SOL

Is Solana Dead? A Look at the Data

by BSC News

October 24, 2023

chain

Despite setbacks, such as the FTX collapse and network performance issues, Solana has demonstrated remarkable endurance, as evidenced by its NFT market resilience, developer activity, and DeFi growth.

Summary:

  • Solana's groundbreaking features include high throughput, low fees, and scalability, setting it apart in the blockchain realm.
  • Challenges such as the FTX collapse and network outages shook Solana, impacting its price and active wallets.
  • Despite setbacks, Solana's NFT market resilience, developer activity, and DeFi growth indicate its survival in the crypto landscape.
  • Notable milestones, partnerships with major players, and enhanced reliability demonstrate Solana's enduring potential and resilience.

Exploring Solana's Ascent 

In 2020, Solana burst onto the blockchain scene with a bold vision—to provide a platform capable of processing over 65,000 transactions per second while upholding the utmost security standards. Its ambitious aim was to address the long-standing scalability issues that had hindered many other blockchain networks. The launch of Solana's Mainnet Beta in March 2020 marked the beginning of its journey as an operational blockchain network. Let's delve into the fundamental features that set Solana apart in the world of blockchain.

1. High Throughput: Solana's exceptional throughput, attributed to its innovative consensus mechanism and Proof of Stake (PoS) system, positions it to manage a staggering number of transactions. This feature makes Solana well-suited for applications ranging from high-frequency trading to decentralized gaming.

2. Low Fees: Unlike many blockchain networks plagued by unpredictable and soaring transaction fees during periods of congestion, Solana offers consistently low fees. 

3. Scalability: From its foundational design, Solana emphasizes scalability. It employs unique approaches such as sharding, which divides the network into smaller subnets that process transactions in parallel. This design ensures that block propagation and confirmation times remain steady as the network expands, accommodating a growing user base without compromising performance.

4. Smart Contracts: Solana empowers developers to create decentralized applications (dApps) through smart contracts, opening the door to a wide array of possibilities. These self-executing contracts drive innovation in areas like decentralized finance (DeFi) and non-fungible token (NFT) marketplaces.

While Solana enjoyed rapid growth and success, it encountered a series of challenges starting with the Luna market incident, which sent shockwaves throughout the crypto market. This tumultuous period had an impact on Solana's price, network activity, and active wallets. However, it was not the end of struggles for Solana in the same year.

Source: Solana Twitter

Effect of FTX Collapse on Solana

FTX's Financial Turmoil Shakes Solana's Foundation

The stunning collapse of FTX, once viewed as an impregnable giant in the crypto space, sent shockwaves through the Solana community. The exchange's mismanagement and subsequent bankruptcy filing not only stirred panic among investors but also raised concerns about the fate of Solana's assets held within the troubled platform.

Solana's Vulnerability Exposed

With FTX's mounting financial woes, Solana's reputation was pulled into the chaos. Sam Bankman-Fried's vocal advocacy of Solana now seemed to work against the blockchain, as the bankrupt FTX held a significant amount of SOL, creating uncertainty leading to a sell-off.

While the Solana Foundation confirmed relatively minimal exposure to FTX's crisis, a report hinted at Alameda Research's considerable holdings of SOL tokens, causing concerns about potential liquidations and their impact on Solana's already turbulent market value.

Solana's Price Plunge Amidst Macroeconomic Headwinds

The broader macroeconomic conditions took a toll on the entire cryptocurrency space, and Solana was no exception. Escalating inflation and an impending rate hike by the Federal Reserve shattered the notion that cryptocurrencies would act as a reliable hedge against economic volatility. 

Other factors adding to the pain of Solana

Perennial Network Outages and Performance Issues

Solana's persistent struggle with network outages and performance glitches has significantly impacted user confidence. Despite attempts to rectify these issues through updates and optimizations, the recurring downtimes have raised concerns about the platform's reliability, potentially deterring users and projects from committing to Solana for critical operations.

Rising Competition from Established Blockchain Platforms

Solana faces stiff competition from well-established blockchain platforms, including Ethereum, Binance Smart Chain, Arbitrum, and Avalanche. Solana hasn’t done well attracting users and projects by showcasing its unique value propositions.

Vigilance Against Security Breaches

The specter of potential security breaches looms over the Solana ecosystem, posing a significant threat to user funds and the overall credibility of the network. The susceptibility of dApps built on the Solana blockchain to security vulnerabilities remains a critical concern, necessitating robust security measures to protect users and maintain trust within the Solana community.

Following the collapse of FTX and other factors, prominent Solana-based DeFi projects Serum and Oxygen ceased operations. Moreover, last December, popular NFT projects, DeGods and Y00ts migrated to Ethereum and Polygon, respectively, due to Solana's diminishing activity. 

