FTX collapse six months later: Can Solana, fallen from grace, regain its glory?

Can Solana regain its glory after FTX collapse six months later?

There are indications that Solana may have the potential to regain its former glory.

More and more voices are discussing whether FTX has a chance to make a comeback, following the announcement of the FTX 2.0 restart plan, which may have sparked interest from large companies such as Nasdaq, Ripple, and BlackRock, more than six months after the collapse of FTX. As some failed crypto companies re-enter the market (such as 3AC and the founder of PayPal Financial Services, who have launched new products in the market), the discussion about whether FTX could make a comeback is growing.

At the same time, Solana, an important member of the FTX “family,” has also received widespread attention recently.

On the one hand, the Solana co-founders have been very active in expressing their views on Solana recently, sparking community discussion. Whether it’s becoming the Apple of the crypto world, or not fearing pressure from emerging blockchain networks like Scroll, Base, and Linea, or believing that Ethereum can become Solana’s L2 solution, these ideas all demonstrate Solana’s ambition to regain its former glory.

On the other hand, hot events surrounding Solana have continued to add fuel to the fire.

  • In April, the decentralized IoT wireless network Helium migrated to Solana, and SOL rose from $20 to $25;

  • In May, the BRC-20 and Meme tokens were hot, causing gas fees to remain high, and many users turned to Solana for trading;

  • In June, the SEC classified SOL and other tokens as unregistered securities, drawing attention from the market and many industry insiders, including Vitalik;

In addition, according to relevant data, in May, the highest number of daily active addresses for Solana reached 490,000, which is almost equivalent to the 500,000 daily active addresses when FTX officially filed for bankruptcy on November 11 last year.

Solana, a public chain that was once highly anticipated by the market, saw its coin price plummet, TVL heavily discounted, and multiple FTX series projects in the ecosystem suffered heavy losses and its reputation almost fell to an all-time low after its biggest supporter, FTX, collapsed.

Returning to mainstream status is the urgent task that Solana wants to accomplish. So can Solana make a comeback?

From “Hype” to “Fading Away”

As a public chain deeply bound to FTX, Solana has been pushed to the forefront in the FTX incident.

Shortly before FTX’s collapse, the Solana Foundation was found to hold a large amount of FTX-related tokens, including FTT worth about $107 million and SRM worth $83 million on the day before FTX’s assets were frozen. This asset exposed the close relationship between Solana and FTX, and the voices of pessimism about Solana were heard one after another.

On November 11, 2022, with FTX officially applying for bankruptcy, Solana suffered a heavy blow from its reputation to ecology.

Solana’s platform token SOL plummeted from $36.72 to just over $10, and by the end of December 2022, SOL was even lower than $10, evaporating billions of dollars in market share in just over a month.

(Data source: Coingecko)

Serum, as Solana’s first DEX, dominated half of Solana’s DeFi liquidity and saw its trading volume and liquidity drop to zero due to FTX’s impact. Other FTX system platforms and non-FTX system platforms either faced a liquidity crisis or were directly forced to close due to a lack of funds.

Before the FTX crash, Solana’s TVL on the ecology dropped to less than $300 million, and has not exceeded $300 million to this day.

“Ethereum Killer,” “Next-Generation Blockchain,” “High-Speed Public Chain,” “DeFi King,” these were all titles given to Solana by the market, reflecting recognition of Solana’s technology and ecology, as well as expectations for the rise of new public chains. Prior to the FTX incident, Solana was already facing a public relations crisis due to frequent crashes and large-scale asset theft, and FTX’s collapse directly brought Solana to the bottom.

The new public chain that was once popular in the previous cycle seems to no longer be the “darling” of the media and capital, and the L1 new public chain landscape has undergone changes, with Solana being forced to fade out of the historical stage for a period of time.

Is Solana “Dead”?

Some voices believe that in the L1 public chain, Solana has lost its competitive position. Without the attention and halo from a large number of outsiders, today’s Solana seems to be struggling.

However, many also believe that the collapse of FTX has the most direct impact on the price of SOL, which actually allows Solana to “get rid of financial speculators” and return to true technical development.

Did Solana really “die”?

SOL price rebounds, with a surge in new on-chain addresses

According to CMC data on July 10, SOL was priced at $21.2, ranking ninth in market capitalization. Compared with the price of $9 during the FTX explosion, it has rebounded significantly, with an increase of more than 130%.

