Solana "Post-Disaster" Reconstruction This Year: What Doesn't Kill Me Makes Me Stronger

Author: flowie, ChainCatcher

Compared to the turmoil of last year's FTX crisis, Solana has truly regained its confidence at this year's Breakpoint. Dan Albert, the Executive Director of the Solana Foundation, finally announced the launch of the Firedancer testnet, which addresses the downtime issues, earning praise from tech giants like Paradigm CTO Georgios Konstantopoulos and Global Macro Investor founder Raoul Pal. Even more exciting is that during the conference (from October 30 to November 3), Solana's token price peaked at $45, setting a 14-month high, with an increase of over 80% in the past month. As of the time of writing, the Solana token price has fallen back to $39.6.

Although many crypto users jokingly attribute this surge to manipulation by institutional investors during Breakpoint, DeFiance Capital founder Arthur even quipped, "If hosting Breakpoint is so effective for Sol's price increase, Solana could hold it every week." Nevertheless, we cannot deny that Solana's recovery is a result of a year of hard "post-disaster" rebuilding.

Almost at the same time last year, shortly after the Breakpoint conference, ChainCatcher published an article titled “How Solana Coped with Internal and External Challenges After Being Deeply Stuck in the FTX Predicament?” documenting Solana before and after Breakpoint. At that time, Solana was in dire straits, suffering from continuous downtimes, unprecedented large-scale attacks on ecosystem projects, and being aggressively chased by new chains like Aptos and Sui. Amid numerous unresolved challenges, Solana was also affected by the collapse of FTX, with its token price briefly falling below $8, teetering on the brink of survival.

Now, as Solana makes a comeback after its near-death experience, multiple indicators show a growth trend, with its technical foundation and ecosystem development recovering and even making breakthroughs. As summarized in Messari's Q3 Solana ecosystem report, "The development momentum is stronger than when it first entered the bear market." Perhaps more people are willing to believe that Solana, the "Ethereum killer," is writing a story of "what doesn't kill me makes me stronger" as it approaches two cycles of bull and bear markets.

From the Data: Solana's Fundamentals

While the surge in Solana's token price is undoubtedly influenced by institutional investors, the key indicators for Solana have indeed shown signs of recovery. According to Defilama, Solana's TVL has reached $460 million, more than doubling from $210 million at the beginning of the year, currently ranking eighth among public chains.

More convincing than TVL is its DeFi Velocity (TVL utilization rate) data. DeFi Velocity evaluates the chain's activity and adoption by measuring the trading volume per dollar of TVL. According to the latest data from Nansen, Solana's DeFi Velocity ratio for the week of September 26 to October 2 was 0.71, indicating that for every $1 of liquidity, the trading volume was nearly $0.71. This is higher than many public chains, including Arbitrum, BSC, Base, Optimism, and Ethereum.

In terms of daily active addresses and daily transaction counts, active trading on Solana has not seen the expected severe decline since the FTX incident. Daily active addresses briefly fell silent for two months at the beginning of the year but saw a peak of over 500,000 around May to June. Daily transaction volume also peaked during the same period, exceeding 25 million transactions. Overall trading volume has outpaced Ethereum, Polygon, and Aptos. At that time, the popularity of Bitcoin ecosystem protocols and meme coins led to congestion and soaring transaction fees on the Bitcoin and Ethereum networks, prompting many developers and users to choose Solana for its lower costs.

Regarding developer activity, the collapse of FTX did not cause a mass exodus of developers from Solana. In November last year, users on the X platform conducted a survey targeting the developer community, revealing that about 73% of developers felt there was no need to leave Solana, and about 67% chose to deploy only on Solana.

Currently, according to data from Solana's official website, the number of monthly active developers has exceeded 2,000, a significant increase from 1,234 monthly active developers reported in Solana's Q2 report (as of April), gradually returning to the peak state of March this year. According to the Electric Capital developer report, after the FTX collapse, Solana's developer activity rose significantly in March, reaching 2,732 monthly active developers, but has since declined, primarily due to significant changes in the number of full-time developers, while the decrease in full-time developers has not been substantial.

Overall, the trauma caused by FTX has not destroyed the solid fundamentals that Solana established in the previous cycle.

