Messari in-depth analysis: Why Solana will not die

The collapse of FTX has had a domino effect in the crypto space, with many lenders, exchanges, and funds going bankrupt. Many tokens have also been hit hard, and the total market value of cryptocurrencies has plummeted. SOL, which was one of the best performing tokens in the 2021 bull run, is now nearly 95% below its all-time high. So, in the context of such a massive collapse, is there still a chance for Solana to rebound? Will Solana go extinct?

Messari, a well-known blockchain analysis company, reported that despite Solana's hardships, it will not go extinct. Let's conduct an in-depth analysis from the following aspects:

1. Network health

As of December 8, the Solana network has a total of 2,306 validators, distributed in more than 35 geographic locations and more than 138 independent data centers around the world. The network health report released by the Solana Foundation in August this year showed that Solana's Nakamoto coefficient is 28, which exceeds the industry average and has a high degree of decentralization.

Nevertheless, the Solana network still has centralization risks, as 42% of Solana validators and 38% of the total shares are located in the United States and Germany. To this end, Solana's German web hosting company Hetzner Online deleted all Solana-related activities on its servers in early November and stated that it would prohibit the use of its servers for crypto-related activities. Not only that, hundreds of validators and millions of shares are migrating from Germany and Hetzner to other countries such as France and Finland, as well as other hosting providers such as OVH SAS. It can be said that the Solana network is now more decentralized.

2. Developer situation

Despite the large number of developers working on other blockchains, including Ethereum, the majority of developers surveyed (66%) insist on developing only on Solana. About 72% of developers said their teams were not affected at all by the FTX crash.

Although surveys like this are not very rigorous, they do provide some key data for us to better understand the actual situation. In addition, Alchemy also released a report on Web3 developers, which showed that the number of active development teams of Solana has increased by more than 10 times and API usage has increased by more than 5 times.

3. Protocol infrastructure

Developer tools, job-specific tools, DAO tools, and experiments with different virtual machines are all part of building or expanding Solana’s infrastructure components, but are not directly related to the protocol itself. Currently, the developer tools are: Coral, Helius, GenesysGo, Clockwork; the experimental virtual machines are: Neon, Eclipse, and Nitro. It is worth mentioning that some projects are trying to import and export different virtual machines to Solana, so that developers of different virtual machines can deploy on Solana, and vice versa, projects on Solana can also deploy their code to other virtual machines.

In the past, it was believed that there was a certain gap between Solana and Ethereum in terms of ecosystem maturity. Although this gap still exists, it is obviously gradually narrowing, and Solana is also working hard to improve its core infrastructure and functions.

On the other hand, if a blockchain only has advanced technology but lacks applications built on it, it will also be useless. Solana has a wide range of applications in DeFi and Web3 infrastructure, as well as NFT and games. The following ecosystem diagram clearly shows the applications in each branch field, as well as the top projects under some subdivisions.

4. DeFi application

Frankly speaking, Solana DeFi is the sub-sector most affected by the FTX crash. The total locked value on Solana DeFi suffered a huge blow due to the involvement of Alameda, and the price of SOL fell by 67%.

Although the situation is a bit bad, we are still happy to see that a group of innovators are working hard to build the future of Solana. Among them, OpenBook, Ellipsis Labs and Lifinity are particularly worthy of attention. OpenBook is a forked version of Serum V3, an important infrastructure of the Solana ecosystem; Ellipsis Labs has expanded Serum's initial central limit order book (CLOB) and provided a series of design decisions to improve efficiency; Lifinity uses centralized liquidity and active market maker models to eliminate dependence on arbitrageurs, and reduces impermanent losses by limiting transactions against stagnant prices, etc.

5. NFT projects and infrastructure

Metaplex has established the NFT protocol standard for the Solana ecosystem, and at the same time provided composability space for various NFT projects in the Solana ecosystem. For many creators, Solana is an efficient place to launch NFTs, especially its code-free solution has attracted a large number of non-technical creators.

Despite the recent fallout from the FTX incident and the bear market in the NFT space, Solana’s position in the NFT space remains strong. In terms of secondary market sales, Solana remains the second-largest network and is closing the gap with Ethereum.

6. Investor information

Previously, some outsiders of the ecosystem generally commented on FTX as "one of the few investors who only want to extract value from the Solana project." In addition, other investors are not so utilitarian and have always supported the Solana ecosystem, such as Jump, CMS, Sino, and Multicoin. If these Solana supporters and some new investors such as Chris Burniske and R89 Capital can unite to solve the long-standing problems in the ecosystem (especially those in token economics), then I believe Solana will soon break away from the aftermath of the FTX collapse and be stronger than ever.

in conclusion

As the saying goes, if the nest is overturned, how can the eggs remain intact? In the context of the collapse of FTX, the total locked amount of Solana has shrunk massively, and the price of SOL has plummeted. The Solana ecosystem is not without any problems. However, judging from the above indicators, the ecosystem is not without hope, but may become a more decentralized and fair place . Not only that, new applications may be re-catalyzed; the technical upgrades that are being actively developed will continue to alleviate network problems and improve network performance; new investors will also make positive contributions to Solana.

As for the price, it depends on everyone's decision.