Following the sudden collapse of fraudulent crypto exchange FTX and other corporations such as Binance facing tremendous challenges, debate has accelerated in recent days over the future prospects of Solana, a layer 1 smart-contract blockchain that in some respects competes with Ethereum. The chain grew rapidly and saw immense hype during the 2020-2021 bull market, particularly from venture capitalists. But the recent departure of major projects to other chains and a massive drop in total value on the Solana chain have raised questions about its future prospects.
Lingering technological challenges are a common worry cited by doubters. Competition from Ethereum layer 2s represent a growing threat to Solana’s core premise of faster and lower-cost transactions. But the biggest cloud shading Solana’s sunshine is the fall of Sam Bankman-Fried, founder of the FTX exchange and hedge fund Alameda Research.
Sam Bankman-Fried (SBF) was perhaps the single most prominent backer of Solana, and skeptics could reasonably argue that the price appreciation of the SOL token and related assets from 2020-2021 was driven at least in part by Sam Bankman-Fried’s market interventions and advocacy.
The consequences of growing Solana skepticism have been dire, based purely on numbers. From a peak price of US$258.78 on November 6, 2021, Solana’s SOL token has declined to just over US$10. That’s a drop of 96 percent, vastly sharper than the drawdowns from the peaks for BTC (-74.5 percent) and ETH (-74.6 percent). It’s even a sharper drop, incredibly, than dogecoin (DOGE) has seen in the bear market – the meme coin is down a mere 76 percent from its October 2021 peak.
From its position as the fifth-most valuable crypto token in early November, Solana’s SOL token has dropped to 19th place. The total value of tokens staked in decentralized-finance (DeFi) protocols on Solana has declined even more dramatically, from nearly US$10.2 billion on November 9, 2021 to under US$210 million at press time – a decline of nearly 98 percent. Solana is now only the 12th-largest DeFi chain by total value locked or TVL, trailing not only Ethereum layer 2s like Polygon and Optimism, but also far more obscure projects like Cronos and DefiChain.
All this comes on top of worries that predated the collapse of FTX. Solana has experienced repeated chain halts since its inception, often caused by “botting” or other forms of spam overwhelming 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.
Moreover, that value proposition may itself be less compelling than it was when Solana launched in March 2020. The years since have seen significant growth in “layer 2” products on Ethereum that offer faster and less expensive transactions, but gain the benefit of Ethereum’s security, mostly through the use of “rollup” technology. Those new competitors include Optimism, a layer 2 that launched in December 2021 and now has more than twice as much value locked as Solana.
Meanwhile, people are getting worried about their investments in crypto sector while experts are suggesting people to immediately withdraw their money from these Ponzi ventures. Here are some of the comments:
Duke: Here is another crypto firm and currency becoming worthless. It’ll be only a short time before bankruptcy.
Howard: SOLANA was definitely propped up by venture capitalists, influencers and SBF. BTC, ETH, ADA, ALGO, AVAX, MATIC, and DOT appear to be offer more in terms of blockchain developments. Now the entire crypto scam projects will collapse – one after another. For those who have already been fooled by these Ponzi rackets, best option is – just rush and withdraw whatever you can, before you lose everything.
Ray: Solana is a VC, pre-mine scam coin for a blockchain that crashes constantly.
Solana, the cryptocurrency backed by fallen crypto grand fraud Sam Bankman-Fried, tumbled on Wednesday amid concerns that large holders may be about to offload the token.
Solana dropped as much as 12 percent on Wednesday and was trading 8.8 percent lower as of 8:40 a.m. in London. Other tokens saw modest declines, with Ether slipping 1.3 percent and Bitcoin down 0.3 percent.
While other so-called altcoins have suffered steep declines this year, Solana has been pummeled by the bankruptcies of Bankman-Fried’s crypto exchange FTX and his hedge fund Alameda Research, which had backed the token. The coin has lost 94 percent of its value in 2022.
“General confidence in Solana’s future has taken a hit given its close connection with SBF”, said Martin Lee, data journalist at blockchain research firm Nansen, using Bankman-Fried’s initials.
