Solana has been having a difficult three months as its price has declined by approximately 57% from its December high of $203.39 per coin to now trade $88.33 as of the time of this writing.
Asides from its price decline, we are also seeing a significant reduction in its Total Value Locked (TVL), which is a measure of participation on its blockchain. According to DeFi Llama, from its December high of $14.92 billion TVL, as of the time of this writing, it currently has a TVL of $6.84 billion, representing a decline of approximately 54%.
Even with these declines, Solana still leads the staking charts with approximately $34.1 billion in stake value, which is equivalent to 74.5% of the SOL tokens in circulation. Multiple reasons can be identified for the underperformance, including four network outages in late 2021 and early 2022.
What you should know
- Solana’s blockchain has been having a series of shut down or network outages. These have become quite frequent with as many as four that has occurred in late 2021 and early 2022, where both the TVL and price experienced significant declines.
- The latest incident was on January 7 and the development team attributed the outage to a distributed denial-of-service (DDoS) attack, causing Solana Lab developers to update the code and consequently reject these types of requests.
- These incidents have weighed in on investor confidence of the platform as many are now reducing their exposure on the blockchain.
- Also, investors are more concerned about the centralization that is brought about, due to the costs of being a Solana validator.
- To achieve 400 millisecond block times, a validator hardware will require hardware that includes a 12 core 2.8GHz CPU, 256 GB memory, high-speed 1 TB SSD drives and a low-latency internet connection. These items cost a lot which means the barrier for entry is only for a selected handful that can afford it.
Light at the end of the tunnel?
Even though Solana has been hit the hardest compared to similar smart contract platforms, there is solid network use on non-fungible tokens (NFT) marketplaces, as measured by Magic Eden’s 178,820 active addresses in the last 30 days. This data is according to DappRadar.
Last year, Solana Ventures partnered with FTX and Lightspeed Venture to launch a $100 million fund dedicated to the gaming sector. Many analysts believe that the network’s focus on gaming and NFT will bring back interest to the blockchain.
We are already seeing a great demand for Solana games. Their games represent half of the top 10 DApps across every blockchain covered by DappRadar. That includes Splinterlands, which has 578,280 active addresses and Alien Worlds which has 544,900.
Bitcoins and other altcoins
Also weighing in on price and its TVL performance is the general decline seen in the cryptocurrency market. As you would expect, when Bitcoin sneezes, altcoins catch a cold. Bitcoin Year-to-Date (YtD) is down 17.90% as it falls below the $40,000 range, after a $10,000 rally from $34,000 level to as high as $45,000 all in the past two weeks. The cryptocurrency market capitalization has also lost its $2 trillion status as it currently stands at $1.77 trillion. It has traded as low as $1.45 trillion, this year alone.