The Solana network has not lived up to its name, as it has been touted as the “ethereum killer” due to the speed of transactions and the scalability it offers.
But why has the price of the token fallen since it exploded last year, and will there be any opportunities behind it? Let’s discuss this today, let’s read on
The series of disruptions the blockchain has suffered in less than a year has brought its reliability claims under scrutiny from members of the cryptocurrency community. In less than six months, Solana has suffered more than five major outages. The series of downtimes on the network had a ripple effect on the price of its native token, SOL.
Following the outage on June 1, the price of the SOL token plummeted from $46 to $38.50 in less than 24 hours. The token’s market cap also fell from $15.6 billion to $13.3 billion during the same window.
The SOL token is down more than 75% due to a series of downtimes in the Solana network and a pessimistic outlook for the crypto market so far this year.
Trending downward since last November, the price chart shows the SOL token currently trading dangerously close to last August’s levels.
Let’s take a look at the token’s performance since last November
The SOL token was launched by the Solana Foundation in March 2020 and has been struggling to gain a foothold in the highly competitive cryptocurrency market. As of press time, each SOL token is trading at $43.17, with the token currently trading at its low point from July/August of last year.
The price chart shows that the SOL token has been struggling to fend off shorts since around Nov. 16 (yellow arrow). After attempting a bull market from Nov. 27 to Dec. 2 (pink arrow), the token suffered heavy losses at the hands of short sellers.
From December 2 to the present, the price of the SOL token has fallen 81%.
Additionally, during that window, the market cap of the SOL token fell 79% from $70.21 billion to $14.69 at press time.
With the promise of increased transaction speeds and scalability that Solana Network claims to offer, on-chain analysis shows a sharp decline in development activity on the network over the past seven months.
Development activity is a key metric in the crypto ecosystem as it assures investors that the project is serious about its business proposition, that new features may be introduced in the future, and that the project is unlikely to be anything more than an exit scam. Over the past seven months, development activity on the Solana network has declined by 48%
On the social front, the SOL token underperformed in March in terms of performance. However, since then, the token has been trending upwards in terms of social dominance and social numbers, with occasional hits.
A simple explanation for this exists due to the excessive downtime suffered. As of press time, social dominance is 2.547%, while social volume is 450.
So seeing this one may ask, is there still hope for SOL?
My answer is that there will be
Solana ecological blowout grew in the post-mid 2021 period, when the coin price of its governance token $SOL rose by as much as a hundred times, and ecological Dapps sprang up, covering tracks such as Defi, NFT, and infrastructure, in an effort to create Solana ecological integration.
1) Consensus mechanism
Unlike other dapp platform competitors, Solana has its own unique approach in the transaction verification process. Notably, Solana founder Yakovenko merged a transaction timestamp system so that the validator (the computer that verifies transactions on the blockchain) can have a unified view of the order in which all new activities on the blockchain are executed.
In other words, the Solana system is essentially a consensus mechanism, since the task of the blockchain network participants is to analyze the validity of transactions and must agree on the history of individual activities, hence the concept is called Proof of History (PoH) consensus.
2) Time, Sand Clock
According to Yakovenko, he borrowed from Google and Intel’s centralized database design when designing the concept of the Solana timestamp system and adapted the system to fit a decentralized architecture.
In addition to the proof-of-history mechanism (PoH) mentioned above, Solana also implements the proof-of-stake (PoS) consensus protocol.
SOL is the original token of the Solana blockchain and is currently ranked among the top 10 cryptocurrencies by market capitalization. SOL works similarly to a functional token used to settle transaction fees, similar to ethereum’s gas, and is the base currency of Solana’s pledge mining economy. Essentially, you have to pledge a certain amount of SOL tokens in order to become a verifier on Solana or to get a pledge mining reward. Note, however, that SOL is not the only digital asset supported in the Solana ecosystem; like Ether, Solana is a multi-asset blockchain where individual blockchain applications running on the network can issue tokens independently.
Regarding SOL I think you can pick up some low chips at low levels, the SOL public chain is still in the early to mid-term, and there will still be a wave of dividends in the future.