Multiple Milestones Achieved, Technical Breakthroughs Shine

The long-discussed solutions for downtime and EVM compatibility have gradually been realized this year.

First, the highly anticipated Firedancer testnet was launched at Breakpoint. Firedancer is a next-generation node validation client for the Solana blockchain developed by Jump Crypto. As Solana's second client, it will reduce the single point of risk caused by a single client, increase the diversity of node clients, and enhance the stability of the Solana blockchain, with expectations to increase Solana's throughput by 10 to 100 times.

Firedancer is the most anticipated infrastructure upgrade for Solana in the coming years. Solana co-founder Anatoly Yakovenko referred to it in a recent interview as a long-term solution to Solana's downtime issues, and its importance is self-evident. Since its launch in 2020, Solana has experienced at least five major outages, three of which occurred in 2022. The extreme instability of Solana has led to large-scale attacks on ecosystem projects, causing them to flee to new chains like Aptos and Sui.

The mainnet for Firedancer is expected to launch in 2024. However, it is worth noting that Delphi Digital analysts believe that the launch at the Breakpoint conference is actually just the network component Frankendancer of Firedancer. There are still significant challenges to overcome before the full version of Firedancer can be launched, which may not happen until 2025.

In terms of addressing downtime issues, network upgrades including QUIC, Stake-weighted QoS, and localized fee markets have improved Solana's network stability significantly compared to 2022. Solana's Q2 report indicated that there was one network interruption on February 25 (during the last software upgrade), but after improvements, no such issues have occurred since.

Secondly, in addition to addressing downtime issues, solutions for integrating the EVM ecosystem have also been implemented. In July, Solana's EVM compatibility solution Neon finally launched on the mainnet, followed by the release of the Solidity smart contract compiler Solang, making it easier for developers to write Ethereum applications on Solana.

Additionally, during last year's Breakpoint, Solana announced new anchor points in GameFi, which have also made progress. During this year's Breakpoint, Solana announced the launch of the beta version of the GameShift game development tool, aimed at reducing the difficulty and complexity of developing games on the Solana chain.

Moreover, Solana's Web3 phone, Saga, was publicly sold in May this year. Although sales figures have not been impressive, it marks Solana's proactive layout in the mobile entry space.

After resolving long-standing issues like downtime, Solana has also made some impressive technical breakthroughs. In April this year, Solana announced the launch of state compression. State compression is a new method of storing data that can reduce the cost of minting NFTs by over 2,000 times. According to a report from Nansen, the cost of minting 1 million NFTs using state compression technology dropped from $25,300 to $113, while the costs on Ethereum and Polygon were $33.6 million and $32,800, respectively. During Helium's migration to Solana in April, it benefited from state compression technology. During the migration, nearly 1 million hotspots on the Helium network were minted as NFTs, which would have incurred over $200,000 in fees without compression technology, but with it, the cost was reduced to just over $110.

The Ecosystem Remains Resilient

In addition to its technical advantages, Solana has also excelled in ecosystem development. Despite a brief lull due to the crypto winter and the FTX collapse, this year, with technological upgrades, the Solana ecosystem unexpectedly welcomed giants from Web2 like Visa and Shopify.

Around September, payment giant Visa announced the expansion of its USDC stablecoin settlement feature to the Solana blockchain. E-commerce giant Shopify also announced integration with Solana Pay, allowing its platform users to pay with USDC. Visa elaborated on its choice of Solana in its report, highlighting "Solana's unique technical advantages, including high throughput from parallel processing, low costs from localized fee markets, and high resilience from numerous nodes and multi-node clients." The addition of Visa and Shopify has brought a promising start to the payment use cases within the Solana ecosystem.

In addition to support from Web2 giants, leading players and star projects in Web3 are also backing Solana. Notably, MakerDao founder Rune publicly expressed his support for Solana, even at the risk of offending Vitalik, stating that after comparing various public chains, he believes Solana is the most suitable new chain for NewChain. The L2 blockchain Eclipse has also embedded Solana's SVM (Solana Virtual Machine) in its solution, claiming that the network effects of SVM are also growing.

