The 'Ethereum Killer' loses its teeth
Solana was dubbed the 'Ethereum Killer' due to its ability to quickly process smart contracts with minimal commission. In 2021, the network grew from $86 million to $52.7 billion and found itself in the Top 5 cryptocurrencies by market capitalisation for some time. However, the lack of stability is increasingly leading to reconsideration of its high assessment.
Smart contracts are in highest demand in the decentralised finance (DeFi) and non-fungible token (NFT) sectors. Before 2021, Ethereum reigned supreme in this segment of the crypto market. However, as dealings with smart contracts grew, so too did the load on the network and its commission, which fairly frequently exceeded $50 per transaction.
Solana quickly won popularity with its ability to process over 50,000 transactions per second and commission below $0.01. It made its debut on the NFT market in August. By November, the NFT marketplace Magic Eden, with support from SOL, topped the market favourite, OpenSea, in terms of the number of transactions. November also saw the peak of Solana's staked funds in DeFi, reaching a volume of $12 billion and occupying a market share of 7%, while its coin traded for $240 and higher.
As a result, Solana ran into the problem of growth. The network was not prepared for such wide demand and that kind of load. Developers were to blame in some situations, while an intentional attack was to blame in others. Since September 2021, the network has shrunk seven-fold, which has often led to a complete halt in transactions.
On 1 June, another failure occurred, leading to a 4.5-hour network outage. The reason for the delay in transaction processing was the nonce function, which is used by several crypto exchanges. The network should recognise each transaction just one time. But instead, the validators processed them several times, which led to a violation of the consensus mechanism. Solana was stopped and restarted after disabling the function.
In the subsequent 12 hours after the blockchain was halted, SOL lost 14% of its value, and social media was flooded with criticism of its developers. The coin has already shrunk by 85% from its all-time high. For being the 'Ethereum Killer', the Solana network experiences failures far too often, and a number of investors are getting rid of the coin due to unmet expectations.
StormGain analytical group
(cryptocurrency trading, exchange and storage platform)