Solana’s Future Uncertain After High-Throughput Blockchain Suffers Latest Crash

Solana has been having a tough time lately, suffering its latest outage after a bug prevented its network from producing new blocks.

As a result of this situation, the Solana network was offline for more than four hours.

This was certainly not the first time this high-performance blockchain suffered downtime, as it has experienced several outages in the last year.

Solana’s latest network difficulties have coincided with losses in its native sol token, which fell to $38.10 this morning on Messari.

At this point, it was down roughly 85% from its all-time high of approximately $260.00, additional Messari figures show.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Following this latest shutdown, several analysts weighed in on the situation, giving their input on the future of the Solana project and the sol token.

Solana ‘Treading Water’

“Solana is treading water right now after going dark the other day,” said Ben Armstrong, founder of BitBoy Crypto.

“It’s just not a great look for a blockchain in the top 10,” he noted.

Armstrong provided some technical analysis, emphasizing that the digital currency could face further downside.

“At the moment SOL is hovering around it’s lowest fib level of support at 35 and frankly I wouldn’t be surprised if it broke that in the next few days and $25 could be a possibility,” he stated.

Ben McMillan, CIO at IDX Digital Assets, also chimed in, speaking to the digital currency’s key support.

“If SOL breaks below $40 the next level we’d look to is $25 as the last real area of support.”

“On the other hand, if we see a bid come back to crypto markets, the next resistance level is around $80,” he noted.

Solana’s Progress And Pain

In addition to pointing out important technical levels, McMillan looked at Solana using a different lens, speaking to the headway the project has made and the inevitable trade-offs incurred by its developers.

“Solana gained a lot of traction in the last couple years by providing Ethereum users with a cheaper and faster blockchain,” he stated.

“However, as Vitalik himself has said, when building a blockchain, developers have to decide which 2 or 3 critical issues they’ll solve for: Decentralization, Security or Scalability,” noted McMillan.

“Ethereum prioritized decentralization and security at the expense of scalability…this resulted in massive ‘congestion’ and high gas fees particularly when NFTs boomed in popularity.”

“Solana sacrificed decentralization in order to prioritize security and scalability,” he noted.

“This allows it to process roughly 50,000 transactions per second vs. 13 for Ethereum at a cost of pennies (or less) vs. hundreds of dollars per transaction…however, this lack of decentralization has meant Solana has suffered multiple instances of downtime which has required a full ‘restart’ of the validators including most recently this Wednesday,” said the analyst.

“This spooked investors and Solana began to selloff almost immediately on the news pushing SOL down to prices not seen since August 2021.”

He claimed that the project’s future success will hinge largely on adoption.

“The key for Solana going forward will be continued growth of applications on the blockchain. Right now, there’s roughly $4BN of ‘Total Value Locked’ in apps built on Solana vs. almost $70BN for Ethereum and gas fees are still comparatively high on Ethereum so there’s still a real opportunity for Solana to capture some of that market.”

Outage Not Cause For Concern, Says Analyst

Konstantin Boyko-Romanovsky, founder and CEO of Allnodes Inc., offered some perspective on Solana’s latest downtime, portraying it as a temporary setback.

“Solana blockchain’s main focus right now is on its long-term stability,” he noted.

“Nevertheless, it is a working blockchain with many interesting projects and a growing NFT market,” said Boyko-Romanovsky.

“The blockchain’s recent outage is not their first, but not a reason for concern. In fact, Solana’s validators, myself included, quickly galvanized to do what’s necessary on our part to bring things under control.”

“There will always be some bumps in the road. It’s naïve to assume that things are meant to work all the time perfectly,” he stated.

“It would be wise for investors, especially those who just entered the crypto market, to research the potential of any given crypto asset and see if the blockchain behind the cryptocurrency makes sense long term. After all, Rome wasn’t built in a day.”

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.