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Is Solana Next to Enter Cryptocurrency Graveyard?

source-logo  u.today 19 November 2022 09:30, UTC

The cryptocurrency market is made up of cycles of projects that claim to be killers of giants. In the early history of Bitcoin (BTC), for example, altcoins that were said to be practice for everyday money emerged.

All these cryptos were based on the argument that they were faster and had lower fees than BTC, but this did not allow these projects to gain great prominence. Litecoin (LTC) and Bitcoin Cash (BCH) confirm this fact.

Both altcoins made it to the top 10 but failed to maintain their popularity - either because nobody needs a new Bitcoin, or because they could not follow the evolution of the market and present relevant attractions to be accumulated.

The altcoin that, in fact, managed to make a difference to the crypto environment was Ethereum (ETH). By not focusing on being a "Bitcoin killer," the cryptocurrency introduced the blockchain world to smart contracts that enabled important industry trends, decentralized finance (DeFi) and non-fungible tokens (NFTs).

At the beginning of Bitcoin, Ethereum had some difficulties when it was widely used, as it also presents slowness and high fees when its network is forced. As a result of this, many ETH killers emerged, and one of them is Solana (SOL).

Solana: The great Ethereum killer

Solana was designed to be a star of decentralized finance, but its biggest breakout in the blockchain space has been in the NFT arena. Its network manages to facilitate the creation of decentralized applications, dApps.

The cryptocurrency has a hybrid model of consensus, proof of stake (PoS) and proof of history (PoH), to ensure scalability. Additionally, it has a low transaction cost, as it is designed to keep fees low for apps with billions of users.

Without a doubt, these qualities would place Solana as a strong competitor for Ethereum. However, once again, history is seen repeating itself, and a project that declares itself to be a “killer” of its predecessor does not stop losing its market share.

According to Arthur Hayes, co-founder of BitMEX, no altcoin posing as an Ethereum killer has the ability to defeat the leading platform in smart contracts. The businessman believes that the developer’s talent counts for much more than the narrative of cheap and fast transactions.

"Ethereum has a few thousand developers. The next blockchain may have a few hundred, and that’s all that matters. Developers create this ecosystem. They build the apps."

Is crypto graveyard welcoming Solana?

Like other cryptocurrencies, Solana underwent a sharp correction in 2022. The altcoin is down more than 90% since its all-time high reached in November 2021.

However, unlike some projects, factors involving the Solana ecosystem itself contributed to this sinking. As observed during the cryptocurrency's months of life, network outages have become frequent on the smart contracts platform.

Since its launch in 2020, the altcoin has experienced eight network outages, as of this writing.

For this reason, the community is increasingly indignant, pointing out that the fragility of the Solana ecosystem is a big "Achilles heel" for the cryptocurrency, preventing it from skyrocketing and showing the potential to overcome Ethereum.

“The reality is that SOL is not innovative at all! It’s just the first major blockchain to be so reckless in its fundamental design while pretending this is innovative (to attract investors),” said Justin Bons, cryptocurrency researcher and founder of Cyber Capital.

Another factor contributing to the skepticism surrounding Solana was the strong support it received from Sam Bankman-Fried (SBF), creator of bankrupt companies FTX and Alameda Research that made strong investments into the SOL ecosystem.

Tokens on Solana’s network that received investment from Alameda are expected to be sold upon filing for bankruptcy by the trading company. In addition, projects that relied on funds from the treasury are without funding for their continuity.

The scenario of the SBF empire caused even greater panic on Solana, which saw even its total blocked amount drop and hit a six-month low. Furthermore, it made the SOL token lose market capitalization and was kicked out of the top 10.

According to Solana’s co-founder, the company had no asset funds in FTX. Anatoly Yakovenko said it still has 30 months of runway under current conditions, which is enough time for things to change. However, getting Solana out of the Crypto Graveyard may be a very difficult task.