Solana is a blockchain platform with a proof-of-stake mechanism to provide smart contract functionality. The demise of FTX and Sam Bankman Fried was a notable event in the crypto business this year. This catastrophic development had far-reaching consequences, affecting numerous protocols and the overall market space.
Among the platforms hit hard by this collapse, Solana stood out as one of the most prominent ones, experiencing a significant negative impact. Consequently, many crypto customers and loyal Solana users are now pondering the future of this blockchain platform.
What Does Solana Entail?
Solana is a blockchain platform with a proof-of-stake mechanism to provide smart contract functionality. Its native cryptocurrency is SOL. Solana, a blockchain platform launched in 2020 by Solana Labs, founded by Anatoly Yakovenko and Raj Gokal in 2018, has faced significant challenges. It has encountered multiple major outages, suffered a hack, and even faced a class action lawsuit.
Solana’s total market capitalization reached US$55 billion in January 2022. However, this value experienced a significant decline to approximately $3 billion at the end of 2022 due to FTX’s bankruptcy. Nevertheless, with the subsequent surge in the overall cryptocurrency market during 2023, Solana’s market capitalization rebounded and climbed up to $7 billion.
What Transpired with Solana in 2022?
In November 2022, Sam Bankman Fried attracted public attention when it came to light that his companies, FTX and Alameda Research, had alarmingly mixed assets. One of the major tokens in their portfolio was the Solana token, which experienced a significant impact due to this intermingling.
FTX’s balance sheet revealed a substantial value of SOL tokens at $982 million. As a consequence of its connection to Sam Bankman Fried through the supported blockchain, the token’s price plummeted by 52% within just one week in mid-November 2022.
Solana’s Market Value Plunge: From 80 Billion to 4 Billion in a Year
In November 2021, Solana’s market value reached an astounding 80 billion US dollars. However, the tides quickly changed as it plummeted to a mere 5 billion dollars by November 2022. Currently, its worth lingers around the 4 billion dollar mark.
FTX’s Role in Solana’s Downturn
Mahin Gupta, the founder of both Zebay and Liminal (Bespoke Wallet Infrastructure), shared insights regarding the significant decline in Solana’s value, attributing it to the FTX fiasco.
He expressed surprise at how Solana got entangled in the aftermath of the FTX incident, further worsening its current situation. Since the security breach earlier this year, SOL has been diligently working towards restoring stability.
However, Serums, FTX’s decentralized exchange (DEX) on the Solana blockchain, recently experienced a drastic 53% drop. The impact is particularly notable as certain assets within the Solana DeFi ecosystem were closely aligned with FTX and have lost their value.
This volatility extends not only to Solana assets but also to other factors within its ecosystem. It is worth mentioning that FTX and its founding team were prominent supporters of Solana’s growth. Alameda Research held $SOL as their second-largest position after FTT tokens — thus contributing to the current unfolding crisis.
Solana’s Unprecedented Plummet Amidst Crypto Turbulence
Amidst the volatile nature of cryptocurrencies, it is important to acknowledge the significant declines experienced by various tokens.
Bitcoin has seen a staggering drop of 75.5%, while Ethereum and BNB have fallen by 75% and 64%, respectively. However, what sets Solana apart is its astonishing decrease of 95%, plummeting from its peak.
While a more than 90% depreciation does not necessarily signify the end, it is crucial to recognize that Solana has lost 90% of its developers and all momentum. These factors compound the challenges faced by Solana as it strives for a resurgence.
Cardano Surpasses Solana in Development Activity and NFT Trading Surge
Solana TVL Plummets by 98% as NFTs Migrate
In recent news, Solana’s Total Value Locked (TVL) has experienced a significant decline of almost 98%. This decline has coincided with a notable exodus of NFT projects from the Solana blockchain.
On the other hand, Cardano, a strong competitor in the blockchain space, has emerged as the leading platform in terms of development activity over the past month.
Moreover, there has been a remarkable surge of 39% in Cardano NFT trades within the last 24 hours. Overall trading activity on Cardano has also witnessed an increase of 10.47%.
