Solanas origins: disaster strikes – block works

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This is part two of a series to Solana’s promotion, autumn and comeback. Click here to read part one.

In 2021, the Solana ecosystem no longer seemed to be stopped because it was expanding an exciting speed. The funds were incorporated into Defi projects such as serum, raydium and mango markets. NFT marketplaces like Magic Eden began with the competitors of Ethereum like Openea, and the network recorded a record transaction volume. But this quick ascent was a precarious dependency: Alameda Research and FTX.

These two companies, both of which were founded by the Sam Bankman fried by the now imprisoned SAM aids (SBF), were some of the earliest and most influential supporters in Solana. Alameda had participated in several financing rounds and recorded large amounts of Sol -token. FTX was the host of Solana Hackathons and played a decisive role in the introduction and maintenance of the serum, a decentralized exchange that was one of Solana’s flagship applications.

First of all, this deep entanglement with FTX was an indispensable advantage. Bankmann fried-the fried at the time as something like a visionary Wurde one of the volume supporters of Solana and often warded his superiority over Ethereum. The partnership helped to attract Solana, liquidity, developers and institutional credibility. However, this also meant that Solana’s fate was closely linked to FTX’s success.

In November 2022 everything dissolved almost overnight. It appeared that FTX had a hole of 8 billion US dollars in its balance sheet, allegedly due to ruthless financial practices in which Alameda and his founder SBF were involved. Panic spread quickly. FTX customers hurried to remove money and triggered a liquidity crisis that the exchange could not survive. Within a few days, FTX and Alameda had both imploded, took billions in customer funds and did not extinguish the empire of Sam Bankman-fried kingdom, but wiped out lonely and level.

The Fallout was catastrophic for the entire crypto industry, but no blockchain suffered more than Solana. Investors who feared a deeper infection hurried to derive their stocks. The Sol price had already decreased significantly from its all-time high of almost $ 250 a year and was traded with around $ 37. While the wider bear market was responsible for this majority decline, the FTX implosion continued to drop its price to around 9.77 US dollars.

Defi activity in the network dried out immediately. The serum, which was based on the FTX’s operation, collapsed and let the dealers crawl for alternatives. The wider web3 community, which was already skeptical about Solana’s stability due to its earlier network failures, now described it as a “Sams chain”, a blockchain that had flown too close to the sun and was now intended to transform into irrelevance. Nevertheless, the crash was not as extended as some expected. Solana recovered over $ 20 to $ 24 within the following weeks, although it remained for a large part of the next year in a long period of the price stagnation.

The psychological tribute was more serious than the financial damage. Developers who had set up their projects on Solana asked whether the network could survive. Venture Capital companies that were once able to finance Solana’s start -ups withdrew and relocated their focus on Ethereum and the promise of L2S. But even when the walls closed, Solanas deeply refused to surrender. Convinced that the technology itself was solid, there was a committed handful of creators, validators and users that they would continue to build and evangelize them. But would your belief be enough?

Next time: The comeback. How Solana opposed the chances, converted from the ashes and recaptured its place as a power package in Web3.

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