November 17 Why the recent renewed interest in Solana?
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Solana, the Web3 series known for its high speed and scalability, is seeing a notable resurgence in interest, characterized by a significant rise in total value locked (TVL) and active user base. Despite previous setbacks associated with the bankruptcy of the FTX exchange and ongoing market volatility, Solana's recent performance indicates a significant turnaround.
Solana price action explodes as TVL rises
Today we'll take a look at what's driving this renewed interest, the challenges it faces in regaining investor confidence, and its ongoing battle to establish itself as a formidable competitor in Web3. Can Solana live up to his reputation as the “Ethereum Killer”?
Solana has recently seen a significant resurgence in interest after a period of decline, particularly in Total Value Locked (TVL). This key metric, which reflects the total value of assets deposited in its smart contracts, has reversed its downward trajectory, showing positive momentum over the past six weeks.
This recovery is also evidenced by a notable 10% increase in deposits via Solana decentralized applications (DApps) in just three days (as of November 10). The current total TVL is $589.75 million, which is still a long way from its peak of over $10 billion in 2021 and even the levels just before the FTX collapse, but double the TVL value at the beginning of the year. This upward trend is a promising sign of the recovery of the Solana ecosystem.
Importantly, this growth in TVL is not only due to a few large owners but is also reflected in the wider user base, with a 28% increase in active titles on the platform. This growth has elevated Solana to the fourth largest blockchain in terms of DeFi TVL, a stark contrast to the decline in user activity on competing blockchains such as Ethereum, which saw a 22% decline in active DeFi users.
Increased network activity and rising TVL have been beneficial for SOL token investors. However, Solana's current market cap of $26.4 billion raises questions about the sustainability of this growth, especially compared to other networks like Polygon.
While Solana's 30-day cumulative fees as of November 10 ($1.9 million) exceed Polygon's fees ($1.6 million), they are lower than the BNB chain's fees ($9.1 million), sparking controversy over SOL's valuation following its recent surge. .
Solana must restore investor confidence in the wake of the FTX fallout
The rise in SOL price notably coincides with Solana's annual conference and has continued despite uncertainty surrounding FTX Group's share of SOL tokens (which are part of the proceeds from FTX's bankruptcy).
Despite facing challenges from a market downturn and the fallout from the FTX collapse, Solana has maintained strong development momentum, attracting interest from major companies such as Shopify and Visa. These companies are actively exploring and building on the Solana platform, underscoring its potential as a versatile blockchain solution. Solana's market performance has been remarkable, with a 176.76% increase over the past 30 days and over 353.89% year over year, trading at around $60.
However, for Solana to reclaim and possibly surpass its all-time high of $260 from 2021, two major hurdles must be overcome. First, it must rebuild investor confidence, which has been significantly eroded by its association with FTX and Sam Bankman-Fried (SBF). Second, regulatory uncertainties, especially from the Securities and Exchange Commission, which previously hinted at the possibility of Solana being an unregistered security, add to the challenges the platform faces. These factors contribute to a higher level of uncertainty compared to its competitors.
Despite these obstacles, Solana continues to attract institutional interest. According to CoinShares, Solana saw net inflows from institutional investors for 28 out of the first 32 weeks of the year, even outperforming Ethereum in this regard. However, Solana's ambitious goal of challenging Ethereum's dominance has yet to be achieved. This is evident in areas such as the NFT market, where Ethereum significantly outperforms Solana in monthly sales volume.
What does the future hold for Solana?
Solana's ambition to position itself as a formidable competitor to Ethereum rests on its ability to enhance its technology offerings and user experience. While Solana has been praised for its high transaction speeds and efficiency, it needs to further develop its ecosystem to support a broader range of applications, especially in areas where it currently lags behind Ethereum, such as the NFT market. The platform needs to prove that it can not only match the capabilities of existing blockchains, but also exceed them in terms of scalability, security, and diversity of decentralized applications.
Solana's attractiveness to institutional investors, demonstrated by consistent net inflows, is a positive sign. It indicates a level of confidence in its long-term viability and its ability to offer a viable alternative to Ethereum. However, turning this institutional interest into broader market adoption will require Solana to demonstrate sustained stability and continuous innovation.
Finally, community engagement and support for development will be vital. For Solana to truly realize its potential as a leading blockchain platform, it needs to foster a strong and active community of developers and users committed to building and maintaining a diverse range of applications. This community support will be crucial in driving innovation, attracting new users, and maintaining a vibrant ecosystem.
Solana's path into the near future is based on a multifaceted approach: addressing regulatory and trust issues, technological advancements, market positioning, and community building. Successfully managing these aspects will be key to its ability to leverage its potential and establish itself as a leading Web3 platform.
November 17, 2023