Solana is one of the leading “ETH killers” and the fastest among blockchain networks with its 65,000 TPS that rivals that of Visa and Mastercard. This makes the network an ideal alternative to Ethereum which is still struggling with woes of scalability and high gas fees. For users who are looking for the best option to replace Ethereum, then Solana could be the answer as it provides faster and cheaper transactions. Let’s have a brief overview of the genesis of the blockchain which existence is a major threat to the Ethereum network.
Solana was an open-source blockchain built to cater to scalable decentralized applications (dApps). It was founded by Anatoly Yakovenko, a systems engineer in 2017. Built at a time when blockchains could only process 15 transactions per process (TPS), Solana was the best example of the industry’s revolution. But what made it possible?
The network utilizes the proof-of-stake (PoS) and Proof-of-History (PoH) as its consensus mechanism. PoS is known as a good alternative to proof-of-work or mining since it is more energy-efficient and environmentally friendly. Solana is the first blockchain to use the PoH which helps reduce the consensus overhead. How? Proof of History is a high-frequency Verifiable Delay Function (VDF) that goes through certain steps to evaluate. But despite this, it provides a unique result that can be publicly confirmed. Since nodes can trust the date and sequencing of the messages they’ve received, they can process generating the next block without having to align themselves with the entire network prior. As a result, the consensus overhead is reduced.
The entry of Web 3 has highlighted the need for a faster network to create dApps that would appeal to users which contributed to Solana’s increased popularity among developers and investors. To date, there are 350 crypto projects that are now built into the network. But the figure is still a minority compared to Ethereum which has more than 3,000 and from the top 100 blockchain projects, 94 of these were built on the network. SOL (Solana), the native token of the platform has also plummeted after the network’s experienced its fifth outage of the year. But the speculation that Solana could be the next Terra is more disturbing and worrisome.
It can be recalled that Terra is one of the top contenders among “ETH killers” along with Solana. But after the collapse of its stablecoin UST, the network’s token, LUNA went on a nosedive and plummeted to almost zero. SOL (Solana) recorded an all-time high of $260 in November 2021. But it has lost more than half of its value as a result of the sharp market correction. Crypto experts are now tracking how it will hold out its price as the BTC (bitcoin), the most dominant crypto asset tumbled down. Solana is also in the middle of a controversy after Solend, a DeFi lending protocol in the network evaded a crash after a Solana whale with a $108 million loan gone at risk of being liquidated after SOL (Solana) tanked to as low as $27. The declining price of SOL (Solana) could have been the reason behind the unfortunate event. But what could be the reasons behind this?
Early this year, the price of SOL (Solana) significantly dropped by more than 60% only a few months after recording its all-time high. Halts and interruptions in the network, tightening regulations, and shifting sentiments to riskier assets were cited as reasons. The price of the altcoin dropped to only $78-80 at that time. Of these three, the outages in the network have made the most significant impact on the drop of the SOL (Solana) price. On June 1, the Solana network suffered another interruption that lasted for more than four hours which triggered a massive sell-off. As of writing, SOL (Solana) is now down to only $35 shedding more than 50% of its previous value in January. It is also noteworthy that interest in NFTs built on the network has also dropped according to a report by Decrypt.
Terra’s fall was marred with controversy and different versions of conspiracy theories that have circulated in the community. It was once tagged as a “Ponzi scheme” but still manage to grow immensely. But after it collapsed, Solana is now being labeled as the next cryptocurrency to crash following Terra. Aside from issues of numerous outages, its lack of decentralization was also raised by some known members of the crypto community. One of them was Gavin Wood, co-founder of Ethereum and creator of Polkadot who expressed his thoughts on the matter in one of his previous tweets.
Events of today in crypto just go to show that genuine decentralisation and well-designed security make a far more valuable proposition than some big tps numbers coming from an exclusive and closed set of servers. If you can't run a full-node yourself then it's just another bank.
— Gavin Wood (@gavofyork) September 14, 2021
As the price of SOL (Solana) plummeted, the altcoin has fallen from its spot as the “most staked cryptocurrency”. It has been surpassed by ETH (Ethereum) which has a total stake value of $14,855,050,347. But there are other factors that have contributed to investors shifting to other crypto projects in the market. The emergence of new blockchains like Bitgert has also posed a threat to Solana which offers faster and cheaper transactions to users than the network could offer. As the market goes for an extended dip as a result of the anticipated crypto winter, the possibility of investors withdrawing from risky assets is imminent. Even BTC (bitcoin), the cryptocurrency with the largest market cap has now lost almost 70% of its price from its previous-time high of $69K. But with serious issues surrounding Solana, there could be a possibility that it could crumble like Terra.
