Author: Cody Poh , investment analyst at Pantera Capital Liquid Token Fund; Compiled by: 0xjs@金财经

Raydium is the leading DEX on Solana, and it is arguably the most attractive asset to investors in the entire market right now.

Raydium has the rare combination of strong market leadership in a long-term growth area and a clear value accretion story that is not common among any other on-chain DeFi protocol.

Solana’s growth

Thanks to the rise of memecoin trading, Solana has become the ecosystem with the most DEX activity. Solana’s monthly transaction volume has grown exponentially throughout the year, far exceeding Ethereum and Base.

As the leading DEX on Solana and a major beneficiary of its strong growth, Raydium has also seen a significant increase in trading volume. The protocol currently accounts for over 50% of all DEX trading volume in the Solana ecosystem.

As a result, Raydium has become one of the highest-grossing applications on Solana, with annual protocol revenue of $450 million, a figure that is expected to grow as Solana continues to prosper.

Main beneficiaries of Memecoin transactions

As mentioned above, much of the increase in on-chain activity on Solana can be attributed to memecoin transactions. Raydium is uniquely positioned to capture memecoin-driven growth on Solana through its integration with pump.fun.

The partnership with pump.fun gives Raydium an unfair head start in building liquidity around the newly graduated tokens, which have a market cap of $69,000, as they will be deployed directly on Raydium rather than Solana on other DEXs.

This is a win-win for both Raydium and pump.fun. Because listing on Raydium will bring higher trading volumes and prices. Raydium is the first choice for this integration because of its established sniping ecosystem since the early days of Solana IDO.

These bot-operated liquidity are programmed to snipe memecoins after they graduate to Raydium. This caused new capital to pour into the newly graduated memecoin, causing the price to rise significantly, creating an effect similar to a CEX listing. This infrastructure moat is difficult to replicate by other competing DEXs on Solana.

Memecoin becomes durable

A major source of controversy for Raydium is that the majority of its trading volume comes from memecoin transactions and should therefore be considered unsustainable. Many even believe that memecoin will not exist in the long run.

Empirically, however, memecoin trading has evolved into a more permanent, less cyclical social on-chain phenomenon. Memecoin trading is essentially a modern, digitally native form of gambling, with a global market size of approximately $400 billion.

Looking at the numbers, Memecoins consistently account for over 50% of all trading volume on Solana, and on average around 50,000 new tokens are minted on Pump.fun every day . This shows that memecoins are here to stay and will continue to grow.

Powerful network effects

As Raydium solidifies its position as the DEX of choice for new token issuances on Solana, a strong liquidity advantage will be established, attracting more trading volume to the platform, as better liquidity leads to tighter spreads and more competitive pricing. This helps Raydium win more deal flow from consumer-facing front-ends and DEX aggregators.

Profitable unit economics and value accumulation

Raydium’s profitable unit economics and clear value accumulation mechanism also stand out from most other DEXs with pure governance tokens on the market.

This can be attributed to Raydium’s dominance of the primary issuance market, as traders of newly issued assets (or mostly memecoins) tend to be price- insensitive takers. This allows Raydium to charge 25bps fees on its AMM v4 pool and has the right not to compete on price with other DEXs in other subsets of transaction flow, such as stablecoin swaps and utility tokens.

Raydium conducts programmatic buybacks of 12% of transaction revenue on the open market, returning value directly to RAY token holders. Raydium has bought back 56 million RAY tokens overall, equivalent to about 10% of its total token supply.

Our Underwriting

Raydium has strong growth prospects, premised on the continued growth of Solana and its role as the home of memecoin trading. We believe that given Raydium's dominance of the primary token issuance market, Raydium will be well-positioned to continue to account for the majority of Solana's trading volume if fee rates remain unchanged.

Raydium currently trades at the lower end of its historical price-to-earnings range at a P/E of 10x , suggesting that strong fundamentals combined with its strong growth prospects may be undervalued by the market. There is reason to believe that both Raydium's P/E ratio and growth rate could double.

in conclusion

With changes in the U.S. regulatory environment leading to speculation about SOL ETF approval, and a resurgence of AI agent activity on Solana, we may see Solana on-chain activity gain support again.

Raydium may be ideal for catching trends.