According to The Block data, the number of active addresses on Solana rose again in May. On May 17, the number of active addresses on Solana reached 493.1K, an increase of nearly 55% compared with the lowest number of daily active addresses in the first half of the year.

It is worth noting that the number of new on-chain addresses on Solana also experienced a significant surge in May, with an increase of more than 300,000 addresses at most.

(Source: https://www.theblock.co/data/on-chain-metrics/solana)

Some analysts believe that the surge in the number of addresses on Solana in May is related to the rise of meme coins and BRC-20. The popularity of meme coins and BRC-20 has caused gas fees on the Bitcoin and Ethereum networks to remain high, prompting many users to turn to Solana for transactions with lower gas fees and faster speed.

The number of developers remains at the forefront

For a public chain, the number of developers is one of the important indicators of its popularity, and it is also an important component of promoting the development of the ecology. The good features of the Rust language and the high performance of Solana are still attractive to developers.

Although some developers chose to “escape” after the FTX explosion, the overall number of active developers on the chain is still relatively stable and at the forefront.

According to the latest data from developerreport.com, the number of monthly active developers on Solana ranked fourth as of June 1, reaching 363, which still has a certain advantage compared with other public chains. In addition, looking at the most followed repositories under Solana on Github, the number of contributors reached 455, while the most followed repositories under Polkadot, Polygon, and Avalanche had 261, 51, and 82 contributors, respectively.

Source: developerreport.com

Liquid Staking Performs Well

With the popularity of liquid staking, the Solana ecosystem has also emerged with a wave of liquid staking, which has brought Solana back into the mainstream market. According to StakingRewards data on July 10th, SOL is currently the second largest staking asset, with a staking market value of more than 8.3 billion U.S. dollars and a staking rate of 69.64%.

(Source: https://www.stakingrewards.com/)

NFT Sales Enter Top 3

According to Cryptoslam data, Solana NFT sales in the past 30 days are only behind Ethereum and Bitcoin NFT data, ranking third, with NFT sales in the past 30 days about 40 million U.S. dollars higher than Polygon, which ranked fourth.

(Source: Cryptoslam)

Some Opportunities and Challenges

Currently, whether it is L1 or L2, they are facing fierce competition, and Solana is also “tightening” its efforts to attract users and developers:

  • In early April, Solana announced a new method of storing data called “state compression” to significantly reduce storage costs. According to official information, this method can be used to store any type of data on the chain, and the first application is to compress NFTs. Users can mint one million NFTs for about $110.

  • On April 13, Solana Phone Saga was launched, attempting to attract more crypto users through Web3-centric Android smartphones.

  • Continuously holding Solana Hacker House events in multiple cities to embrace more developers from all over the world and enhance the value of the Solana chain itself. Solana Hacker House landed in Taipei in May, and this event will also go to Hong Kong in November.

  • Launching the “NFT Showdown” competition to promote the development of the NFT ecosystem.

  • Launching a $10 million grant program for AI-focused projects based on Solana.

In addition, the optimistic voices of the community about Solana seem to be increasing. KOL @CryptoKaleo on Twitter, who has nearly 600,000 followers, recently expressed his views on Solana. He believes that Solana’s continued Build after the collapse of FTX may bring Solana back to its level before FTX went bankrupt in its future development. This view has also gained support from some users.

These are opportunities for Solana, but it still faces challenges.

In the face of the rapid expansion of other public chains, Solana still needs to take more measures to expand its ecology. In addition, the trust crisis caused by the collapse of FTX still exists. Strengthening contact with the community and enhancing community confidence is also the direction that Solana should focus on.

Can ambitions be realized

Solana co-founder Raj Gokal recently stated that Solana has the potential to become the apple of the encryption field, and its goal is to achieve 10 to 100 times growth through cooperation with small enterprises and infrastructure.

Raj believes that it took Apple nearly ten years of research time to launch the iPhone, and the Apple application ecology has reached today’s level, all starting with “unremitting attention to simple interactions that must run perfectly”, which is also the core of Solana’s engineering and ecosystem. This analogy seems to want to express that Solana’s silence is actually precipitation, with the potential of “keeping a low profile and making a big move”.

In addition, with the launch of new products by Three Arrows Capital and the founder of PayPal Financial, the concept of “bankruptcy restart” is receiving widespread attention from the encryption community. If FTX 2.0 restarts, it will undoubtedly attract interest from users and institutions again. Projects in the FTX series headed by Solana may have the possibility of regaining their former glory again with this opportunity.