Is Solana Worth it ?
In a recent interview FTX-Founder and CEO Sam Bankman-fried was asked what the most underrated cryptocurrency is and his answer was Solana(SOL). Now, he said this is because of all the bad press that Solana has received in recent months. Bad press that even Sam acknowledges was deserved. So this. Begs the question, is SBF(Sam Bankman-fried) right about Solana? Today I'm going to briefly explain what Solana is, bring you up to speed with some of the projects most important updates, and tell you why Sol may in fact be one of the most underrated cryptocurrencies. I need to give you a disclaimer before I talk about solana .
I am not a financial advisor , I'm just an educator and this blog post is written with the sole purpose of providing you factual information. Please contact a financial advisor if your portfolio has been killed. If you're new here, you might be feeling a little bit lost right My name is "MrCrypt "and I am your crypto geek here at the cryptolibrarynow . I pass on the knowledge of cryptocurrencies, exchanges, DeFi, protocols, NFT'S and market analysis are just a few of the topics I tackle on the daily basis. Now enough with the intro. Let's get it on , Let's unpack "What's Up" with solana....
What is Solana?
If you're unfamiliar with Solana, here's what you need to know. Solana was founded in 2017 by seasoned software engineer Anatoly Yakovenko. Solana was built by Solana Labs, a software company based in the United States and its ongoing development is coordinated by the Solana Foundation. A nonprofit based in Switzerland. The project raised around $25 million across various ICOS in 2018-2019 and 2020 and raised an additional $314 million from various crypto VCs last year. Solana's main net went live in the spring of 2020, though it is still technically in beta and it's not entirely clear when Solana will enter full release. Under the bonnet, the Solana blockchain uses a novel proof of stake consensus mechanism that leverages a technology called proof of history that makes it possible to timestamp transactions. Although the Solana blockchain is currently secured by over 1900 validators, Transactions are processed by smaller groups of up to 150 validators called Solana clusters. This centralization along with Solana Sub second block time makes it possible for its blockchain to process between 50 and 65,000 transactions per second, making Solana the fastest cryptocurrency. Now SOL is Solana's native cryptocurrency coin. It's used to pay for transaction fees, half of which are burned and the other half of which go to validators. On that note, solana's low fees are a part of why its blockchain has experienced so many outages. Low fees have made it possible for bots and bad actors to spam transactions which clog up the network. More about that later. Now, in addition to paying for fees, Sol is used for staking, and though there is no minimum stake, the hardware requirements to run a validator are so high that Anatoly says you need to use a data center. Luckily, delegation is possible with no minimum stake. Staking rewards are currently around 6% per year for validators, and delegators with a five day lockup note that misbehaving validators are slashed. Staking sol and interacting with Solomon's ecosystem can be easily done using the Phantom Browser extension wallet, which has been downloaded over 2 million times on Chrome based browsers alone. Well, Solana's popularity was initially due to its defi protocols. Lately, its NFT projects have been luring hundreds of thousands of users to its blockchain every day. It should come as no surprise then that according to crypto slam, Solana is the third biggest blockchain by NFT sales volume, behind Ethereum and flow. More recently, Solanas ecosystem has been pivoting towards payments and blockchain gaming with the creation of products such as Solana Pay, which continue to onboard new merchants and users. Circles Usdc stable coin has been at the center of this initiative, which makes sense given that Solana is apparently usdc's official blockchain. Now, all of this is quite a deviation from Solana's initial purpose, which was to become a decentralized alternative to centralized stock exchanges like the NASDAQ. Hence why Solana is FTX's de facto exchange chain. The last thing you need to know about Solana is how its long-term transaction history is stored It seems that Solana recently switched its transaction History storage to Google Bigtable. This makes the Solana blockchain even more centralized than meets the eye .
