Solana made a number of big announcements at its Breakpoint conference this weekend. SOL, on the other hand, was unconcerned.
Solana is one of numerous Layer 1 networks that have been impacted by the current crypto winter. According to Chris Williams, sunny skies may return.
Breakpoint Joins Forces with Solana
Solana had a busy weekend as the Layer 1 network hosted its Breakpoint conference in 2022. What about the SOL? Absolutely not. Several big announcements were presented to the thousands of Solana fans who traveled to Lisbon for the debut event of the Layer 1 blockchain. On Saturday, Google Cloud announced that it was running a Solana validator and that it will begin indexing Solana data via its BigQuery offering in early 2023. Solana will also be available via Google Cloud’s Blockchain Node Engine, allowing users to run their own nodes in the cloud. According to CoinGecko data, SOL rose by double digits past $38 immediately after the news, but the momentum did not last. It has since fallen 5.5% to around $34 today.
Unlike other blockchains like as Ethereum, the Solana ecosystem’s various technologists have focused on building goods for the mass market. The Saga phone, for example, aims to be the world’s first Web3-ready smartphone. At Breakpoint, Solana stated that the solution would be accessible to developers as early as next month.
Circle, another USDC issuer, also attended Breakpoint and said that their Euro Coin offering would be available on Solana in the first half of 2023. On Ethereum, the Euro Coin is already available. Circle also announced that Solana will be supported by its upcoming cross-chain protocol.
The developers of Star Atlas revealed an early demo for the game at Breakpoint, undoubtedly GameFi’s most anticipated title. Solana’s high-speed capabilities (it claims to process 65,000 transactions per second) should make it a strong rival for Web3 gaming, but with no leading titles available to play today, it’s unclear how far teams have progressed—and whether Solana will become a niche hotspot. Because games often take years to develop, Solana’s GameFi ecosystem may take some time to take off.
The situation of Solana DeFi
Solana has had a terrible year, as has most of the crypto community, particularly in its DeFi environment.
Solana topped $10 billion in total value locked as SOL approached $260 in November 2021, around the time of the debut edition of Breakpoint.
Solana DeFi, on the other hand, has suffered a hit this year as a result of dropping market prices, liquidity migrating to other networks, and strict token unlocks timelines eroding the value of some of the ecosystem’s 2021 stars. According to Defi Llama figures, the total value locked on Solana is currently around $968 million, which is somewhat less than Avalanche’s $1.31 billion and a fraction of Ethereum’s $32.29 billion. Solana may learn that it flourishes in other regions if the populations do not change substantially in the future. However, it is worth noting that the overall value locked in SOL terms has been more consistent this year, declining roughly 54% from its peak in June 2022 to around 31.3 million SOL.
Notably, Solana is presently trailing the Ethereum Layer 2 network Arbitrum and is only marginally ahead of Optimism in total value-locked terms. If Layer 2 continues to grow at its current rate, Solana may find itself competing with other Layer 1 networks for more than just liquidity.
Low liquidity levels on their platforms enabled the Mango Markets and Solend vulnerabilities, making it easier for whales to manipulate their markets and take out massive loans. While Solana protocols seek to address such concerns, the network’s DeFi ecosystem may continue to encounter challenges as long as liquidity stays low.
While Solana DeFi is down, the network’s frequent outages have gotten the most attention. Solana has experienced many hours-long outages in the last two years, the most recent of which occurred in September 2021. In 2022, Solana experienced four severe outages, the most recent of which happened last month due to a misconfigured node.
Though network outages have been a persistent problem, Solana Labs CEO Anatoly Yakovenko has said that a forthcoming upgrade will eradicate such incidents in the future. If Solana is successful in resolving the issue, the network will be in a far stronger position by the next crypto market rise.
Profiting from High Speeds and Low Costs
While Solana DeFi is declining, the network’s NFT ecosystem is not.
Solana has built the second-largest NFT ecosystem behind Ethereum, with a rapidly growing community of “JPEG addicts.” Collections like DeGods and y00ts have taken over the NFT scene this year, charging hundreds of dollars on the secondary market despite the market’s poor performance.
Solana has also attracted a number of well-known names from the world of digital art. At Breakpoint, Metaplex announced that it would install “immersive 3D NFTs” from Beeple on Solana, a significant shift from Ethereum. Solana NFTs were created by pplpleasr, another well-known artist in the NFT industry. Whereas Ethereum has gained much of the public attention for non-fungible digital collectibles, NFT natives have seen that activity on its strongest competitor network is expanding. Because Solana’s NFT community and infrastructure grew so swiftly during the downturn, the next NFT bull cycle may look significantly different from the last one.
Because of its high-speed, low-cost capabilities, Solana appears to be aware of its position in the GameFi market. Breakpoint devoted a whole day to the buzzy sector, with Star Atlas and other teams showcasing their latest advancements to a crowded crowd of would-be Web3 gamers.
What is the future of Solana?
While the network has issues, it is clear that the network is yielding many positive benefits. The numerous announcements made during Breakpoint show that, despite its challenges, creative companies, artists, and projects are taking an active interest in the Solana network.
It’s also worth mentioning that Solana and SOL aren’t the only victims of the crypto winter. While SOL is down roughly 86.9% from its peak after exceeding expectations in 2021, several other Layer 1 networks have suffered equivalent losses. DeFi has also suffered widespread losses, with Ethereum faring the best. Historically, Ethereum’s competitors, called “Ethereum Killers,” have seen activity fall and coins die off in low markets, but none have seen as many positive developments in recent months as Solana.
The most challenging hurdle ahead may be the network’s competitors. The new Layer 1 networks Aptos and Sui, both created by former Meta workers, have been compared to Solana because of their promise of fast speeds, and both projects have raised nine-figure war chests this year. Aptos, which claims to be able to conduct 100,000 transactions per second using its Move programming language, began with a token airdrop last month and expects quick development. Sui may also be plotting its own airdrop. Capital in crypto is merciless; if these businesses successfully capture the attention of the ecosystem, they may wind up outperforming Solana during the next market rise.
In the near future, Solana, like other pioneers in the “alternative Layer 1” domain, will face competition from Layer 2 networks. The rapid expansion of Arbitrum and Optimism this year has proved that if Ethereum succeeds, liquidity will flow into Layer 2, and many other Layer 2 projects have yet to begin in earnest.
Despite this, Solana has one of the most active and fast-expanding crypto communities, with some interesting potential in the future. Despite its flaws, it is clear that the network will not be phased out anytime soon. While SOL isn’t moving today, this isn’t unusual in crypto bear markets, regardless of how bullish the news cycle appears. However, as sentiment improves, there is reason to believe that SOL will profit.
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