Solana's Competitive Advantage in On-Chain Trading
Fidelity Digital Assets examines Solana’s edge in on‑chain trading and concludes that its low fees, high throughput, and native AMM infrastructure give it a clear advantage over competing blockchains.
Key points
- Solana processes transactions at sub‑second latency, enabling near‑instant trade execution.
- Network fees are consistently lower than those on Ethereum and other Layer‑1s.
- A proprietary automated market maker (AMM) built into the protocol reduces reliance on external liquidity providers.
- Recent protocol upgrades (e.g., 100M CU blocks) expand capacity for high‑volume derivatives trading.
- Perpetual DEXs on Solana capture a growing share of futures notional volume.
What the report investigates
Fidelity Digital Assets set out to determine whether Solana’s technical design translates into a sustainable competitive advantage for on‑chain trading. The analysis focused on three core dimensions: transaction speed, fee structure, and the impact of Solana’s native automated market maker (AMM) on liquidity provision.
Data and methodology
The firm combined on‑chain metrics—such as confirmed transaction counts, average block compute units, and fee rates—from Solana’s public documentation with third‑party analytics on perpetual DEX activity. It also reviewed recent network upgrades, notably the 100 million compute‑unit (CU) block expansion, and compared Solana’s performance against other Layer‑1s using publicly available data from Nasdaq and Blockworks.
Main findings
Fidelity Digital Assets estimates that Solana’s average transaction finality is under one second, markedly faster than many rivals. Fee estimates show that typical trades cost a fraction of a cent, roughly an order of magnitude below Ethereum’s gas fees during comparable periods. The proprietary AMM, described by Helius as a “revolution,” allows on‑chain order matching without external market‑making contracts, lowering latency and slippage for traders. Together, these factors have helped Solana‑based perpetual DEXs capture a rising share of futures notional volume, signaling strong demand for high‑speed, low‑cost derivatives trading.
Caveats and limitations
The report cautions that on‑chain performance can be affected by network congestion during peak usage, and that fee levels are subject to market dynamics and protocol governance decisions. Additionally, the proprietary AMM’s centralization aspects may raise regulatory scrutiny, and the long‑term sustainability of high‑throughput trading depends on continued developer support and ecosystem growth.
Implications for readers
For market participants seeking efficient on‑chain trading venues, Solana presents a compelling option, especially for high‑frequency and derivatives strategies. However, investors should weigh the technical advantages against the broader risks inherent to digital assets, including volatility, liquidity constraints, and evolving regulatory landscapes. Conducting independent due diligence remains essential before allocating capital to Solana‑based trading protocols.