Solana 1st Update -:
In early May, the Solana blockchain went down for what must have been the eighth time, though I've honestly lost count as many others have. In a post mortem, Solana explained that the seven hour outage was caused by a quote enormous number of transactions being submitted by bots which spammed the network into submission. A couple of days later, Solana announced the introduction of transaction requests to Solana pay, making it possible for merchants to request payments for goods and services within a user's Solana pay App. As a cherry on top, Instagram announced that it would be supporting NFTS on Solana Ethereum, Polygon and flow. Keep your eyes peeled for that one. In mid-May, solana's wormhole bridge expanded to support elgrand, something that not everyone celebrated given fears around wormholes security as it was hacked for $320 million back in February, solana's Magic Eden NFT marketplace also surpassed Ethereum's opensea marketplace in trading volume for the first time. At the end of May, Solana's Wormhole Bridge expanded to support crypto projects in the Cosmos ecosystem, starting with injective protocol. The Chinese government also announced that it would be banning solano's popular play to earn app Stepn, causing Stepn's GMT token to crash. In early June, the Solana blockchain went down yet again. This time, the outage was caused by a bug that's used in cold storage transactions on the blockchain. The next day, crypto Oracle Chain Link announced that it had added native support for Solana, allowing its defi ecosystem to access its decentralized data feeds for more accurate crypto pricing? Two days later, Stephen was reportedly hit by a cyber attack, which apparently didn't affect the Solana blockchain. Shortly afterwards, Solana Ventures established a $100 million fund for blockchain gaming and DEFI in South Korea, a timely decision given the collapse of terror just one month before . An independent defi ratings organization called Defi Safety also gave Solana the second worst score of any cryptocurrency, citing its blockchain's constant outages, centralized node hosting services, and lack of transparency around long term transaction history and storage pouch. At the end of June, there was more Solana drama when the Solend Defi protocol suddenly passed and then unpassed a proposal to take away the sol of a Solana whale who was at risk of getting liquidated. It's believed this liquidation would have crashed sol's on chain price to abnormally low levels. Solana's Magic Eden NFT marketplace also raised $130 million from various crypto VC's, bringing its valuation to a whopping $1.3 billion, and last but not least, Solana announced a crypto phone called SAGA, which will leverage the Solana blockchain, the Solana mobile stack, or SMS, which is a developer toolkit for the phone and a $10 million incentive fund for developers to create apps for the upcoming phone, including an App Store. The Solana phone was met with mixed reviews, especially since many crypto phones have come and gone over the years .
Solana 2nd Update -:
Anyhow, in early July, Solana got more bad news when a class action lawsuit was launched against the project, alleging that sol was sold like a security, in this case by Solana Labs. If you read our recent blogpost about the criteria the SEC is using to crack down on cryptocurrency(click on me to read it), you'll know that this is a big deal. As a securities designation could potentially kill the project. In mid-july, research by coinmarketcap found that the number of new wallets on Solana was growing faster than any other cryptocurrency, probably because of its expanding NFT ecosystem . At the end of July a Defi project called Unstoppable Finance argued in a medium post that Solana was more decentralized than people think, and let's just say it wasn't all that convincing. In my opinion, the only metric that suggests Solana is decentralized is its nakamoto coefficient, which refers to how many validators are required to corrupt its blockchain. Solana has the third best Nakamoto coefficient of all major proof of stake blockchains, behind Avalanche and Polkadot . Now, Solana also announced the opening of its first physical store in New York City, which founder Anatoly Yakovenko believes will bring over 100,000 users to the Solana blockchain every month. The store features Solana merch, NFTS and will probably carry the Solana phone once released. Now another Solana related headline from the end of July was the news that Aptos had raised an additional $150 million from various crypto VCs, bringing its total funding to $350 million. For context, Aptos was created by developers of Facebook AKA Meta's failed cryptocurrency. BM, formerly known as Libra. Got that? Aptos has apparently labeled itself the Solana Killer, so watch out. Earlier this month, Solana's Magic Eden NFT Marketplace expanded to Ethereum, where it intends to act as an NFT aggregator rather than a standard marketplace. And because Solana can't begin a month without bad news, some 10,000 Solana wallets were suddenly drained of around $10 million in cryptocurrency, while Solana developers scrambled to figure out. What was going on? In the end, it appeared that a Solana wallet called Slope had been saving and storing wallet seeds in a centralized manner, resulting in anyone who had a slope wallet or had created another Solana wallet using a wallet seed they had initially created on the slope wallet, losing their sol and SPL tokens. If you were one of the people affected by the hack, Here is the link to a form provided by the Solana Foundation , click here . I suspect that there may be plans to compensate affected users in the near future. To make things worse, Coindesk then reported that Saber, one of Solana's largest DeFi protocols, had allegedly faked its total value locked through various methods, and that its creators, the Macalinao brothers, are now planning to do the same thing on the aforementioned Solana killer, Aptos. For what it's worth, just a couple of days ago Jump Crypto announced that it will be creating a second node hosting service for Solana, which means that its blockchain will become ever so slightly more decentralized.
