Solana News Can’t Help SOL Soar. What’s Next for the High-Speed Layer 1?

Solana is one in every of a number of Layer 1 networks to have suffered within the enduring crypto winter. However sunny skies might return, Chris Williams writes. 

Solana Makes a Splash at Breakpoint

It was a giant weekend for Solana because the Layer 1 community hosted the 2022 version of its Breakpoint convention. As for SOL? Not a lot. 

The 1000’s of Solana followers that flocked to Lisbon for the Layer 1 blockchain’s flagship occasion have been handled to a number of huge bulletins all through the convention. Arguably the most important one got here Saturday when Google Cloud revealed that it was operating a Solana validator and would begin indexing Solana knowledge through its BigQuery product in early 2023. Google Cloud can even make Solana out there through its Blockchain Node Engine to assist customers run their very own nodes within the cloud. Per CoinGecko data, SOL instantly rallied double digits previous $38 because the announcement broke, however the momentum didn’t final. It’s since cooled by 5.5%, buying and selling at round $34 right this moment. 

In a unique strategy to different blockchains corresponding to Ethereum, the varied engineers working within the Solana ecosystem have centered on constructing merchandise for the mass market. An instance of such a product is its Saga telephone, which goals to be the world’s first Web3-ready smartphone. Solana introduced at Breakpoint that it might ship the product to builders as quickly as subsequent month.

USDC issuer Circle additionally appeared at Breakpoint, announcing that it might make its Euro Coin providing out there on Solana within the first half of 2023. Euro Coin is already stay on Ethereum. Circle additionally revealed that its forthcoming cross-chain protocol would help Solana. 

Arguably GameFi’s most anticipated title, Star Atlas builders shared an early demo for the sport at Breakpoint. Solana’s high-speed capabilities (it claims to course of 65,000 transactions per second) might make it a main candidate for the Web3 gaming area, however as there are not any main titles out there to play right this moment, it’s unclear how a lot progress groups have made—and whether or not Solana will turn into a hub for the area of interest. Video games sometimes take years to develop, so it might be a while till Solana’s GameFi ecosystem picks up.

The State of Solana DeFi

Like a lot of the crypto area, Solana has had a rocky yr, not least in its DeFi ecosystem. 

Solana topped $10 billion in whole worth locked as SOL neared $260 in November 2021, across the time of the inaugural version of Breakpoint.

Nonetheless, Solana DeFi has taken a beating this yr because of crashing market costs, liquidity withdrawing to different networks, and brutal token unlock schedules diluting the worth of a few of the ecosystem’s stars of 2021. In keeping with Defi Llama data, right this moment the whole worth locked on Solana is round $968 million, which is barely lower than Avalanche’s $1.31 billion and a fraction of Ethereum’s $32.29 billion. If the numbers don’t drastically change sooner or later, Solana could discover that it thrives in different areas. Nonetheless, it’s additionally price noting that the whole worth locked has remained extra secure in SOL phrases this yr, down round 54% from its June 2022 peak to roughly 31.3 million SOL. 

Notably, Solana now trails the Ethereum Layer 2 community Arbitrum in whole worth locked phrases, and solely barely leads forward of Optimism. If Layer 2 continues to develop at its present tempo, Solana might discover that it’s not solely in competitors with different Layer 1 networks for liquidity.

Each the Mango Markets and Solend exploits have been potential attributable to low liquidity ranges on their platforms, which made it simpler for whales to govern their markets to take out outsized loans. Whereas Solana protocols are arising with options to such issues, the community’s DeFi ecosystem might proceed to run into points so long as liquidity is low. 

Whereas Solana DeFi is down, by far the most important criticism leveled on the community is over its repeated outages. Solana has suffered from hours-long downtimes on a number of events over the previous two years, most notably in September 2021 when it went down for 18 hours. Solana has been hit by 4 main outages in 2022, with the newest downtime final month occurring attributable to a misconfigured node. 

Although outages have been a persistent downside for the community, Solana Labs CEO Anatoly Yakovenko has said {that a} forthcoming improve will forestall such incidents sooner or later. If Solana can overcome the issue as he guarantees, the community needs to be in a significantly better place by the following crypto market growth. 

Leveraging Excessive Speeds and Low Prices

Whereas Solana DeFi could also be in a stoop, the identical can’t be stated for the community’s NFT ecosystem. 

With the second greatest NFT ecosystem behind Ethereum, Solana has constructed a fast-growing group of so-called “JPEG fans.” This yr, collections like DeGods and y00ts have taken the NFT scene by storm, buying and selling at 1000’s of {dollars} on the secondary market regardless of adversarial market circumstances. 

Solana has additionally attracted many huge names from the digital artwork world. At Breakpoint, Metaplex announced that it might launch “immersive 3D NFTs” from Beeple on Solana, taking a notable department out from Ethereum. pplpleasr, one other main artist within the NFT area, has additionally beforehand launched Solana NFTs. The place a lot of the mainstream consideration over non-fungible digital collectibles has been on Ethereum, NFT natives have seen that exercise is rising on its strongest competitor community. The subsequent NFT bull cycle might look completely different to the final one now that Solana’s NFT group and infrastructure have gained a lot tempo all through the bear market. 

Solana additionally appears to concentrate on its standing within the GameFi world attributable to its high-speed, low-cost capabilities. Breakpoint featured a complete day devoted to the buzzy sector, which was the place Star Atlas and different groups confirmed off their newest progress to a packed room of would-be Web3 players.

What’s the Future for Solana?

Whereas the community has challenges to beat, it’s abundantly clear that many optimistic developments are coming from the community. The varied bulletins made at Breakpoint show that proficient corporations, artists, and tasks are taking a eager curiosity within the Solana community regardless of the difficulties it has confronted.

It’s additionally price declaring that Solana and SOL aren’t the one victims of crypto winter. Whereas SOL is down round 86.9% from its peak after outperforming in 2021, many different Layer 1 networks have suffered related losses. DeFi has additionally taken a beating throughout the board, with Ethereum popping out strongest. Traditionally, Ethereum’s rivals—generally dubbed “Ethereum Killers”—have seen exercise wane and their tokens die off in bear markets, however none of them has had as many optimistic developments as Solana has achieved over latest months. 

Maybe the best hurdle forward for the community lies in its competitors. The brand new Layer 1 networks Aptos and Sui, each developed by former Meta workers, have been in comparison with Solana owing to their promise of excessive speeds, and each tasks have raised nine-figure battle chests this yr. Aptos, which claims it will probably course of 100,000 transactions per second by its Transfer programming language, launched with a token airdrop final month and anticipation for its development is excessive. Sui can be believed to be making ready its personal airdrop. Capital is cruel in crypto; if these tasks efficiently seize the area’s consideration, they might find yourself outpacing Solana on the following market rally.

As with different leaders of what’s turn into often called the “different Layer 1” area, Solana can even quickly have competitors within the type of Layer 2 networks. Arbitrum and Optimism’s speedy development this yr has confirmed that liquidity will flood to Layer 2 if Ethereum succeeds, and plenty of different Layer 2 tasks are but to launch in earnest. 

Nonetheless, Solana has one in every of crypto’s most energetic and fastest-growing ecosystems with a number of promising developments on the horizon. Regardless of its points, it’s clear that the community isn’t going wherever anytime quickly. As for SOL, whereas the utility token is probably not transferring right this moment, that’s not unusual for crypto bear markets—nonetheless optimistic the information cycle appears. As soon as sentiment flips to bullish, although, there’s good motive to imagine that SOL might see the profit. 

Disclosure: On the time of writing, the writer of this piece owned ETH and several other different cryptocurrencies.