🥛 PRO | Is Solana DeFi undervalued? 📊

GM, this is Milk Road PRO, the newsletter that spots asymmetric opportunities while others are still debating yesterday's news.

Hold onto your wallets, because we're about to show you something wild.

Solana applications pulled in 3.9x more revenue than Ethereum applications year over year (April 2024 to April 2025), yet Solana DeFi protocols trade at a cheaper valuation compared to Ethereum DeFi protocols.

Are we looking at one of the biggest inefficiencies in crypto right now? Or is there something we're missing? 

Based on the data shown above, we need to look further into Solana DeFi.

Hell, it could be crypto’s most overlooked opportunity right now.

Solana’s DeFi protocols aren’t just popular, they’re among the top earners across all blockchains. 

But despite having similar (or better!) fundamentals compared to Ethereum’s established DeFi players, their valuation multiples remain way lower.

This cycle, Solana has been the standout Layer-1, powered by growing stablecoin adoption and hot narratives like memes, AI agents, and DePIN. 

As these trends gain momentum again, they could fuel significant user growth and drive protocol metrics much higher.

Even after the mini-bear market we've seen in March and April, Solana apps have continued to outperform Ethereum apps in terms of revenue. 

The big green candle in the app revenue chart shows that Solana constitutes about 50% of all application revenue generated on blockchains - with half coming from DeFi applications and half from trading applications and bots.

At Milk Road PRO, our investment thesis has been laser-focused on fundamentals like revenue generation. 

For that reason, we’ve been highlighting Ethereum DeFi protocols like Sky and AAVE which generate real revenue and have even begun buying back their tokens.

But this same focus on fundamentals is forcing us to look deeper into Solana DeFi. 

Could the next big winners in crypto be hiding in the Solana DeFi ecosystem? That's exactly what we're answering in today's report.

Here’s what we’re digging in to:

• The current state of Solana

• Three reasons why Solana is back and is bringing DeFi with it

• Which protocols are winning on Solana

• How Solana DeFi stacks up against Ethereum DeFi (by the numbers)

• What are the real risks that could blow up this whole thesis?

• Should we add more Solana DeFi tokens to our portfolio?

THE STATE OF SOLANA: A THRIVING DEFI ECOSYSTEM NEEDS A THRIVING CHAIN

Before we get too excited about Solana DeFi, we need to address the elephant in the room: Solana's ecosystem activity and revenue has been crushed.

When comparing March and April 2025 to Solana’s peak period of app revenue (November 2024 to February 2025) - it’s down more than 50%! 

Just look at the decline from January onwards (after the $TRUMP memecoin was launched and prices were at all-time highs).

DEX volume and trading activity are also significantly down: 

In January trading volume topped out at $392 billion, before dropping to $102 billion in April (though since May, it's getting significantly more traction again).

The decline has been even more brutal across REV which we feel is one of the most important metrics for Solana. 

Network REV (Real Economic Value) is a way to measure how much money users actually spend to use a blockchain. This includes three things:

1. Base transaction fees: The standard fees users pay to execute transactions on the chain.

2. Priority fees: Additional protocol-integrated fees paid to prioritize a transaction.

3. Jito tips: Offchain tips paid directly to validators (via Jito) to ensure transactions are included in the next block, often to capture MEV.

While we saw a REV of $551M in January, in April it was merely $88M – a devastating 84% drop.

And it's not just a Solana problem, most L1s have seen similar drops as crypto sentiment cooled. 

But Solana's drop has been particularly sharp after its explosive growth in late 2024 and with the launch of the $TRUMP token on January 17th.

So the big question we now have to answer is: Can Solana bounce back? Because if it doesn’t, even the best DeFi protocols built on it will struggle.

✍ Here's why we think it will…

THREE REASONS WHY SOLANA WILL BOUNCE BACK (AND BRING DEFI WITH IT)

1/ Developer momentum is accelerating 🧑‍💻

While prices and user activity have recently dropped, it's worth noting that Solana added more new developers than any other blockchain in 2024 (including Ethereum).

