Home » Solana’s accelerating, yearlong slide wipes out over $50 billion

Solana’s accelerating, yearlong slide wipes out over $50 billion

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This illustrated photo taken in Krakow, Poland on August 21, 2021 shows the Solana logo and cryptocurrency representation on a smartphone screen.

Jakub Porzycki | Noor Photo | Getty Images

Solana It was touted as a cryptocurrency that would challenge Ether with its eco-friendly approach, faster transaction speeds, and more consistent costs.

The bet investor had a disastrous year. Token market cap plummeted from over $55 billion in January to just over $3 billion at the end of the year.

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One of Solana’s biggest problems in late 2022 was her close relationship with FTX founder Sam Bankman-Fried. eight scams after his cryptocurrency exchange went bankrupt last month. The disgraced former crypto billionaire touted the benefits of blockchain technology and invested more than $500 million in Solana tokens, making him one of Solana’s most popular boosters.

“Sell as much as you want” Bankman-Fried told one skeptic January 2021.

The Bankman-Fried firm held approximately $1.2 billion worth of tokens and related assets in June. Document reviewed by CoinDesk.

When FTX collapsed, investors put about $8 billion into Solana. More recently, however, Solana has plummeted further as the rest of the crypto world has remained relatively quiet and prices have stabilized.

two of the largest Non-fungible token The Built on Solana (NFT) project announced on Christmas Day its migration from the Solana platform. However, Solana’s recent slides are shrouded in mystery, as they came after the news had already been reported.

Last week, Solana was down over 30%. Ether has remained stable, even though he has fallen 1.7% over the same period. Bitcoin Only 1.2% has fallen. Among the 20 most valuable cryptocurrencies tracked by CoinMarketCap, the next biggest loss on that stretch was dogecoinwhich fell 9%.

In just one hour of trading on Thursday, Solana fell 5.8%, its lowest level since early 2021 when Bankman-Fried opened trading. vocally Offer his support to the project.

Since then, Solana has broken out of its lows, current market capitalization Exceeded $3.5 billion. Its his 24 hour trading volume relatively he has increased more than 200%.

Bankman-Fried wasn’t the only bull in the 2021 crypto market heyday.

Developers appreciated Solana’s support for smart contracts, code that executes pre-programmed directives, and an innovative proof-of-history consensus mechanism.

A consensus mechanism is a way for a blockchain platform to evaluate the validity of transactions performed, based on consensus among multiple record-keeping computers called nodes, based on who owns what and how well the system is functioning. track who is

Bitcoin uses a proof-of-work mechanism. Ethereum and rival Solana use Proof of Stake. Rather than relying on energy-intensive mining, proof-of-stake systems ask big users to become “validators” by providing collateral or a stake. Instead of solving cryptographic hashes like Bitcoin does, proof-of-work validators validate transaction activity, and instead of maintaining a “book of books” on the blockchain, in exchange for a proportional reduction in transaction fees.

Solana’s supposed differentiator was to strengthen its proof of stake. proof of history — Ability to prove that a transaction occurred at a specific moment.

Solana will skyrocket in 2021, with a single token rising 12,000% annually, reaching $250 by November. even before that Collapse of FTXSolana faced a series of public struggles challenging the protocol’s claims that it was superior technology.

Much of Solana’s popularity is based on growing interest in NFTs. serumAnother Bankman-Fried backed exchange was built on Solana. As the calendar turned to 2022, Solana’s limitations began to become apparent.

Less than a month after the New Year, network outage You’ve taken Solana down for over 24 hours. Solana’s token fell from $141 to just over $94. In May, Solana 7 hour suspension After NFT minting flooded validators and crashed the network.

“A record-breaking 4 million transactions [per second]’ took out Solana, causing its token’s price to drop 7%, CoinTelegraph reported at the timepushed it further into the deficit during the onset of Cryptowinter’s bruising.

Why Anatoly Yakovenko ditched conventional technology and co-founded Solana

Another stop in June prompted a 12% declineSeveral hours of downtime occurred after validators stopped processing blocks, jamming Solana’s touted consensus mechanism and forcing a network restart.

The outage was worrying enough for a protocol looking to overthrow Ether’s dominance and establish itself as a stable, high-speed platform. Solana was experiencing growing pains in public. This project was first built in his 2020 and is a newer protocol than Ether, which was published in 2015.

Expect technical challenges. Unfortunately for Solana, something else was brewing in the Bahamas.

SEC called it “Bold” fraud. Bankman-Fried uses client funds on his FTX to trade and lend at his hedge fund, Alameda Research, to his Caribbean luxury lifestyle Disrupted the crypto market. Bankman-Fried is Released at $250 million hook up While he was awaiting trial on fraud and other criminal charges last week Located in the Southern District of New York.

Solana since November 2022 when FTX collapsed and filed for bankruptcy protection.

Solana has lost more than 70% of its total in the weeks since FTX filed for bankruptcy in November. Investors fled anything associated with his Bankman-Fried, and prices of FTT (FTX’s native token), Solana, and Serum plummeted dramatically.

Solana founder Anatoly Yakovenko told Bloomberg Instead of focusing on price action, we need to continue to focus on “getting people to build great decentralized things.”

Yakovenko did not immediately respond to CNBC’s request for comment.

FTT has gone to hell and lost virtually all its value. However, Solana has continued to fly recently, reflecting ongoing concerns. FTX contagion Skepticism about the long-term viability of proprietary protocols.

Developer flights are our most pressing concern. According to the developer, Solana’s raison d’être was to resolve the conflict between Bitcoin and Ethereum, and that “around the world he scales beyond 15 transactions per second.” documentationHowever, according to Token Terminal, active developers on the platform have fallen to 67 from the October 2021 high of 159.

Cryptocurrency investment firm Multicoin Capital maintains a bullish stance on Solana. After the demise of FTX, Multicoin continued to strike an optimistic tone about the suddenly bewildered blockchain.

“Given the partnership with SBF, we recognized that SOL is likely to underperform in the short term.
and FTX; however, since the crisis began, we have decided to maintain our position based on various factors,” Multicoin wrote in a message to partners. Obtained by CNBC.

Multicoin and other prominent crypto voices argue that the impact from FTX underscores the need to get back to basics in the crypto industry. A move away from powerful centralized exchanges in favor of decentralized finance (DeFi) and self-custody.

What is DeFi?

Ann Increased daily activity Binance, which is currently unmatched, may suggest that many cryptocurrency enthusiasts have yet to take their mission to heart.

No wonder Yakovenko continues to believe in Solana. But even his Vitalik Buterin, the man behind Ethereum, expressed his support for Solana on Thursday. “It’s hard to tell from the outside, but I hope the community gets a fair chance to thrive,” Buterin wrote. on Twitter.

Chris Berniske, Partner Web3 venture capital firm placeholderhe said in a December 29 Twitter thread that he was “still craving” Solana.

Cryptocurrencies have been widely adopted thanks to centralized platforms such as FTX, Crypto.com and Binance. FTX spent millions Stadium deals and naming rightscrypto.com invested heavily in high-profile advertising campaignsEven Binance Sponsorship with the Grammy Awards.

2023 could be an important year for defi. Investors interested in cryptocurrencies are looking for safer ways to generate income and store their assets. Bitcoin was born out of the 2008 financial crisis. Currently, the cryptocurrency industry faces unique challenges.

“Lehman was not the end of the banking industry. Enron was not the end of the energy industry.
And FTX is not the end of the cryptocurrency industry,” Multicoin told investors.

– CNBC’s Ari Levy and MacKenzie Sigalos contributed to this report.

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