Resurgence of Solana — Will it shine again?
Solana was the star of the last bull run of 2021 and gave investors a return of as high as 100X. It was that golden layer one solution that was pipped to be the Ethereum killer with its super high transaction throughput and lower costs.
Yet, like many other alt-coins, the bear markets that followed took the wind out of Solana. But Solana, to its great credit, still fared better than most of its other competitors like Avalanche, largely due to the healthy ecosystem of dapps and developers it could build quickly as a result of generous funding of the ecosystem through the money it raised from a clutch of institutional and strategic investors. One such investor was FTX and Solana paid a big price for this partnership as FTX collapsed, making the Solana market price plunge with it.
But it seems like Solana is now rising from the ashes! Solana price has surged from the low of $8.39 recorded on 29th December, 2022 to almost 32 in July, 2023. So, is this the perfect comeback for Solana? What next? Would it rally beyond the highs seen in the 2021 bull run?
Well, I am not a fortune teller to be able to answer these questions in a quick yes or no so let’s dive into the performance data of Solana together to explore the possibilities!
I am a string believer in the fact that the underlying intrinsic value any cryptocurrency is derived from the growth of the network of dapps that deploy on that network and use that token and thus should be an apt parameter to judge the future potential rather than the market sentiments data or the technical analysis (not discounting their value though, especially if you wish to take short term positions for trade).
Apart from the external worries of bearish environment, the collapse of trust in institutional players and the regulatory crackdown being pursued against the industry which has affected the whole market, a factor that has been specific to Solana have been concerns on Network Outages.
Solana has worked on its reliability and uptime for the major part of the last year, as a result of which there has been major improvements in this regard and so far in 2023 there has been only one outage (following the release of v1.14 upgrade in February).
According to the research report by DeveloperReport.com, Solana is still the fourth largest ecosystem by the number of full time devs, a number that has grown by 167% in the last two years. The total number of devs, including the part-time ones is reported to be 1475 and this dev growth rate is much higher than that of Ethereum, Polkadot and Cosmos who stand above Solana in the total dev count. This is largely due to the incentives rolled out to foster the network growth by the Solana Foundation which has invested almost 600 mn over the last year into the ecosystem. The number of validators have risen from 1653 to 2846 during the same period, an impressive jump of almost 75% within a year.
While the network capability has expanded, the user interest has certainly dropped due to the uncertainties and the Solana Active Wallet Addresses stood at an 9.5 mn at the end of July 2023 as against 25.2 mn just a year back at the end of July in 2022. The average non-vote transactions have thus fallen from close to 1.2 bn per month in July 2022 to almost 500 mn in July 2023.
But Solana’s FireDancer Validator Client introduced by Jump Crypto may prove to be the game changer in improving adoption of the network going forward. In a December 2022 demo, it exhibited the capability to run 1 million TPS, a 20X improvement over Solana’s current theoretical TPS limit (the actual TPS is 300–500 per second for now). This can be expected to give a stiff competition to the current Ethereum roll-up narrative that may drive the market in the next bull run. Solana is also plugging into the Liquid Staking narrative via Marinade Finance, Lido, Jito, and JPool. Further, Solana EVM being developed by Neon Labs may allow for better accessibility to the Solana ecosystem and help easy porting of smart contracts which can be expected to bring new funds and users, thus impacting the TVL and network activity positively.
Overall, Solana story is far from over and it is definitely not dead. I have a strong conviction that, while it will never be the Ethereum killer, it will certainly be one of the largest Layer-1 ecosystem beyond Etheruem. The innovation and resilience that the Solana core team has exhibited during the tough times shows the resolve they have towards making Solana a network of choice for low cost and fast transactions at high volume.
Though, there are significant challenges in stimulating the market buy activity and in one-upping the increased competition from Layer 1s like Cosmos and emerging Ethereum Layer 2 solutions, Solana with its current price is an undervalued gem ready to be picked by the value investors. It’s tough to say if Solana would test its previous high or how soon, but since this is not meant to be an investment thesis with an aim to predict a definite price and time range, what can be a safe statement is that it is definitely bound for a meteoric rise and a patient investor may be rewarded handsomely once the markets start a major uptrend. But till then, keep watching this space to stay updated on more of the L1 and L2 ecosystems.