Debate over the future prospects of Solana, a Layer 1 smart-contract blockchain that competes with Ethereum in some respects, has accelerated in recent days. The chain grew rapidly and saw a lot of buzz during the 2020-2021 bull market, especially from venture capitalists. But recent departures of major projects to other chains and a massive decline in the total value of the Solana chain have raised questions about its future prospects.
Persistent technical challenges are a common concern cited by skeptics. Competition from Ethereum Layer 2s represents a growing threat to Solana’s core premise for faster and lower-cost transactions. But the biggest cloud shadowing Solana’s sunshine is the fall of Sam Bankman-Fried, founder of FTX Exchange and hedge fund Alameda Research.
David Z. Morris is CoinDesk’s lead insights columnist.
Bankman-Fried is perhaps Solana’s most prominent supporter, and skeptics might justifiably argue that the price is inflated. SOL 2020-2021 Token and Related Assets At Least Driven by Bankman-Fried’s Market Interventions and advocacy.
The effects of the growing Solana skepticism are based entirely on numbers. Solana’s SOL token is down more than $10 from its peak price of $258.78 on November 6, 2021. This is a 96% drop BTC (-74.5%) and ETH (-74.6%). This is a sharper drop than dogecoin, incredibly (the dog) Seen in a bear market – commemorative coin Just 76% down From its October 2021 local high, it has fallen 87% from its May 2021 all-time high.
According to data from CoinGecko, Solana’s SOL token has dropped to 19th place, from being the fifth-most valuable crypto token in early November.
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The total value of tokens in a decentralized fund (DeFi) Solana’s net worth has fallen from nearly $10.2 billion on Nov. 9, 2021 to just under $210 million at press time — nearly 98%. Solana is now the 12th largest DeFi chain The total value is locked Or not just Ethereum layer 2s like TVL, Polygon and Optimism, but also more obscure projects like Cronos and DefiChain.
Following the collapse of FTX in early November, evidence of a massive fraud perpetrated by Sam Bankman-Fried mounted. It now appears that Bankman-Fried’s extensive support for the chain was funded by some. Total theft of FTX’s customer funds.
Former Alameda executives, including CEO Carolyn Ellison, said in recent filings with the U.S. Securities and Exchange Commission that Bankman-Fried promoted it. Market manipulation of FTX’s FTT token. Therefore, it seems unlikely that Bankman-Fried did not manipulate the cost of Solana-based projects. He helped initiate, Controlled large stakes and used Account and credit fraud This formed the core of the FTX scam.
Those related projects, including the decentralized exchange Serum and the self-described DeFi brokerage Oxygen, are sometimes derisively referred to as “Samcoins.” They have seen Catastrophic collapses At their own token price, and had the serum Translated as “doesn’t work”. With the collapse of FTX, a need Social fork.
Market manipulation via Alameda is effectively financed by indirectly diverting FTX client funds away from other assets such as Bitcoin and Ether towards the trading of SOL or other ecosystem tokens. Alameda’s market-making and trading activities appear to have been largely retrospective Largely unprofitable. Some critics have argued that their SOL activity inflates Solana’s value while artificially depressing the price of blue chips like ETH and BTC.
This chaos has led to hints of something like a death spiral as developers and projects leave the struggling chain. Most dramatically, DeGods and Y00ts NFT (Fungible Token) Plans confirmed Leaving Solana for Ethereum and Polygon respectively. In November, stablecoin issuer Tether exchanged $1 billion for USDT From Solana to Ethereum.
– May not have PMF for high performance L1s
– Inexpensive Blackspace is prone to DOS
– Consensus (tower BFT) is not strict
– Shred overhead ~O(KN) per tx, where K = shreds, N = nodes
Everyone building Solana believes 1. We need 2-4 sharp research teams.
– Jarxiao 🔥🦅 (@jarxiao) December 27, 2022
All of this comes on top of FTX’s pre-collapse concerns. Solana has experienced Repeated chain termination Since its inception, it has often been caused by “botting” or other forms of spam flooding the network. This is inextricably linked to Solana’s core value proposition as a faster, cheaper Layer 1 than Ethereum: for a blockchain, lower transaction costs and higher speed often come as a trade-off for security and stability.
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Also, that value proposition may be less compelling than when Solana launched in March 2020. The years since then have seen significant growth in Ethereum’s “Layer 2” products, which offer faster and lower-cost transactions but benefit from Ethereum’s security. , mostly by application “Rollup” technology. That includes new competitors hopeLaunched in December 2021, Layer 2 is now worth twice as much as Solana.
These are serious headwinds, and there are commentators in the crypto industry Discusses the chain’s prospects In recent days. In a best-case scenario, Solana’s remaining builders face a long road to environmental health and fitness. The big question is whether there are enough of them, confident enough to go the distance.
The views and opinions expressed herein are those of the author and those of Nasdaq, Inc.