- SOL has jumped 7x in worth because the FTX-induced downturn.
- Solana’s community benefits and a loyal developer neighborhood helped script a comeback.
Round this time final yr, Solana [SOL], the favored sensible contracts community, was grappling with maybe its greatest problem.
One of many world’s largest crypto exchanges at the moment, FTX, collapsed spectacularly, triggering a knock-on impact on entities with publicity to the bankrupt platform. The Solana ecosystem was one among them.
Whereas in a roundabout way associated to FTX, SOL was broadly endorsed by the disgraced co-founder of the alternate Sam Bankman-Fried (SBF). A lot in order that critics held SBF’s campaigning partly answerable for the token’s worth hike seen beforehand.
Other than this, FTX made vital investments in initiatives constructed on the blockchain.
Little did Solana proponents know that the affiliation would come again to hang-out them large time.
The autumn and rise
Native token SOL plunged to historic lows within the days following the implosion. From an all-time excessive of $259 recorded only a yr in the past, the asset sank under $9 within the dying phases of 2022.
Furthermore, customers, capital, and initiatives began deserting the community.
As per knowledge fetched by AMBCrypto from DeFiLlama, liquidity price $769 million was emptied from Solana between the primary week of November when the difficulty surfaced, and the tip of 2022.
The sentiment across the challenge, as soon as positioned because the Ethereum [ETH] killer, was at an all-time low.
However like all good issues, all dangerous issues come to an finish too!
Lower to 2023 and Solana has scripted arguably the perfect comeback ever within the historical past of cryptocurrencies.
If you happen to believed within the long-term outlook of SOL amidst all of the FUD a yr again and resisted the temptation to promote, properly, congrats! You’d be seven occasions richer in your SOL holdings as you learn this piece.
Many of the good points got here within the late-year flourish, as seen under. Wider market optimism, mixed with Solana’s achievements throughout the yr, propelled SOL to a $44.83 billion market cap as of this writing, the fifth-largest amongst all cryptos.
Supply: CoinMarketCap
The leap in SOL’s worth additionally boosted the USD worth of capital invested into totally different initiatives on Solana. At press time, the TVL was $1.42 billion, reversing all of the losses made within the aftermath of FTX’s collapse.
Supply: DefiLlama
What’s behind the turnaround?
Practically all of the analysts that AMBCrypto spoke to hailed Solana’s basic benefits as the important thing to the turnaround. Rahul Maradiya, co-founder & international CEO of Dubai-based blockchain ecosystem CIFDAQ, mentioned,
“Solana has a vibrant community of developers who aim to take advantage of its innate scalability. Its transaction speed, in particular, allows it to boast of many use cases.”
The sentiment was echoed by Jeff Owens, co-founder of layer 1 blockchain Haven 1, who argued,
“The fact that Solana is fast, cheap, and seems to have shaken off the reliability issues that plagued the chain in 2021 seems to indicate that Solana is here to stay.”
In reality, Solana itself credited the onerous work of its developer neighborhood in flipping issues round. In an announcement shared over mail, Austin Federa, Head of Technique for the Solana Basis, acknowledged,
“The collapse of FTX hit the entire industry hard, but the position the network is in today is entirely due to the resiliency and capabilities of Solana’s global builder community. The Solana community went back to work, built through the bear, and a year later we’re seeing the culmination of that determination and effort.”
On the face of it, these arguments maintain water. Solana is without doubt one of the quickest blockchains in operation as of this writing, with a median of three,500 transactions per second (TPS) during the last month, based on Solscan.
Theoretically, Solana can deal with 50000–65000 TPS, aligning with cost giants from the Web2 world. Compared, Ethereum, the a lot greater sensible contracts community, averaged between 10-13 TPS over the yr.
Supply: Solscan
Furthermore, Solana gives exceptionally low transaction charges as properly, when in comparison with Ethereum.
The common transaction payment paid by Solana’s customers within the final epoch was 0.00003304 SOL, or $0.002, as per SOL’s market worth at press time. Then again, Ethereum charged 48 gwei, equal to $2.19, on common to validate a transaction.
It was clear that Solana by no means misplaced out on its basic strengths — cost-effectiveness and pace — essential traits for any blockchain price its salt.
Such community benefits go a good distance in attracting decentralized functions (dApps) in numerous realms like finance, gaming, and non-fungible tokens (NFT).
That is exactly why lots of the ecosystem’s builders caught with the community and contributed to its progress.
The yr that glided by
Amidst the relative calmness of the bear market, Solana centered on constructing high-profile partnerships with Web2 giants.
Arguably essentially the most vital amongst them was the partnership with funds big Visa. The partnership concerned the extension of its stablecoin settlement capabilities to the Solana chain.
The event was frantically cheered by the Solana neighborhood as a result of a serious TradFi participant thought-about the community for funds for the primary time.
Whereas Visa was already utilizing Ethereum [ETH] for its pilot challenge, the choice so as to add assist for Solana was motivated by the excessive transaction throughput and low prices.
Visa acknowledged Solana’s strategic benefits whereas saying the partnership.
