Ship or Die 2025: Institutional DeFi

Solana's top DeFi projects are gearing up for a tidal wave of institutional capital, with innovative solutions to compliance, market depth, and real-world asset integration paving the way for trillion-dollar growth.

Summary

Top Projects

Lulo

Score: 7,586.13

Bonk

Score: 4,806.12

Sphere

Score: 2,544.42

Moonwalk

Score: 2,026.11

At the Ship or Die 2025 conference, leading figures in Solana's DeFi ecosystem gathered to discuss the future of institutional adoption. The panel, featuring representatives from Ellipsis Labs, Galaxy Digital, ORCA, and Margin, addressed key challenges and opportunities in bringing large-scale institutional capital to Solana's DeFi landscape.

The discussion centered around several critical areas, including market depth and liquidity, compliance and risk management, new financial primitives, and the integration of real-world assets (RWAs). Panelists highlighted Solana's unique advantages, such as its speed and architecture, while also acknowledging areas for improvement, particularly in compliance tracking and market structure.

A significant focus was placed on the role of token extensions in facilitating institutional compliance, as well as the development of new primitives like termed-out loans. The panel also explored the potential for Solana to revolutionize trading in long-tail assets from traditional finance, leveraging the blockchain's efficiency and concentrated liquidity models.

The conversation revealed a clear roadmap for Solana's DeFi ecosystem to capture institutional interest, with projects actively working on solutions to bridge the gap between decentralized and traditional finance. The integration of major players like PayPal and the development of stablecoins like USDG were cited as crucial steps towards mainstream adoption.

Key Points:

Market Depth and Liquidity

Eugene from Ellipsis Labs emphasized the importance of efficient protocols that can deliver deep liquidity without excessive incentivization. He highlighted their on-chain order book, Phoenix, as a solution for providing substantial liquidity for major pairs like SOL/USDC. Additionally, Ellipsis Labs is addressing the challenge of liquidity bootstrapping for new assets with their recently launched Gavel product.

Eduardo from Galaxy Digital positioned Solana as the second-largest ecosystem in terms of depth, right behind Ethereum. He stressed that Solana's speed and architecture give it a significant advantage in attracting large players. However, he noted that improvements in compliance tracking tools, comparable to those available in EVM environments, would further boost institutional confidence.

Compliance and Risk Management

The panel discussed the fundamental difference between DeFi and traditional finance in terms of permissions. While DeFi is permissionless by default, institutions require more controlled environments. Nathan from ORCA highlighted Solana's proactive approach with token extensions, which allow for whitelisting addresses that have passed KYC/AML checks.

Eduardo explained Galaxy Digital's approach to managing counterparty risk, which involves evaluating pools based on historical trading volumes and setting thresholds for potentially problematic funds. He suggested that future developments could include protocol-level transaction prevention for enhanced security.

New Financial Primitives

Mac from Margin emphasized the importance of historical data in risk modeling, noting that Solana DeFi has now accumulated enough data to enable more sophisticated products. He outlined Margin's focus on unifying users' DeFi portfolios, particularly on the credit side, to allow borrowing against entire portfolios rather than fragmented positions.

The panel also discussed the potential for new primitives like termed-out loans and more mature market designs. Eugene highlighted the upcoming Multiple Concurrent Proposers (MCP) upgrade for Solana, which could significantly improve the blockchain's capacity to host sophisticated exchange mechanisms.

Real-World Asset Integration

Nathan from ORCA discussed their involvement in Project Open, a collaboration with Superstate and the Solana Policy Institute to develop a framework for compliant on-chain equity trading. He emphasized the potential for Solana to enhance liquidity in long-tail traditional finance assets, such as private credit, mineral rights, and emerging market debt.

Eduardo noted the excitement around stablecoins and tokenization efforts, mentioning USDG, MZERO, and PayPal's integration into blockchain systems as significant developments for institutional adoption, particularly in the payments sector.

Facts + Figures

• Solana is considered the second-largest DeFi ecosystem in terms of market depth, behind Ethereum
• Ellipsis Labs' Phoenix is one of the largest liquidity providers for SOL/USDC through Solana DeFi
• Galaxy Digital evaluates DeFi pools on a pool-by-pool basis, considering historical trading volumes
• Solana's token extensions feature has been in development for several years
• Margin-fi has handled hundreds of millions of dollars in withdrawals and deposits in a single day
• The Multiple Concurrent Proposers (MCP) upgrade is expected to significantly improve Solana's market structure capabilities
• ORCA has joined Project Open to develop a framework for compliant on-chain equity trading
• Private credit, mineral rights, and emerging market debt are multi-trillion dollar asset classes that could benefit from tokenization and improved market structures
• Protocols like Humor are processing billions of dollars in transactions on Solana

Top quotes

• "The fact of the matter is it's more difficult to build in DeFi than it is to build in tradFi. You're building in a much more adverse environment." - Eugene, Ellipsis Labs
• "I think in terms of depth, Solana is probably number two right behind Ethereum." - Eduardo, Galaxy Digital
• "The biggest difference between DeFi and TradFi is DeFi is by default permissionless." - Nathan, ORCA
• "We're actually at the point now where a lot of protocols on Solana that are issuing credit like margin-fi, like Camino, like Drift have really solidified themselves in terms of their own risk management." - Mac, Margin
• "I think it's really interesting and really great for Solana that some more assets with a non-zero terminal value are showing up to the chain." - Eugene, Ellipsis Labs

Questions Answered

What is the current state of Solana DeFi in terms of institutional readiness?

Solana DeFi is rapidly evolving to meet institutional demands, with improvements in market depth, compliance tools, and the integration of real-world assets. It's currently considered the second-largest DeFi ecosystem in terms of depth, behind Ethereum. However, there's still work to be done in areas such as compliance tracking and market structure to fully cater to institutional needs.

How are Solana projects addressing compliance concerns for institutions?

Solana has proactively developed token extensions that allow for whitelisting of addresses that have passed KYC/AML checks. This feature enables institutions to maintain compliance while interacting with permissionless protocols. Additionally, projects like Galaxy Digital are implementing their own risk management strategies, evaluating pools based on historical trading volumes and setting thresholds for potentially problematic funds.

What new financial primitives are being developed on Solana?

New financial primitives on Solana include termed-out loans, unified credit portfolios, and improved market structures. Margin is working on unifying users' entire DeFi portfolios to allow borrowing against a holistic position. The upcoming Multiple Concurrent Proposers (MCP) upgrade is expected to enable more sophisticated exchange mechanisms, potentially revolutionizing the market structure on Solana.

How is Solana integrating real-world assets (RWAs) into its DeFi ecosystem?

Solana is making significant strides in integrating RWAs. ORCA is involved in Project Open, which aims to develop a framework for compliant on-chain equity trading. There's also a focus on improving liquidity for long-tail traditional finance assets like private credit, mineral rights, and emerging market debt. Stablecoins like USDG and MZERO, along with PayPal's blockchain integration, are further facilitating the bridge between traditional finance and DeFi.

What advantages does Solana have over other blockchains for institutional DeFi?

Solana's main advantages include its speed, scalability, and innovative architecture. These features allow for more efficient market structures and the potential to handle large-scale institutional flows. The blockchain's proactive approach to compliance through token extensions and its growing ecosystem of sophisticated DeFi protocols make it an attractive platform for institutional adoption.