This growth is absolutely critical, as developers are the leading indicator of ecosystem health:

• More developers = more applications

• More applications = more users

• More users = more activity and capital

• More activity and capital = more DeFi usage

Current numbers show that Solana is the only big ecosystem with a growing number of developers over the last year:

2/ Stablecoin adoption is booming 💵

The stablecoin market cap on Solana is still way up!

This might be the most underappreciated bullish signal for Solana DeFi.

Since its high in early May, the stablecoin market cap on Solana has decreased by $1.4 billion – though, over a longer time frame it’s still in a solid uptrend. We’ll continue to monitor this metric.

PayPal’s $PYUSD on Solana is up 26.3% in the last 30 days (reaching a $159M market cap).

Since January and the infamous launch of Donald Trump’s $TRUMP memecoin, the numbers are still very impressive:

• January 1, 2025: $5.1 billion

• May 14, 2025: $11.7 billion

That’s an increase of $6.6 billion, or 129%.

Why is this so important for DeFi specifically? Because stablecoins are the foundation of DeFi activity. They power:

• Payments

• Lending markets

• Trading pairs & DEX liquidity

The increased supply means there’s more capital for DeFi protocols to tap into if/when market conditions strengthen. 

3/ The triple narrative engine: Memes + AI + DePIN

What do these narratives have to do with DeFi?

It's simple: each are massive user acquisition funnels that directly feed into DeFi.

Here's how it works:

• Memecoin degen wants to buy $BONK → uses Raydium to trade 

• AI investor needs a good entry into the next hyped, AI-infused Internet Capital Market token from Believe app → uses Jupiter with a limit order 

• DePIN node operator earns rewards → swaps them into stables and lends those on Kamino for yield

👉 Each narrative brings a different user base to Solana and DeFi is where they land to trade and manage their assets. 

As these narratives heat up again, they'll bring a tsunami of new transactions, users, and capital that could flow directly into DeFi protocols.

Let's take a closer look at each narrative:

Memes: don't write the obituary yet 🐶

Despite what the doom-posters say: Memecoins are far from dead. In fact, they've become a permanent feature of the Solana landscape.

The data doesn't lie - Solana is still seeing an average of 1 million new memecoins launched per month. That's down from the peak of 1.7 million in January, but still significantly higher than the 286k we saw in April 2024.

Why does this matter for DeFi? Do you see the big purple bar down below?

Memecoins have been responsible for 50% or more of all DEX volume on Solana since October 2024. When meme season returns (as it always does), it will likely translate to massive trading volume for Jupiter, Pump(dot)fun and Raydium.

AI: the unstoppable force 🤖

While AI token prices have pulled back, the underlying technology continues to improve at incredible speed.

Solana has positioned itself as the dominant blockchain for AI agents in crypto, thanks to its speed and low transaction costs. 

Now that liquidity is returning to the market, AI x crypto is one of the fastest-growing narratives again – and Solana is where the majority of that action is happening.

DePIN: the one narrative that never slowed down 🌐 

What impressed us the most: While memes and AI pulled back, DePIN has continued its growth throughout this market downturn.

More than 13 million devices globally contribute to DePIN every single day. In 2024 alone, twenty different DePIN projects grew to over 100,000 active nodes, with five of them now surpassing the 1 million node mark.

When we combine accelerating developer growth, increasing stablecoin adoption, multiple user acquisition narratives, and growing institutional interest, one thing becomes clear:

👉 Solana isn't just surviving the current pullback - it's well positioned to ride the next wave of crypto narratives.

Plus, when market sentiment improves and animal spirits return, Solana's ecosystem metrics should rebound strongly. Which leads us to our next question:

Which Solana DeFi protocols are best positioned to capitalize on this eventual comeback?

DEFI WINNERS: WHO STANDS TO BENEFIT MOST FROM EACH NARRATIVE