Since then, Solana's number of active wallets has declined. 

Solana active wallets all-time chart (Source: Solscan)

Moreover, the total locked volume fell from $945 million on Nov. 4 to $210 million on January 1. 

Total volume locked (TVL) (Source: Artemis)

The price of Solana also dipped below $10 to $9.65 last December, a 96% fall from its all-time high.

Does this mean Solana is dead?

Is Solana Dead?

To answer the questions, let’s look at some of the metrics on the Solana network.

Solana NFT Market 

Despite the broader NFT market's downturn, Solana's NFT ecosystem has displayed signs of resilience, with recent stabilization and notable growth observed in key metrics. The Solana NFT Floor Value and Trading Volume, although affected in Q3, 2023, have shown signs of recovery over the last two weeks, pointing to a potential upward trajectory in the coming months. 

Solana NFT Index 90-day Chart (Source: Solana Floor)

Noteworthy projects within the Solana NFT market, such as Idle Gaming, The Heist, and Reavers, have demonstrated substantial growth, highlighting the continued vibrancy of the Solana NFT landscape.

Core Developer Activity and On-Chain Transactions

While Solana experienced a significant drop in developer activity in the past year, recent data suggests a stabilization in this domain. The network's daily transactions, although trailing behind competitors like Ethereum and Polygon, have shown stability over the last few months. 

Solana core developer activity over the past 365 days (Source: Token Terminal)

Despite minor fluctuations, Solana has seen stable daily completed transactions over the last three months, signaling sustained user engagement and network activity. 

Solana 3-month daily transactions chart (Source: Artemis)

DeFi Growth and Value Capture

Solana's DeFi sector has witnessed substantial growth, as evidenced by the notable increase in Total Value Locked (TVL) and the rising prominence of top dApps like Sharky, Parrot, and Saber Labs. As of writing, the TVL stands at $1.269 billion, a growth from $421 million on Dec.31, 2022.

Solana TVL (Source: DeFiLlama)

The platform's upward trajectory was supported by increased fees and overall blockchain revenue. 

SAGE Labs Surpasses Expectations

SAGE Labs, the innovative browser-based sci-fi game on Solana's network, achieved remarkable milestones recently, outshining even established networks like Polygon. With over 2.29 million transactions recorded in a single day on Oct. 9, SAGE Labs surpassed Polygon's total transaction count by approximately 256,000. 

Solana's immersive 2D space management simulation game, featuring interactive elements tied to the Solana blockchain, has captivated the crypto gaming community, enhancing its gaming credibility.

Uptime and Reliability Progress

The year 2023 has marked an improvement in Solana's reliability and uptime, with only one outage reported, as per the Solana Foundation's report. The network has historically struggled with these issues, with co-founder Anatoly Yakovenko referring to them as a "curse" in previous years. Notably, the network's low-cost transactions were identified as a primary cause of these outages, according to a report.

Solana's Lucrative Partnerships Foster Growth

Solana's strategic collaborations with major players like Visa, Shopify, and Google Cloud underscore the platform's growing influence and market relevance. The extension of Visa's stablecoin settlement pilot program to include Solana represents a significant vote of confidence in the network's capabilities, dispelling concerns associated with past downtime issues. Additionally, the integration of Solana Pay with Shopify empowers businesses with enhanced payment solutions, illustrating Solana's commitment to fostering a robust blockchain ecosystem. Google Cloud's efforts to incentivize Web3 startups through grants further reinforce Solana's status as a leading platform for innovative projects.

Looking at the metrics we can clearly say Solana isn’t dead yet. While it has been battered, it has also shown resilience and has been through one of the worst crypto winters.

Over the past 10 months, Solana ($SOL) has grown rapidly. On Oct. 24, it reached $31.7, an increase of 325% from $9.65 on Dec. 30.

Solana 1-month price chart (Source: CoinMarketCap)

Solana's Resilience and Growth Potential

Despite recent challenges, Solana's underlying strengths remain robust, making it a key player in the blockchain ecosystem. Its capacity to efficiently host DApps and support NFTs and DeFi protocols illustrates its relevance and potential in the ever-expanding crypto landscape.

While Solana has grappled with system downtimes and project migrations, it has an opportunity to address these issues comprehensively. 

By enhancing its infrastructure and bolstering its solutions, Solana can rebuild trust and solidify its position in the market.

Concerns about Solana's sustainability reflect the overall volatility of the cryptocurrency market in its ever-fluctuating world. While challenges persist, Solana's commitment to its vision and innovative approach positions it as a formidable contender in the layer-2 race, ready to embrace the opportunities.

Disclaimer

Disclaimer: The views expressed in this article do not necessarily represent the views of BSCNews. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. BSCNews assumes no responsibility for any investment decisions made based on the information provided in this article