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Yesterday, I wrote about an Indian institution-focused project called the “finternet.” Today, we’re going to dive even deeper into the question of how and why institutions may come onchain — particularly with Solana.

Let’s hope this is a Madagascar movie situation where the sequel is even better than the first installment:

Solana engages institutions for tokenization, stables, private ledgers

With spot bitcoin ETFs seeing successful launches and MicroStrategy buying with reckless abandon, the oldest cryptocurrency has proven its value — at least to some institutions. 

Institutions are to blockchains what whale traders are to casinos; having just a couple can really drive up revenue. But for non-Bitcoin blockchains, the path to institutional adoption is a little less clear.

Ether spot ETFs have so far been uninspiring, and large companies don’t seem to be putting non-bitcoin assets on their balance sheets with nearly as much gusto. Solana is likely far from seeing a spot ETF of its own, but it’s making a run for institutions, and some see it as having more institutional potential than Ethereum.

I got thinking about this after receiving a note from Katalin Tischhauser, Sygnum’s head of investment research.

Tischhauser said Solana has made “real progress” as a layer-1 in the past year and a half, but expectations that it would make a serious run for Ethereum’s “leading position” among smart contract blockchains were misplaced. Ethereum still wins in market share, plus Solana’s volume metrics are “overstated” and based on memecoins, which is a fragile place to make hay, Tischhauser said.

But Tischhauser said the way she thinks Solana can pass Ethereum is by drawing institutions for tokenization platforms and stablecoins.

“[T]here have been indications recently that even conservative institutions may place greater emphasis on Solana’s scalability over Ethereum’s greater stability and security,” Tischhauser wrote. She added that PayPal and Visa both praised Solana’s fast and cheap architecture when rolling out initiatives using the blockchain.

In a separate note, B2BINPAY chief marketing officer Georgy Slavin-Rudakov said Solana’s “efficiency and institutional adoption” could help it challenge Ethereum, citing tokenization and stablecoins as sectors where Solana could see growth.

In a text, Solana Foundation head of institutional growth Nick Ducoff cast stablecoins as a near-term means to gin up demand for real-world assets. In the long run, tokenization could make the pie bigger by bringing more diverse users and assets to Solana, Ducoff added.

Or perhaps institutional adoption could come from the Solana SVM being used by permissioned blockchains. 

Earlier this week, I spoke with Arnold Lee from Sphere about the payments infrastructure startup’s plans to launch SphereNet, which will be a private shared ledger running on Solana’s software — the type of thing that helps institutions and fintechs stay compliant. The project has a co-sign from Anza, which is the engineering firm spun out of Solana Labs.

“Permissioned blockchains in some sense are still successful; we just don’t think of them as blockchains,” Lee said.

He added that the closest example would be Ripple, which acts as a permissioned counterparty on the financial network RippleNet, and has shown surprising resilience as a layer-1 (it’s still the seventh-largest crypto) despite being out of the spotlight and in regulators’ crosshairs in recent years.

— Jack Kubinec

Permissionless has the galaxy brain content you read the Lightspeed newsletter for, but IRL. 

Catch the brightest minds in the Solana ecosystem as they discuss the challenges and future of blockbuilding in Solana.

Here’s the most-traded Solana wager on Polymarket:

Traders don’t seem to be very bullish on so-called Uptober, putting just a 14% chance on SOL crossing its all-time high price of roughly $260 this year. The only time bettors put a greater than 50% chance on SOL hitting an all-time high this year was on April 4, shortly after SOL cleared $200 for the only time in 2024. 

And look, I’m no market genie, and I’m also not much of a gambler, but to paraphrase Joe Weisenthal: It sure looks like they’re selling dollars for 87 cents right now.

But in the event I’m wrong, I’d be very curious to learn what SOL’s path to an all-time high could be this year. Trump victory with a pledge to fire Gensler plus surprise ETF approval? The Fed decides to tokenize all US dollars on Solana? We discover aliens and find out they’re bullish SOL?

— Jack Kubinec

ICYMI — Stories you may have missed from Solanaland this week:

• Jupiter’s DAO approved an extension of the ASR program with 215 million $JUP for staking rewards. It also launched Portfolio, a unified view for swaps, limit orders, DCA, VA and perps.

• Solayer rolled out $sUSD, a yield-bearing stablecoin backed by US Treasury bills, developed in partnership with OpenEden.

• Dialect introduced Action Chaining across major wallets, allowing users to carry out multi-step actions effortlessly.

• Lucid Drakes created Lucid Ventures, a Solana-focused venture syndicate providing exclusive investment opportunities for holders.

• Raydium launched Teleport to enable frictionless token transfers from EVM networks to Solana using Circle CCTP and Wormhole.

• Nifty Island has integrated Solana wallets, allowing communities to create avatars, join quests and participate in play-to-airdrop campaigns for $ISLAND rewards until Nov. 1.

• Hivemapper’s Bee dash cam was approved for mass production. The Bee is designed to capture high-quality 3D imagery to improve mapping accuracy across the Hivemapper network.

• HBO's documentary "Money Electric: The Bitcoin Mystery" claims it will reveal the real name of Bitcoin creator Satoshi Nakamoto. It is set to air on Oct. 8 (aka the first day of Permissionless III)

— Jeffrey Albus

A message from Nick Ducoff, head of institutional growth at the Solana Foundation: