News from Solana

Solana made a number of significant news this weekend at its Breakpoint conference. SOL, on the other hand, paid little attention.

Solana is one of several Layer 1 networks that have suffered as a result of the ongoing crypto winter. Chris Williams says that sunny skies may return.

Breakpoint Makes a Splash with Solana

Solana had a busy weekend as the Layer 1 network held the 2022 edition of its Breakpoint conference. What about SOL? Not at all.Several major announcements were made to the thousands of Solana enthusiasts who went to Lisbon for the Layer 1 blockchain’s premier event. The most significant announcement occurred on Saturday when Google Cloud said that it was running a Solana validator and will begin indexing Solana data via its BigQuery offering in early 2023. Solana will also be offered through Google Cloud’s Blockchain Node Engine, which will allow users to run their own nodes in the cloud. According to CoinGecko data, SOL surged by double digits beyond $38 as soon as the announcement was made, but the momentum did not stay. It has since dropped 5.5% to roughly $34 today.

Unlike other blockchains like Ethereum, the numerous technologists working in the Solana ecosystem have concentrated on developing goods for the mainstream market. One example is the Saga phone, which seeks to be the world’s first Web3-ready smartphone. Solana revealed at Breakpoint that the solution would be available to developers as early as next month.

Circle, another USDC issuer, also made an appearance at Breakpoint, saying that their Euro Coin offering would be accessible on Solana in the first half of 2023. The Euro Coin is already available on Ethereum. Circle also confirmed that its next cross-chain protocol will support Solana.

Star Atlas devs released an early demo for the game at Breakpoint, arguably GameFi’s most anticipated title. Solana’s high-speed capabilities (it claims to execute 65,000 transactions per second) should make it a strong contender for the Web3 gaming area, but with no leading titles available to play today, it’s unclear how far teams have progressed—and whether Solana will become a hub for the niche. Because games often take years to develop, it may be some time before Solana’s GameFi ecosystem takes off.

Solana DeFi’s Situation

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Solana, like much of the crypto world, has had a difficult year, particularly in its DeFi environment.

As SOL approached $260 in November 2021, around the time of the inaugural edition of Breakpoint, Solana surpassed $10 billion in total value locked.

However, Solana DeFi has taken a hit this year as a result of falling market prices, liquidity fleeing to other networks, and severe token unlock schedules undermining the value of some of the ecosystem’s 2021 stars. Today, the entire value locked on Solana is roughly $968 million, which is somewhat less than Avalanche’s $1.31 billion and a fraction of Ethereum’s $32.29 billion, according to Defi Llama statistics. If the numbers do not alter dramatically in the future, Solana may discover that it thrives in other locations. However, it’s worth noting that the overall value locked has been more constant in SOL terms this year, falling around 54% from its peak in June 2022 to around 31.3 million SOL.

Notably, in total value-locked terms, Solana is now behind the Ethereum Layer 2 network Arbitrum and is only marginally ahead of Optimism. If Layer 2 continues to grow at its current rate, Solana may find itself not just competing for liquidity with other Layer 1 networks.

The Mango Markets and Solend exploits were both made possible by low liquidity levels on their platforms, which made it simpler for whales to manipulate their markets and take out large loans. While Solana protocols are developing solutions to such concerns, the network’s DeFi ecosystem may continue to face difficulties as long as liquidity remains low.

While Solana DeFi is down, the network’s persistent outages have received the most criticism. Solana has seen several hours-long outages in the last two years, the most recent being an 18-hour outage in September 2021. Solana has seen four major outages in 2022, the most recent of which occurred last month due to a misconfigured node.

Though network interruptions have been a chronic issue, Solana Labs CEO Anatoly Yakovenko has stated that a pending upgrade will eliminate such events in the future. If Solana can solve the problem, the network will be in a far better position by the next crypto market surge.

Taking Advantage of High Speeds and Low Costs

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While Solana DeFi is experiencing a decline, the network’s NFT ecology is not.

Solana has developed a rapidly increasing community of “JPEG fanatics” with the second-largest NFT ecosystem behind Ethereum. Collections such as DeGods and y00ts have seized the NFT scene by storm this year, commanding hundreds of dollars on the secondary market despite terrible market conditions.

Solana has also drawn a number of prominent figures from the realm of digital art. Metaplex revealed at Breakpoint that it would deploy “immersive 3D NFTs” from Beeple on Solana, a major departure from Ethereum. Solana NFTs were originally launched by pplpleasr, another prominent artist in the NFT sector. Whereas Ethereum has received much of the popular attention for non-fungible digital collectibles, NFT natives have seen that activity is increasing on its strongest competitor network. Because Solana’s NFT community and infrastructure have grown so quickly during the weak market, the next NFT bull cycle may look very different from the last one.

Solana appears to be cognizant of its position in the GameFi industry as a result of its high-speed, low-cost capabilities. Breakpoint dedicated a full day to the buzzy sector when Star Atlas and other teams demonstrated their latest progress to a packed gathering of would-be Web3 gamers.

What is Solana’s Future?

While the network has problems, it is abundantly obvious that the network is producing many positive results. The multiple announcements made during Breakpoint demonstrate that, despite its difficulties, talented companies, artists, and projects are taking a serious interest in the Solana network.

It’s also worth noting that Solana and SOL aren’t the only crypto winter victims. While SOL is down approximately 86.9% from its high after excelling in 2021, several other Layer 1 networks have incurred comparable losses. DeFi has also taken a hit across the board, with Ethereum faring the best. Historically, Ethereum’s competitors—dubbed “Ethereum Killers“—have seen activity decline and coins die off in down markets, but none have witnessed as many good changes as Solana has in recent months.

The network’s competition may be the most difficult challenge ahead. Because of their promise of fast speeds, the new Layer 1 network Aptos and Sui, both designed by former Meta personnel, have been likened to Solana, and both projects have raised nine-figure war chests this year. Aptos, which promises to be able to execute 100,000 transactions per second using its Move programming language, started with a token airdrop last month, and the company’s growth is expected to be rapid. Sui is also thought to be planning its own airdrop. Capital is unforgiving in crypto; if these businesses successfully capture the attention of the space, they may end up outperforming Solana on the next market rally.

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Solana, like other pioneers in the “alternative Layer 1” space, will face competition from Layer 2 networks in the near future. Arbitrum and Optimism’s rapid growth this year has demonstrated that if Ethereum succeeds, liquidity will stream into Layer 2, and many other Layer 2 projects have yet to begin in earnest.

Nonetheless, Solana has one of the most active and rapidly growing crypto ecosystems, with some exciting prospects on the horizon. Despite its shortcomings, it is evident that the network is not going away anytime soon. While SOL isn’t moving today, that’s not uncommon in crypto bear markets—regardless of how bullish the news cycle appears. However, whenever sentiment turns bullish, there is reason to anticipate that SOL will benefit.

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