Other than this, Solana introduced the combination of Solana Pay, its native funds resolution, with common e-commerce firm Shopify.
The mixing allowed retailers and entrepreneurs to bypass excessive transaction charges typically related to Web2-based third-party cost processors.
Solana’s technical prowess was acknowledged by friends from the Web3 neighborhood as properly. MakerDAO, a number one stablecoin issuing protocol, considered utilizing Solana as an alternative of Ethereum for its upcoming stand-alone blockchain.
Praising Solana’s technical capabilities, Maker’s co-founder Rune Christensen acknowledged that the PoS community would stay the perfect match to handle Maker’s particular wants.
He additionally attributed the sturdy developer ecosystem as a serious motive behind selecting Solana.
Simply the ‘Fire’ Solana wanted
It’s no secret that Solana has a historical past of downtime points and community halts. In reality, co-founder Anatoly Yakovenko went to the extent of terming community outages as “Solana’s curse” in one among his older interviews.
Solana suffered its first major network outage of 2023 in February, lasting almost 20 hours. Nonetheless, since then, the community has maintained a 100% uptime.
Nonetheless, even these one-off glitches might be a factor of the previous as soon as Solana’s upcoming validator shopper, Firedancer, is ready in movement. A substitute for the present natively-developed shopper, Firedancer is being developed by a 3rd social gathering.
Solana govt Austin Federa remarked,
“At the Foundation we’re looking forward to the launch of FireDancer, an entirely new validator client for the Solana network. Having a second validator client implementation will even further increase the resiliency and reliability of the network.”
As of this writing, Firedancer’s check model has been launched, with the mainnet launch anticipated within the first half of 2024.
Solana lastly goes BONKers
Through the peak of the FTX-induced negativities, Solana introduced a dog-themed token Bonk [BONK]. The acknowledged purpose of the meme coin was to shift the main focus away from ‘toxic Alameda tokenomics’.
Whereas the asset did reach infusing a constructive vibe into SOL initially, it rapidly pale into irrelevance. Nonetheless, the actual present began a lot later.
The late-year rally and bettering sentiment across the Solana ecosystem trickled all the way down to the meme coin.
From a market cap of $10 million in mid-October, BONK exploded to $1.29 billion on the seventeenth of December, giving unreal 106x returns to its holders.
The surge propelled BONK to turn out to be the third-largest meme coin out there, AMBCrypto noticed utilizing CoinMarketCap’s knowledge.
Supply: CoinMarketCap
In contrast to a number of the different memecoins that lack utility, BONK has use instances within the Solana ecosystem, together with utilizing the token as cost for NFTs.
What subsequent for Solana?
With Solana all poised to finish 2023 on observe, the subsequent query that’ll be on the thoughts of Solana fans might be — What to look forward in 2024?
So far as the much-publicized ‘Ethereum Killer’ narrative is worried, it might in all probability go and discover some sound sleep. Most specialists that AMBCrypto spoke to dominated out the potential of Solana dethroning Ethereum quickly.
Stefan Rust, CEO of unbiased financial knowledge aggregator Truflation, opined,
“I don’t think Solana is an Ethereum killer. There is too much momentum and strong leadership already behind the Ethereum network to the extent that Ethereum is no longer building just with ETH. Plus the liquidity advantage that is available on Ethereum is going to be very hard to catch up with.”
Nonetheless, Solana backers nonetheless have a lot to look ahead to. On the prospects of SOL storming into the highest 5 checklist of cryptos by market cap in 2024.
Inasmuch, Johnny Gabriele, Head Of Decentralized Finance at Web3-native incubation studio CryptoOracle, made a daring prediction.
“At the top of this bull market, Coinmarketcap will say: 1. Bitcoin 2. Ethereum 3. Solana. I believe three will live in harmony one day.”
Rahul Maradiya additionally gave a thumbs as much as the probability of Solana ending up within the high 5,
“As Solana continues to trend upwards, there’s the very real possibility that BNB becomes caught up with ongoing Binance-related drama. BNB doesn’t need to crash in order for Solana to ascend. Instead, each only needs to move marginally in opposite directions.”
Thoughts the challenges
Maybe essentially the most vital obstacle to attaining these goals will come from regulators.
Do not forget that america Securities and Exchanges Fee (SEC) labeled SOL, together with a number of different main cryptos, as securities in a lawsuit filed in opposition to Binance earlier within the yr.
Regulatory crackdowns this yr, and usually, have prompted vital injury to the entities focused. No matter how sturdy the basics seem like, it could all come all the way down to compliance and legality in the long run.
Secondly, FTX acquired judicial approval to liquidate the recovered crypto-assets and pay out the collectors who’ve patiently waited for his or her cash because the platform’s demise final yr.
The issue — It might apply vital downward stress on SOL.
SOL was FTX’s largest holding, as per a latest report by CoinGecko. At about 55.8 million, it equated to just about 13% of the asset’s circulating provide.
If the whole lot of SOL holdings are dumped out there, SOL’s worth may properly be at the risk of falling to lows seen after the collapse of the alternate final yr.
