Solana is one of the largest proof-of-stake blockchains in the market and promises to be able to sustain 50,000 transactions per second without compromising decentralization. After a month of being overshadowed by the FTX and Alameda crashes, Solana rebounded more than 76% from the bottom and returned to the $17 mark. Solana has not been completely declared dead, and 2023 will be a decisive year for Solana.

“Ethereum Killer” Solana plunged 96% due to FTX crash

According to CoinGecko data, $SOL, the world's fifth largest cryptocurrency by market value, plummeted 96% due to the FTX incident. In comparison, BTC's maximum plunge was only 25.4%.

As core investors in the Solana ecosystem, FTX/Alameda collapsed in November, and the TVL of the Solana ecosystem plummeted, and the TVL of various DeFi protocols showed continuous outflows. Solana now has about $247 million of TVL remaining on its platform, down about 98% from its peak (the peak TVL was $10.17 billion on November 9, 2021). Mainstream DeFi protocols have also seen a large outflow of funds in the past month, with the TVL of Marinade, Lido, and Raydium all experiencing a retracement of more than 60%. DeGods and y00ts have also stated that they will turn to Ethereum and Polygon, respectively.

As shown in the figure below, both institutional and retail stablecoin holders are showing signs of leaving Solana. On November 18, stablecoin issuer Tether announced that it would coordinate with a third party to execute a cross-chain transaction to transfer 1 billion USDT from the Solana blockchain to Ethereum ERC-20. Data from DeFiLlama shows that on November 8, the market capitalization of USDC and USDT on the Solana chain was US$2.11 billion and US$1.81 billion, respectively. As of the time of writing, they have fallen to US$975 million and US$798 million, respectively.

According to the statement of the Solana Foundation, the Solana Foundation and Solana Labs sold more than 58 million SOL to FTX and Alameda Research, accounting for about 10% of the total supply. This statement further caused panic among people, fearing that FTX might sell a large amount of SOL…

Farewell to 2022 and welcome to 2023

Solana has been in a price slump since the collapse of its two financiers, FTX and Alameda. But at the beginning of the new year of 2023, it suddenly got off to an exciting start. According to Tradingview, the price of $SOL has risen by 76% in the past two weeks. In addition, at the time of writing this article, it is trading at $16.87 with a market value of more than $6.2 billion.

According to data from Token Terminal, the number of daily active users in the Solana ecosystem has increased significantly in recent weeks, and the number of daily active wallets has also increased threefold after the FTX incident. Despite the negative sentiment surrounding Solana in the past few months, the platform has outperformed other public chains in terms of user engagement. Investors and developers are beginning to rekindle their confidence in Solana's future.

According to Santiment data, Solana's development activities have also gradually increased, indicating that developers are working hard to improve the Solana ecosystem. The rise in Solana Binance funding rate also reflects the popularity of $SOL in the derivatives market. LunarCrush data shows that $SOL is one of the top 10 cryptocurrencies with the highest social media mentions between January 1 and 7.

Market interest in Solana NFTs is also on the rise. According to data from Solana Floor, the total floor value of Solana NFTs has increased significantly over the past month. As shown in the figure below, the trading volume of Solana NFTs has also increased during the same period.

Solana Ecosystem Savior

The reason why $SOL has seen such a big rebound in a short period of time is thanks to the ecosystem’s recently issued new token $Bonk. $Bonk is the latest Shiba Inu-themed meme coin launched by the Solana ecosystem.

When the token was first released, it did not receive much attention from the market, but as the token was integrated with more and more project functions, such as: NFT market transactions supporting $Bonk payment, BONK liquidity mining pool, support for NFT minting fees, Bonk domain names, listing on exchanges such as Huobi Matcha, etc., a series of operations have caused $Bonk to rise by up to 40 times.

In the context of a bear market, $Bonk skyrocketed shortly after its launch. In my opinion, the reason why Bonk skyrocketed is not just because of cooperation with the project party and riding on the popularity of Meme coins. It is mainly because the Bonk project party launched an anti-FTX narrative that resonated with Solana community users and achieved a surge against the trend. In the context of a bear market, Solana community users have no specific outlet for their hatred of FTX and Alameda. The Bonk project party seized this opportunity and publicly stated that the purpose of Bonk's establishment was to oppose the Alameda token economy and point the bear market to FTX and Alameda's behavior of cutting leeks.

It is precisely because of the popularity of the $Bonk token that it has driven the irrational prosperity of the Solana ecosystem. On-chain transactions and active users have increased significantly, and the SOL token has also rebounded sharply. However, there may be a question mark as to whether the popularity of Bonk can be sustained and whether it can capture the short-term market enthusiasm.

Solana is still the same high-performance public chain

Solana has been committed to becoming the "fastest high-performance public chain" since the beginning. It uses historical proof mechanism (PoH), Tower BFT algorithm, Turbine propagation protocol, Sealevel engine and other technologies to build a completely different system architecture, which makes it faster and cheaper than other blockchains.

Solana has reportedly hit a record high of 8,453 TPS per second, with an average daily TPS of over 3,000. In comparison, Ethereum’s TPS is about 30, with a maximum TPS of only 86.77. The highest TPS recorded on Ethereum’s most popular L2 solution, Arbitrum One, is 286, which is also far lower than Solana. Not to mention that Solana can theoretically reach up to 710,000 TPS. Its TPS is comparable to that of Visa and Mastercard, making it quickly an industry leader in terms of speed and global scalability.

In addition to transaction speed, Solana’s transaction fees are also much lower than Ethereum. A transaction on Ethereum usually costs more than $10 in Gas Fee, while a transaction on Solana only costs $0.00001.

Solana has always performed well technically, and it is still the high-performance public chain known for its high scalability and low transaction fees.

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