SOL Price Analysis 2022 -:
Now, all the bearish headlines that have been coming out about Solana over the last four months have predictably caused sol's price to plummet. But believe it or not, this doesn't seem to be the primary cause of the crash. As you can see, Sol's price is highly correlated with BTC's, which makes sense given that it's a large cap altcoin with institutional exposure, obviously they and the rest of the crypto market crashed because of terrorist collapse in early May. At the same time, sol's circulating supply has increased by anywhere between 15 and 20 million since April, according to coinmarketcap and coingecko respectively. For the sake of simplicity, let's assume that sol's circulating supply has increased by roughly 17 million. With an average price of around $40 per sol since that time, this means that sol experienced up to $680 million of sale pressure from Stakers and early investors, which is a lot during a bear market. As far as I can tell, most of this cell pressure is coming from the Solana Foundation, which is issued over 130 grants, according to an April. interview with Anatoly Yakovenko. Now, I can't say for sure because it's not entirely clear what sol's current vesting schedule looks like. Now, some of you might recall that soul's initial vesting schedule was one of the most aggressive of any cryptocurrency, so much so that it should have crashed sol's price early last year. The silver lining is that the demand side of the equation is looking good, at least according to the analytics page on Sol scan. The number of daily active wallets continues to hover around 700K, and the number of daily token transfers is still in an uptrend. What's more is that institutional investment vehicles for Solana still hold around $120 million of soul despite the crypto bear market, according to just ETF's. With the recently released coin shares FTX physical staked ETF alone holding $40 million of sol. Sol's price action is also looking interesting from several angles. In terms of raw price action, soul could potentially pull a 2X if the current recovery rally continues. This doesn't sound like much, but if the rally does continue, it would be a larger percentage gain than other large cap alt coins. That's why there's some legitimacy to Sam Bankman fried to remark that Solana is underrated. And there's some more evidence to suggest that Seoul could see a serious rally if the current crypto market momentum continues. Some of you may have noticed that Solana, Avalanche, near protocol and other so-called Ethereum killers have been rallying as the merge approaches. This is no coincidence, as there are many traders who are likely trying to hedge their portfolios in case something goes horribly wrong with the merge. I mean, it's one of the main reasons why. I hold sol as part of My Portfolio. Now take a look at the sole versus ETH chart on the weekly do you notice anything? Call me crazy, but I see a pattern where sol loses value relative to eat for around five to six weeks at a time before seeing a one to three-week rally against ETH. Well, it's been six weeks of decline and with the merge less than a month. Way we could see another multi week rally against ETH, all while ETH is simultaneously gaining in value relative to BTC and hopefully in Fiat terms too. This would translate to that 2X gain for sol .
