The rise of Solana

• Solana was one of the hottest projects of the last bull run
• In the time between early 2020 and late 2021, the price of Solana climbed from under a dollar to over 250 dollars at its peak
• It wasn’t just speculation either, Solana was attracting a ton of developers and had applications that people were actually using
• Solana was leading the pack for alternative layer ones, or “Ethereum killers” as they are sometimes called
• Solana was extremely fast and cheap, which made it attractive for users and developers who were fed up with high gas fees on Ethereum

Solana’s trade offs and problems

• Solana’s speed and low fees were possible because decentralization was not prioritized on the network
• This is the tricky thing about blockchains, the decentralization part is what makes the user experience difficult, slow and expensive, but this is also what makes the technology valuable in the first place
• It wasn’t long before the Solana network started facing challenges because of the trade offs that were made in terms of decentralization
• The low costs on the network made it much easier for people to spam NFT drops with bots, which Solana developers likened to “DDOS attacks” on the blockchain
• In some cases, these bots would manage to shut down the entire blockchain for hours, something that is unacceptable in the world of crypto that is always running 24/7
• Shut downs like this can have huge financial implications for people who have leveraged positions opened on decentralized exchanges or lending platforms. If the market is volatile, and they are unable to manage their positions, they could get liquidated, and that ended up happening to a lot of people throughout Solana’s numerous crashes

FTX and SBF connections

• Despite all of these problems, the price of Solana remained strong throughout the bull market, and we now know that this was mostly thanks to market manipulation by SBF, FTX and Alameda
• When the SBF house of cards began to crumble, things started to look really bad for Solana
• Even though we didn’t learn about problems at FTX until the past few months, the initial blowup actually happened at the beginning of the year, when the price of Solana was dancing around 100$
• In the months since the troubles began, Solana’s price has dropped all the way down to 11 dollars and some change.
• The problems with outages have also continued, even during the bear market when activity is low
• Solana co-founder Anatoly Yakovenko was forced to address these concerns at the Breakpoint conference in Lisbon, Portugal
• The comments were made just days before the bankruptcy of FTX, which could have very well been the nail in the coffin for Solana
• In the month and a half since FTX has declared bankruptcy, the price of Solana has been cut in half, and continues to fall

Developer Exodus

• There are also now reports that developers are leaving Solana in droves
• A report from Token Terminal data recently suggested that 90% of developers on Solana have left the network
• The official Solana Twitter account hit back with a claim of its own that there are currently 25,000 unique developers working on Solana, citing data from the auditing firm “sec3,” although it seems that this firm is specifically focused on the Solana ecosystem, so there could be a potential conflict of interest there
• Regardless of the exact percentage, developers and projects are leaving Solana in droves
• This week it was announced that two of the top NFT projects on Solana, DeGods and y00ts will be bridging to Ethereum and Polygon respectively.
• As far as total value locked is concerned, The TVL across the entire Solana ecosystem has been reduced from $10 billion all the way down to $215 million.

Layer One Investments

• I can’t help but think back to the last bull run and notice how familiar this all seems to the conversation about EOS, a layer one blockchain that was once seen as a serious Ethereum competitor, but is now nothing more than a cautionary tale.
• In every bull run it seems that there are layer one networks that come out of nowhere offering a radically better user experience, but making major compromises when it comes to decentralization. They also tend to spend a ton of money on marketing.
• These are usually red flags that a project isn’t a long term hold, so if you are trying to take advantage of pumps for hyped up layer ones like this when the next cycle rolls around, keep a close eye on those positions and get out when everyone is euphoric
• Ethereum will not be the only layer one network, and there is a lot of value to capture in the layer one investment space, but when it comes to long term holds, look at the professional teams that have their heads down building unique technology, instead of the most shiny flashy new toy that VCs rolled out for the bull run.