Nobody can say that 2022 was a stellar year for Solana, and it certainly did not prove to be an “Ethereum killer.” Solana had multiple issues throughout the year and was unstable when used heavily. Every time there was a network outage, the SOL price fluctuated, and users criticized it for its centralization.
At press time, SOL was trading at $11.16.
Other factors have emerged, signaling more trouble for the ecosystem as we cross into 2023.
FTX fueling Solana’s chaos
FTX’s balance sheet indicated substantial SOL tokens valued at $982 million. At the time of the collapse, the exchange had $8.9 billion in liabilities. The then CEO Sam Bankman Fried (SBF) shared the balance sheet to raise funds for the troubled platform.
Solana Foundation said they held about $1 million in cash and its equivalents on the exchange. As of 11/14/22, the Solana Foundation had exposure to assets connected to FTX/ Alameda. These included 3.24 million FTX Trading LTD common stock shares, 3.43 million FTT tokens, and 134.54 million SRM tokens.
A day before the FTX bankruptcy filing, the FTT was worth $83 million, and SRM was worth $107 million. At press time, the assets were worth $3.17 million and $20 million, respectively.
Legislators are determining what will happen to these assets during bankruptcy proceedings.
On the fateful week, SRM fell by 69%, while OXY and MAPS fell by 46% and 78%, respectively. FTT lost over 90% within the same time frame. The foundation held zero SOL on the exchange.
FTX owned Serum decentralized exchange and built on Solana.
According to Solana compass, Alameda has a locked stake of 48,671,518 coins, which constitute 65.4% of the locked stake. The funds are unlikely to be moved when they are unlocked since the exchange is under bankruptcy protection. Meanwhile, the funds continue to accrue interest.
FTX and Alameda Research committed fraud and stole customer funds to invest in Solana projects. Now all the funds are gone, and users will forever associate the two negatively.
NFT projects abandon the ecosystem
In a shocking turn of events, big Solana NFT projects are now abandoning the blockchain for alternatives. The Sol blockchain has had its fair share of downtime, but it has still proven to be a game changer in terms of high scalability, fast speed, and low costs.
Boxing day 2022, the DeGods NFT art collection announced on Twitter that it was cutting ties with the ecosystem in favor of Ethereum.
DeGods is the top collection on the ecosystem, with a total value of $56.77 million. Following the announcement, the collection experienced a spike of 220% in trading volumes from the previous week.
Y00ts NFT art collection also made a similar move on the same day, revealing that they were bridging to the Polygon blockchain.
All the changes will take place in 2023.
Tainted brand image
During the bull market of 2022, an anon launched the Sunny decentralized finance (DeFi) application on the Solana blockchain. Within two weeks, billions of dollars were flowing into this yield farm.
Ian Macalinao, the anon behind the application, worked as the single brain behind 11 purportedly independent developers. The developer had a large web of DeFi protocols to project that billions of dollars in double-counted value flowed into the ecosystem.
At its peak, the project constituted 75% of Solana’s $10.5 billion TVL, which impacted its price.
Crypto venture firms are also taking a big hit from their association with the blockchain. Multicoin Capital, once a big FTX and SOL advocate, is one such victim. In November, the firm lost more than half of its crypto holdings.
Final Thoughts
Once portrayed as a genius wunderkind, one of the biggest frauds in the crypto industry backed the Solana ecosystem. The association has dramatically impacted the blockchain’s image.
In 2018, the Ethereum ecosystem experienced a similar backlash and lost over 90% of its value; the coin would later rise to new records. The crypto industry is full of surprises, and 2023 may prove us wrong.
Also, read SOL’s price prediction 2023-2031.