Solana RoadMap -:
Anywho, even though SOl could 2X in the near term, the fact of the matter is that we're still in a crypto bear market and this means that the current recovery rally is unlikely to last. What happens to sol after that ultimately depends on the projects. Upcoming milestones, Solana's upcoming milestones can be found on the Solana GitHub and in interviews with members of the team, starting with Solana's GitHub, I couldn't help but notice that there are a few repositories related to governance that are seeing lots of commits. This suggests that Solana dev's are in the process of building a governance dashboard for the Solana blockchain as far as interviews go. Founder Anatoly Yakovenko dropped some alpha in April about Solana's long term aspirations, and that's to have all stocks tokenized and trading on FTX's serum decks, which is of course built on the Solana blockchain. In a May interview, Solana Labs co-founder Raj Gokal dropped some more alpha, and that's The project is turning its focus to blockchain games to continue its adoption, so keep your eyes peeled for promising projects on that front. During the June presentation, which revealed Solana's mobile phone, Anatoly also teased an upcoming partnership with Qualcomm, the famous telecoms company where he spent most of his career. Raj mentioned during the same presentation that Solana is in the phone game for the long haul, as they believe this is another route to the global adoption of its blockchain. Naturally, this suggests that there will be a second Solana phone, and that might be when the Qualcomm partnership comes into play. In a July interview, Anatoly mentioned that Solana is also starting to focus on privacy and is working to fix solana's fee model so that it becomes more difficult to breakdown the network with spam transactions. No dates for that, I'm afraid. I also didn't hear any dates about when Solana will enter its full main-net and Anatoly has suggested in many interviews that it could be years, given that he likens Solana's development to Google products like Gmail, which were themselves in beta for years.
Solana Concerns -:
So this brings me to the concerns I have about Solana and my first concern is all the outages it's blockchain continues to experience. Make no mistake, if these outages continue, Solana will fall out of favor with regular users, even though the crypto VCs and institutions. It really seemed to care. As amazing as it is that Anatoly and the team are working towards fixing Solana's fee structure, it's only a part of what's been affecting its blockchain. The other element appears to be centralization, which is getting better in some respects but much worse in others. Case in point, in an April interview, Anatoly admitted that the hardware requirements. Run a validator node on Solana are likely going to increase as time goes on, meaning solana could become even more centralized and potentially more vulnerable to synchronization issues as well. What's scary is that Solana's outages seem to only scratch the surface of the state of its blockchain if success rate of transactions on soul scans analytics dashboard means what I think it does. Then around 1/4 of transactions on Solana failed to go through even when the blockchain is fully functional . This is actually consistent with my own experience using the blockchain, with transactions failing every so often. To be fair, this doesn't happen nearly as often as it used to. And Anatoly and. team have repeated many times that they will continue fixing these issues as they go and Solana grows. I only hope that they address my second concern and that is transparency. The Solana Foundation was allocated 12.5% of Sol's total supply and controls the Community Reserve Fund which received. 38% of Saul's initial supply, in other words, the Solana Foundation, was allocated more than 50% of sol supply, and it sounds like they've been spending quite a bit of it. As per anatoli's comments. That's why it's shocking that there have been no transparency reports since June of 2020, and it looks like that was the first one. This ties into my third concern, and that's regulation. With the SEC looking to crack down on crypto projects, Solana is an admittedly easy target. Besides being based in the United States, it ticks many of the boxes that the SEC is looking at when classifying a cryptocurrency as a security. Now, to be clear. I am not saying that soul is a security and according to the Howey test, it's not a security. As I mentioned earlier, however, it seems the SEC is clearly using a different criterion than it's supposed to be, and that's where Solana could become a target. That said, Solana has appealed to institutions, could very well protect it from any serious scrutiny. Consider for a moment that FTX is actively lobbying politicians. About crypto regulations, and seems to be making some serious progress on that front. It's also important to remember that Solna seems to be the preferred hedge against anything going wrong with Ethereum when it transitions to proof of stake. If there's even the slightest sense of uncertainty, you could see some serious capital flee from ETH into Sol. Out of caution? Then again, it's possible that this capital could instead flee from ETH into ADA, if Cardano's upcoming vessel upgrade brings the scalability improvements that everyone's expecting.
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