While the SAGA smartphone and the Google cloud partnership are pleasing minds, the bear market, network failures and relations with FTX are dampening the track record. A status report on Solana's ups and downs.
In 2017, Anatoly Yakovenko addressed the question of how blockchains become faster. The future CEO wrote his answer to this question in the Solana whitepaper, in which transactions must be time-stamped in order to process them independently of blocks. Today, seven years later, an entire company, including a foundation, is behind the high-speed blockchain, which is said to process over 50,000 transactions per second (currently around 3,000 - 5,000 Tps) and charges gas fees of less than a thousandth of a US dollar per transaction.
This feature helped Solana with the SOL token into the top 10 projects on the crypto market in the last bull market. The entire ecosystem comprises hundreds of projects, including the well-known move-to-earn game StepN. Last but not least, the Meta group opened up access to Solana NFTs to its users on Instagram and Facebook, and Google Cloud unveiled a collaboration with Solana. Since 2023, the first version of the first Solana mobile phone SAGA has also been available, which includes some blockchain features.
What Solana is struggling with
But for all its successes, Solana has had to take some knocks in the past year. For one thing, Solana - like many other projects - is struggling with the current market situation, which is keeping buying interest in cryptocurrencies generally in check. In 2022, the network was also the victim of several hacks. In addition, a lawsuit was filed for securities violations and the close relationship with the crypto exchange FTX or Alameda Research still weighs on the ecosystem today.
In the case of the latter FTX bankruptcy, many critics found their opinion confirmed that the network was increasingly centralised by individual investors. Last but not least, Solana is burdened by its own "curse": it is the numerous network failures that run like a red thread through its history. Is this the cost Solana pays to offer low-cost transactions? What is clear is that explaining a problem is not enough. Accordingly, Solana plans to rehabilitate the mainnet in 2023 with further upgrades to the core and to set up a second validator network for emergencies. Perhaps this interim solution could prevent Solana from taking the network offline in the future. After all, this kind of security measure does not necessarily have to remain part of a cursed centralisation flaw.
Conclusion: The long-term bet
Solana is seen as a highly scalable and low-cost network backed by strong collaborations outside the industry. The strategy on fast network synchronisation worked in the last bull market, so that Solana has positioned itself among the top 10 projects close to Ethereum despite some dampers. But Solana cannot rest on its laurels. Just as Ethereum is working on further scaling solutions, Solana must get a grip on its failures. For in the next bull market at the latest, low gas fees could assure Solana renewed market share as users increasingly seek alternative trading venues in the DeFi and NFT markets. In the end, it remains a long-term bet.