With support from leading forces, Solana is also actively pushing for ecosystem incentives. Throughout the third quarter, Solana not only hosted the Solana Hyperdrive hackathon with a $1 million prize pool but also participated in several hackathon events like OPOS hackathon, Hacker Houses, and PlayGG through sponsorship. Recently, Solana launched an incubator aimed at attracting startup founders to choose Solana.

This year, within the Solana ecosystem, established DeFi protocols like Marinade Finance, Lido, and Solend have not only shown impressive growth but also witnessed the emergence of dark horses like Jito, marginfi, Ocra, Tensor, and Backpack, most of which are in the liquid staking sector. According to DeFilama's data, protocols with high TVL on Solana have generally risen in the past month, with three protocols achieving over 100% growth, the highest exceeding 255%.

Among them, the liquid staking protocol Jito, which launched its mainnet shortly after the FTX collapse, saw its TVL rise from $4 million to nearly $200 million in a year, becoming the second-ranked protocol in the Solana ecosystem after Marinade Finance. Jito's unique feature is that it offers stakers rewards not only from staking yields but also additional MEV rewards. According to the latest data released by Solana, over 31% of Solana validators are running through the Jito Labs client. Additionally, the DeFi margin protocol MarginFi saw its TVL grow by over 700% in the entire third quarter, leading the development of the points reward mechanism in Solana DeFi, followed by the perpetual contract trading platform Cypher and the Solana lending protocol Solend, which also introduced points reward mechanisms.

Recently, the Solana ecosystem's Web3 integrated application Backpack has also been very active and is worth noting. Backpack innovated the construction method of Web3.0 wallets. Unlike other wallets, it allows developers to build permissionless asset management tools on a single interface through a revolutionary new standard called xNFT, enabling new core functionalities through request interfaces to provide a more user-friendly experience for mobile clients.

Recently, Backpack launched the NFT project Mad Lads, which is currently the highest-valued NFT project on Solana, with 24-hour sales surpassing the top 5 NFT series. Backpack also announced the launch of a regulated cryptocurrency exchange, Backpack Exchange. Currently, Backpack Exchange has obtained a Virtual Asset Service Provider (VASP) license issued by the Dubai Virtual Assets Regulatory Authority (VARA) and will launch a beta version for existing Backpack and Mad Lads community members in November.

Related Reading: “a16z Talks with Solana Co-Founder: People Should Try to Create Greater Ideas Instead of Repeating Existing Ones”

The "Good Relations" Behind Solana

Looking back, during difficult times, Solana has not lacked strong supporters. After the FTX collapse, industry leaders like Vitalik, MakerDao founder Rune, Bankless founder, and Placeholder VC partner Chris Burniske, along with Web2 asset management giant VanEck and payment giant Visa, have all stood by Solana.

A closer look at the reasons given by each supporter reveals that most point directly to Solana's technical strength and community vitality, and they have become even more optimistic about Solana after the FTX collapse. Shortly after the FTX incident, Vitalik Buterin tweeted that he hopes the Solana community has a fair opportunity to thrive because a smart person told him: Solana is a serious and intelligent developer community, and now those terrible, opportunistic people have been washed away.

This "smart person," Placeholder VC partner Chris Burniske, also took the opportunity to elaborate on the specific reasons for his support, noting that the Solana community has dedicated and hardcore developers, and compared to Ethereum and Cosmos, Solana's on-chain innovations are more independent. He stated, "In terms of ecosystem, the DApp builders on Solana are more like a hybrid of Web2 and Web3, with a backend that operates in a very crypto manner, while the frontend has the ability to engage with the mainstream." MakerDao founder Rune appreciates Solana for its high code quality and the resilience of its ecosystem after the FTX collapse.

VanEck took a more direct approach by publishing a lengthy report expressing optimism about Solana, comparing Solana and Ethereum from various aspects such as ecosystem applications and cost revenues. VanEck believes, "Solana's community has a strong sense of identity, which has allowed it to maintain resilience in the face of significant setbacks, even though these setbacks could destroy many other blockchain ecosystems."

After experiencing ups and downs, Solana may be telling us that in the brutal elimination race of Web3, continuous innovation and maintaining "resilience" in the face of major setbacks will make you stronger.