to constrain adoption across many asset classes. Nevertheless, the growth of tokenized assets suggests that the scope of financial activity occurring on public blockchain networks may continue to broaden over time.

Perpetual Futures Trading

The expansion of perpetual futures markets represents another important development in Solana's trading ecosystem. Perpetual futures are derivative contracts that allow traders to gain leveraged long or short exposure without holding the underlying asset and use a funding-rate mechanism to keep prices aligned with spot markets. Perpetual futures have become one of the largest categories within digital asset trading, facilitating trillions of dollars in annual trading volume in aggregate. Solana-based perpetual futures exchanges processed over $590 billion in notional volume over the past 12 months.⁵

Solana-based perpetual futures activity has grown substantially in recent years and has periodically rivaled some of the largest venues in the sector as shown in the chart “Solana Perpetual Futures Volume vs. Hyperliquid.” While competition remains intense, perpetual futures have become a meaningful component of Solana's broader trading ecosystem.  

From a market structure perspective, perpetual futures broaden the range of trading activity occurring on the network. Rather than serving exclusively as a venue for spot transactions, Solana increasingly supports a broader range of trading strategies, participant types, and risk-management tools.

SOL Value Accrual is Directly Tied to Trading Activity

For investors, the key question is how Solana's growth as a trading platform translates into value accrual for SOL holders.

Solana's economic model is unique because network revenue is driven less by persistent demand for scarce blockspace (in contrast to other blockchains) and more by competition for valuable economic opportunities. As a result, the network can generate meaningful revenue while maintaining notably low transaction costs for users.

Solana's transaction fees can be separated into four primary categories:

• Base Fees: A fixed cost associated with submitting transactions to the network.
• Priority Fees: Paid by users seeking faster transaction inclusion. During periods of elevated volatility or significant market opportunities, users may pay higher priority fees to increase the likelihood that their transaction is executed quickly.
• Jito Tips: Typically paid by traders competing to capture arbitrage opportunities, liquidations, and other forms of maximal extractable value (MEV). In many cases, these opportunities are worth substantially more than the underlying transaction cost.
• Vote Fees: A fixed cost associated with validator voting and consensus. While important for network operations, vote fees are generally less relevant to investors because they do not scale directly with economic activity occurring on the network.

While base fees are largely a function of transaction count, priority fees and Jito tips are primarily driven by trading activity. For example, a simple token transfer typically generates little revenue because the sender pays only the base fee and, in some cases, a modest priority fee. 

In contrast, traders competing for a $1,000 arbitrage opportunity may willingly pay significantly more in priority fees (up to their breakeven point) to be able to capture that opportunity.  

As a result, Solana remains accessible to users wanting to do simple transactions while charging a premium only to high-value, time-sensitive actors such as arbitrageurs, market makers, and high-frequency traders. These groups compete amongst each other for execution priority, while most everyday users remain largely unaffected by this activity.

This dynamic means Solana’s revenue mix is largely driven by financial competition occurring on the network rather than from users competing for limited blockspace. For investors, the most useful lens to view this dynamic is the network's ability to generate revenue as economic activity grows.

The “Solana Network Revenue” table illustrates this relationship, showcasing that Solana’s potential revenue growth stems specifically from priority fees and Jito tips. Base fees and vote fees remain relatively constant and do not scale with activity or trading growth. However, as trading volumes increase, priority fees and Jito tips can expand without requiring higher baseline transaction costs for users. For example, in 2024 and 2025, when on-chain trading activity was at its peak, the bulk of Solana revenue was driven by priority fees and Jito tips while base fees were substantially less volatile.Unlike systems that rely on increasingly scarce blockspace to drive value accrual, Solana's model is aligned with scale. The network does not require all users to pay meaningfully higher transaction fees to generate additional revenue. Instead, value accrues from greater participation in the financial opportunities being facilitated by the network.

Solana’s future revenue is subject to two core risks: the cyclicality of on-chain trading and competitive dynamics.

During the latest bear market, competition for profitable trading opportunities declined significantly relative to the prior bull market. While Solana’s operating history offers limited data, the available evidence suggests that on-chain trading activity may remain cyclical in nature for some time. This could contribute to periods of revenue and valuation volatility.

Decentralized trading remains one of the most competitive sectors across all of digital assets. Although Solana has established a leading position within the sector, sustaining that position will likely require continued network improvements and user growth.

Conclusion

Solana has evolved into one of the largest venues for on-chain financial activity, processing substantial transaction volumes across spot assets, derivatives, stablecoins, and an expanding range of tokenized assets. The network's scale alone does not guarantee long-term success, but it warrants serious consideration as an emerging piece of financial market infrastructure.

The analysis presented throughout this article suggests that Solana's competitive position is supported by a combination of network performance and market structure. Continued improvements in latency, throughput, transaction reliability, and execution quality have helped establish an environment increasingly suited for trading activity. 

At the same time, the emergence of active liquidity providers, improvements in transaction inclusion, and the expansion of tradeable asset classes suggest the network is becoming progressively more capable of supporting sophisticated financial activity.

The network's long-term success will ultimately be determined by its ability to attract traders, liquidity providers, assets, and financial applications. If that occurs, Solana's fee architecture is increasingly positioned to allow a growing share of the resulting economic activity to accrue to validators and stakers. In this sense, SOL functions less as a claim on scarce blockspace and increasingly as an asset tied to the growth of on-chain financial markets.

To learn more about Solana's role in on-chain financial markets and the broader digital asset landscape, get in touch.