DeGods, a High-Value NFT Collection, Gains Momentum with Ethereum Bridge
DeGods, a highly regarded NFT collection in the Solana ecosystem, currently holds an impressive total value of $56.77 million.
The recent announcement of DeGods’ migration to Ethereum resulted in a remarkable surge of trading volumes for the collection, experiencing a whopping 220% increase compared to the previous week.
Solana (SOL) Exhibits Low Trading Volume and Bearish Patterns
Moreover, the native token of Solana, known as SOL, currently exhibits remarkably low trading volume. This suggests a lack of active trading activity over an extended period. Furthermore, a technical analysis highlights the presence of an inverted cup and handle pattern—a bearish signal indicating negative trends in the market.
The Shift Towards Decentralization: Assessing Solana’s Centralized Token Allocation in 2022
Solana, a highly centralized platform in the dynamic world of blockchain technology, has gained significant recognition. However, as we enter 2023, the developments of 2022 have revealed the growing importance of decentralized platforms.
Presently, there is an escalating demand for blockchain networks and projects that effectively combine decentralization, scalability, and strong user security.
Centralized Token Allocation on Solana
The heavily centralized token allocation on the Solana platform has come under scrutiny, with one critical aspect drawing particular attention.
Venture capitalists, developers, and Solana Labs hold a significant portion of the allocated funds, collectively controlling almost half. This concentration of tokens has not gone unnoticed and has sparked criticism from influential figures in the Web3 community and thought leaders.
Deviation from Web3 Ideals
Many individuals within the Web3 community participate in an ongoing discussion regarding Solana’s centralized token distribution. They argue that this approach contradicts the core principles and ideology of Web3, which prioritizes decentralization, democratization, and user empowerment.
How tokens are allocated has become a significant point of contention, raising doubts about Solana’s ability to embody the values associated with the Web3 movement.
Impact of Centralized Token Allocation
In addition, the impact of Solana’s centralized token allocation has come to light, especially considering the FTX collapse. Comparatively, Solana faced more significant consequences from this incident than Bitcoin and Ethereum, raising concerns about the vulnerability of centralized systems during times of crisis.
Analyzing Solana’s Prospects and Challenges
Resilience Amidst Challenges
While past experiences have shown projects bouncing back from significant value drops, it is crucial to recognize that Solana must overcome numerous obstacles on its path to recovery. The prevailing market sentiment leans towards pessimism, although a few remain optimistic.
Balancing Act: Challenges and Advantages
Solana’s heavy centralization may discourage users, especially those who have been negatively affected by the consequences of centralized exchanges like FTX. To thrive, Solana needs to adapt by implementing new methods and making network adjustments.
In a booming market teeming with formidable competitors like Cardano (ADA) and Polkadot (DOT), investor expectations are bound to soar. However, Solana’s history of network shutdowns continues to work against its favor.
Glimmers of Hope
On a positive note, the blockchain is expected to experience a surge in active developers by 2023. This influx of talent holds great potential for enhancing the platform. Moreover, Solana stands out with its remarkable speed, low transaction fees, easy-to-use smart contract development tools, and a thriving ecosystem for developers—an impressive array of advantages working in its favor.
Solana is currently confronting forthcoming challenges, with its future heavily relying on the effective resolution of these obstacles. Although recovering from a significant setback might appear daunting, it is not an insurmountable feat. The industry, as a whole, tends to foster a negative sentiment; however, amidst such skepticism, there exist loyal supporters who steadfastly maintain their faith in this platform.
As we navigate through uncertain times in the realm of cryptocurrency and blockchain technology, one thing remains clear: the potential for growth and innovation is immense. By encouraging increased adoption among individuals and businesses alike, we are likely to witness further advancements spurred by this widespread acceptance.
Before entering this domain, investors must take prudence and properly examine the associated dangers. For those willing to embrace calculated risks, substantial returns may be within reach. Ultimately, success in cryptocurrencies hinges upon not only resolving real-world challenges but also delivering tangible value to users within our ever-evolving digital landscape.