This episode reveals how Solana's next major growth cycle will be driven not by on-chain hype, but by the massive influx of capital from traditional finance products like DATs and ETFs.
Solana's Shifting Market Narrative
- Jack notes that while he has transitioned away from his role as "the Solana guy" at Blockworks for other projects, he's noticed a perception that "Solana is not hot anymore."
- Despite this sentiment, SOL's price has remained resilient, particularly against BTC, suggesting a disconnect between narrative and market performance.
The Twin Catalysts: DATs and ETFs
- The guest presents a powerful, data-driven thesis: Solana's next significant market cap expansion will be a direct result of integrating with legacy finance through Digital Asset Trusts (DATs) and Exchange-Traded Funds (ETFs). A DAT is a financial product that allows investors to gain exposure to a crypto asset without holding it directly, while an ETF is a fund traded on stock exchanges that holds the underlying asset.
- The guest draws a direct parallel to Ethereum, which saw its market cap nearly double—adding approximately $300 billion in value—following the launch of its DATs and ETFs, which attracted a combined $45 billion in visible demand.
- Applying this logic to Solana, the guest performs "back of the napkin math": with Solana DATs having already raised ~$2.5 billion, a successful launch combined with future ETFs could inject $15-20 billion in new capital.
- Using Ethereum's 6-7x value creation multiple, this influx could translate into a potential $100 billion increase in Solana's market cap over the coming months.
- The guest emphasizes the speed of modern capital flows, stating, "It took [Michael] Saylor... many years to acquire the stack of Bitcoin that he has... folks like Tom Lee... have essentially acquired the same supply in a function of a month and a half."
Macro Headwinds and Solana's Core Pitch
- A potential interest rate cut could fuel investor appetite for assets like Solana just as DATs and ETFs become widely available.
- The guest contrasts Solana's narrative challenge with Ethereum's, which Tom Lee has successfully pitched as the home of "stablecoins and future... AI."
- He dismisses the common critique that Solana is just a "retail... casino chain," arguing that early Ethereum exhibited similar speculative behavior around ICOs and NFTs, and that institutional capital is still in the early stages of understanding blockchains beyond Bitcoin and Ethereum.
The Strategic Battleground: Liquid Staking Tokens (LSTs)
- The conversation dives deep into the technical and strategic nuances of yield generation for these new Solana products, focusing on Liquid Staking Tokens (LSTs). LSTs are tokens representing staked assets, allowing users to earn staking rewards while maintaining liquidity for use in DeFi.
- The guest argues that DAT issuers creating their own LSTs are making a strategic error, as they are primarily capturing inflationary emissions, which will decline over time.
- He makes a provocative claim: "Anyone who isn't leveraging JitoSOL is synthetically short on-chain activity [on] Solana."
- The core argument is that using an established, deeply integrated LST like JitoSOL positions an issuer to capture long-term, organic value from transaction fees and Maximal Extractable Value (MEV)—the profit validators earn by ordering transactions. This aligns the issuer's success directly with the growth of the entire Solana ecosystem.
- Leveraging JitoSOL provides immediate access to deep on-chain liquidity, broad custodial support, and a direct pipeline to MEV, which is expected to grow as network activity increases.
LST Counterarguments: Branding and Restaking
- Host Jack offers a counterpoint, suggesting that branding and ecosystem presence are powerful motivators for DAT issuers like DFDV to create their own LSTs via platforms like Sanctum.
- Having a branded LST (e.g., "DFDV") increases a firm's visibility and establishes it as an integral part of the Solana ecosystem.
- Jack also introduces the concept of restaking, where staked assets are used to secure other protocols for additional yield. He notes that DFDV is using its custom LST with Fragmetric, a restaking protocol, to stack yields.
- The guest concedes the importance of branding but doubles down on his long-term view, questioning whether a custom LST's yield can ultimately compete with a blended yield from a dominant, MEV-capturing LST like JitoSOL, especially as on-chain activity accelerates.
Conclusion
This episode argues that Solana's next growth phase is tied to its financialization through DATs and ETFs. For investors and researchers, the key is to look beyond the initial capital inflows and analyze the underlying yield strategies, particularly the choice of LSTs, which will determine long-term value accrual.
