Token TLDR #2: Scoring Solana
SOL is up nearly 100% since FTX declared bankruptcy. And up 30% since Gensler labeled it a security. Some people love SOL. Others hate it. But today, we are going to score it. TOKEN TLDR
DISCLAIMER: NOTHING IN THIS POST IS FINANCIAL ADVICE OR AN INDUCEMENT TO MAKE ANY INVESTMENT.
So what is TOKEN TLDR?
Token TLDR is a series where I score tokens out of 10, using a calculator I built in excel.
The technique is called "Value Modeling", a technique in systems engineering that uses quantitative and qualitative analysis.
Do you need to know the technical details?
Nope, but if you want to learn more about how I built it, please ask below. :)
TOKEN: SOL Solana
Read to the end for the final score!
Utility: 9/10
SOL has one the highest daily trading volumes of $440M. Whether it's through staking, network fees, or various smart contracts, SOL is a highly utilized and traded token in and outside of its ecosystem.
Inflation: 6.3/10
SOL has no max supply which makes it difficult to score it's inflation. However, in such cases, this tool calculates the future 1 year emission and compares it to the circulating supply.
1 year emissions: ~30M tokens
Circulating supply: ~411M tokens
Projected Inflation rate: ~ 6.8%
Keep in mind, this rate will reduce by 15% each year until it settles at 1.5%.
Roadmap: 8/10
Solana has generated significant buzz from external partnerships. Visa announced its plans to explore stablecoin payments, using the Solana chain.
MakerDAO founder suggested forking the Solana blockchain code to make a new chain for Maker.
Solana also has plans of its own.
"Token 22" is a new token standard coming to Solana to make enterprise features simpler on chain (IE: issuing stablecoins).
Solana also plans to roll out a series of updates on its consensus algorithm and also to increase speed and scalability of the network.
Roadmap is the only metric not calculated from data but based on my subjective assessment. 8/10.
Decentralization: 3.8/10
SOL scores low in this category due to a large amount of tokens in the hands of founders and investors.
In fact, 52% of the current circulating supply has been unlocked to founders and investors.
Why is this problematic?
Governance and voting power.
Keep in mind, SOL emissions will give more power back to the community over time.
However, for the time being, founders and key investors could have significant influence on governance.
Vulnerabilities: 8/10
Unfortunately, SOL does not have a scanner score on DeDotFi
In this case, this tool took scores from Certik and removed the decentralization score (as this was already accounted for in our model).
Solana did have its share of exploits in 2022. However, I have no major reservations about its security. 8/10.
Popularity: 5/10
This may seem like a bad score. It's not.
Remember, OP scored only 3.6 the previous week.
SOL has over 189k daily active addresses and boasts one of the strongest and largest DeFi communities. DeFi, NFTs, Gaming- Solana has it.
Once again, I expect this number to increase and this score to go up in a bull market.
Potential to 100x: 1/10
SOL has a MCAP/TVL ratio of 24.6. It's not a memecoin or a new token no one has heard of. Thus, it's no surprise that it scores low in this category.
VC/Team Dumping: 9/10
All tokens to founders and investors were already unlocked in January of this year. However, some are worried about FTX dumping its $1B tokens in bankruptcy proceedings.
Consider:
1) More than $140M of this $1B is locked up until 2025.
2) FTX is only allowed to liquidate a maximum of 100M in assets each week. (This includes assets other than SOL) For all of these reasons, dumping is unlikely to have any major effect on SOL price in the near future.
FINAL SCORE: 6.9/10
Closing thoughts: SOL receives a lot of criticism for situations out of its control: FTX's massive SOL holdings and Gensler's wanton labeling of SOL as a security.
Yet, Solana has survived all of this. Today, it still has one of the most active ecosystems in all of crypto and is attracting major players both in and outside of DeFi. There are notable risks but also notable upside. 6.9/10.
Data Sources:
excellent analysis as always, thank you, Deebs!