Solana had a bad 2022. Very bad.
In the space of 12 months, the high-speed blockchain network’s SOL token lost 94% of its market value.
Taken from its all-time high during the November 2021 bull run, those losses stretched out to 95%.
Sure, the market was down across the board, but to provide some context, bitcoin (BTC) fell 64% in the same period, roughly the same amount as the crypto markets globally.
Clearly, there was more to Solana’s losses than the cascade of scandals that began with Terra LUNA’s collapse and ended with FTX’s collapse, by way of Three Arrows Capital, BlockFi, Vauld, Voyager, Celsius… you get the point.
While yes, these all contributed to SOL’s plummeting market value, as did the relative US dollar strength, the shoddy performance of the Solana ecosystem needs to share a large slice of the blame pie.
No fewer than five network outages hit the blockchain in 2022, probably the worst track record of any major Ethereum competitor.
The first outage occurred in January, when a distributed denial-of-service (DDoS) attack sent the network offline for four hours.
In April, Solana suffered a seven-hour outage when validators couldn’t keep up with transaction volumes. Other outages occurred in March, June and October.
Attempting somewhat to paint Solana as too good for its own good, co-founder Anatoly Yakovenko told podcaster and Real Vision chief executive Raoul Pal in September 2022: “That’s been, I guess, our curse, but it’s because the network is so cheap and fast that there are enough users and applications that are driving that.”
Fair enough, but Solana’s unreliable performance didn’t just start in 2022, or even in 2021.
In December 2020, merely nine months after launching, Solana users were hit by a six-hour outage after the Mainnet Beta cluster stopped producing blocks, which prevented any new transactions from being confirmed.
In September 2021, the blockchain went offline for a bruising 17 hours for the same reason as above.
Clearly Solana Labs needs to get its house in order if it wants to regain trust among users.
Steps towards scalability
Solflare, a third-party Solana wallet developed by Solrise Finance (which was co-founded by Filip Dragoslavic, Matthew Martin and Vidor Gencel), is already taking steps to solving Solana’s congestion problems for its wallet users.
Solflare announced a priority gas fee system where users will be able to pay more to get their transactions prioritised.
"Solflare will automatically detect whether the network is under load and slightly increase fees to prioritize your transaction over others," the company tweeted separately. "When it matters the most, your transactions will go through and be fast."
???? Priority fees are live in Solflare Web/Extension ????That’s all well and good, but what happens when every other wallet decides to implement similar functions?Solflare will automatically detect whether the @solana network is under load & slightly increase fees to prioritize your transaction over others.
When it matters the most, your transactions will go through and be fast! ???? pic.twitter.com/4OGV4IvjxZ
— Solflare Wallet (@solflare_wallet) January 16, 2023
Progress clearly needs to come from the source. Thankfully, Solana Labs seems to recognise this.
A new validator client in development called Firedancer would allow validators to run two clients simultaneously, which has the potential to increase the network's reliability.
“Solana would be the only other smart contract network besides Ethereum to have more than one independent validator client- which would be a boon for the network,” Solana co-founder Anatoly Yakovenko explained in his recent Keynote speech at Solana’s AGM.
Yakovenko said: “If a bug happens to take down one of the clients, the network will remain running on the other, increasing Solana’s reliability and resiliency.”
“We've had a lot of challenges over the last year,” Yakovenko reflected, adding: “I would say this whole last year has been all about reliability for the Solana engineering team. And a lot of that, I think we've solved.”
Yakovenko also mentioned the possibility of implementing priority fee markets at the mainnet level.
Off to a good start
Solana’s SOL token has far outpaced bitcoin (BTC) and the wider market in 2023, as can be seen with the SOL/BTC trading pair.
SOL makes strong gains on BTC – Source: binance.com
Year to date, SOL/BTC has gained around 78%, albeit from a severely compressed position following the FTX collapse.
Herein lies Solana’s last hurdle- overcoming its toxic association with FTX’s disgraced founder Sam Bankman-Fried.
Bankman-Fried participated in a US$314mln funding round for Solana Labs in 2021 and subsequently went to work on building Solana-bas ed decentralised applications.
Solana Labs is taking steps to distance itself from its close friendship with Bankman-Fried, but the redemption arc has not come full circle just yet
Read more on Proactive Investors AU
