Orca Fee Switch Implementation

Orca pools capture a large % of Solana LP fees, with figures approximating it at >70% of all LP fees across all Solana DEXs, and >90% of LP fees generated on “altcoin” pairs. Given the relatively strong dominance of Orca within the Solana ecosystem, a fee switch is a natural next step in token value accrual. 

The fee switch has recently been implemented and the DAO treasury’s “fee switch USDC address” has started to receive  trading fees in USDC. Using data on Dune, one could calculate how much revenue the fee switch would have collected over various time periods. For example, in the past seven days, the fee switch would have collected $441K in revenue to the DAO treasury. In the past thirty days, the fee switch would have collected $2.32M in revenue to the DAO treasury.

Granted, Orca has seen a relatively elevated amount of volume in the past month as a result of memecoin activity on Solana. However, it is possible to see such sustained levels of volume and fee revenue if market activity continues in a positive direction. If one were to extrapolate the thirty-day DAO revenue from the fee switch, that would equate to $27.85M in revenue from the fee switch. Taking ORCA’s current market cap of $257.9M would bring us to a P/E ratio of 9.26x, a lower multiple than crypto’s favorite token based on fundamentals, MKR, based on its Q4 earnings. 

In comparison to UNI, at a $4.76B market cap, which is still struggling to turn on its fee switch, ORCA has stronger fundamentals. In addition, the amount of MEV activity on Solana is much less than Ethereum, meaning that even with the fee switch enabled, the protocol should not see a significant drop in volume/liquidity, especially taking into account that a large amount of Orca volume originates from Jupiter. Furthermore, there are many pending airdrops in the Solana ecosystem, the most notable of which is Jupiter which is slated to occur on January 31st, which should boost Orca’s volumes further. 

It would be prudent to monitor Orca’s volume over the coming weeks, especially for liquidity pools with a fee tier of 0.3% or higher, and evaluate whether the market is sufficiently pricing in the fee switch revenue. If you believe Solana’s best days are yet to come, especially in terms of DEX activity, then it is safe to assume that ORCA is a fundamentally attractive investment due to the fee switch.