Understanding Solana's Decrease in Active Addresses: Uncovering the Full Picture

Decrease in Daily Active Addresses on Solana

The number of daily active addresses using Solana has recently reached a low point, despite several positive developments. However, according to Austin Federa, the acting head of strategy for the Solana Foundation, this does not indicate a significant decrease in actual users. Federa explains that while there may be fewer bots running on the network, the focus should be on the number of human users. The wallets that are paying their own fees and the retention data still remain strong.

Drop in Daily Active Addresses

According to The Block’s Data Dashboard, the number of daily active addresses on Solana dropped from over 300,000 in mid-August to around 204,000 by the end of the month. This is based on a seven-day moving average (7DMA) metric that helps identify trends.

Fewer Bots and Trading Activity

Federa suggests that the decrease in active addresses could be due to fewer bots operating on the network. Economic incentives for bots have been removed with recent network upgrades. Additionally, traders who previously ran multiple bots may now opt to pay priority fees instead of relying on active addresses. This shift could account for the drop in active addresses without a decrease in actual users.

Transaction Fees as a Meaningful Metric

Kevin Peng, a research analyst at The Block, points out that daily active addresses can be easily manipulated or influenced by short-term events. He suggests that transaction fees are a more meaningful metric as they directly reflect the amount of money users are willing to pay to use the blockchain. Despite the decrease in daily active addresses, Peng remains bullish on Solana.

Hot Take: The Importance of Looking Beyond Daily Active Addresses

The recent decrease in daily active addresses on Solana may not be a cause for concern. While the numbers have dropped, it doesn’t necessarily mean there are fewer actual users on the network. The removal of economic incentives for bots and changes in trading activity could explain the decline in active addresses. Instead of focusing solely on this metric, it is important to consider transaction fees as a more meaningful indicator of user engagement and value on the blockchain.