Once called an “Ethereum killer” Solana’s blockchain, with its low cost and high transaction speed, was particularly affected by the demise of centralized exchange FTX as well as its sister company Alameda Research.
Solana was once heavily backed by former FTX CEO Sam Bankman-Fried, and Alameda Research reportedly held an estimated $1.2 billion in SOL tokens — its second largest position.
Traders sold solana en bulk after the FTX scam broke. It was a few days later that details about its illiquidity were revealed. SOL is down 60% from its high of $35, to a low of less than $12. SOL has fallen over 95% from its November record high.
Price crash shakes ecosystem supporters beyond markets. Solana’s projects, including NFT Marketplace MagicEden and NFT Project DeGods shared recent plans for a transition to multichain.
Anatoly Yakovenko is the co-founder and CEO of Solana Labs. “bittersweet to watch.”
Yakovenko, along with co-founder Raj Gokal, haven’t lost all hope in the Blockchain. In fact, it has actively sought ways to help projects in its entire ecosystem.
Yakovenko, Gokal and Blockworks discussed the future of Solana in a conversation they had recently.
Blockworks: What has been the situation since the FTX collapse?
Gokal: This has been an emotional rollercoaster. It was a striking contrast for the Solana eco-system to have such a high level of cohesion, support and unity in person just prior to the FTX crash.
My opinion is that the issue of FTX is a common one in the cryptocurrency industry. We saw that a small percentage of Solana teams had this impact. The foundation was only able to connect them with investors. There was a huge outpouring from the traditional as well as new investors. [venture capitalists] Crypto is a great way to get into the crypto world for those who are on the fence.
The network’s performance was also a contributing factor to the volatility of the markets during the collapse. There were a number of liquidations and record volatility. The volumes in DeFi had increased six-fold since the FTX crash, there were no interruptions and the performance was not degraded.
It’s all been bittersweet. [emotions]. This part of market cycles is difficult for all of us.
Blockworks: Serum, Solana’s decentralized stock exchange, may have also been affected by the hacking of FTX. Can you tell us what happened?
Yakovenko: During the FTX crash, people were unsure if these transfers had been hacked. It appeared that FTX was compromised.
The developers knew that Serum was not run by a DAO, but by keys held at FTX. They feared that these keys could also be compromised.
People just started working on forking the Serum program — by taking the exact same open source code and re-deploying it under a new address with different upgrade authority to different keys — basically controlling how that program can be upgraded by moving all the projects that were using Serum, including market makers, to this thing called Open Book, which was byte for byte the exact same code used on Serum but now under the control of a DAO.
This moment felt like the turning point in my life, as I really thought that everything was going to fall apart. But when I saw the developers all come together, it made me feel like: “Okay, there are people that know what they’re doing, that actually understand these very sophisticated systems and how to fix it.”
This was not done by large companies. It was a group of small hobbyist teams and individuals. I was amazed at how fast decentralized communities could recover when an actor centralized failed.
Gokal: This was a bittersweet moment. I was sorry that Serum’s upgrade keys were compromised. It also made me sad that the protocol needed to be forked.
But the fact that it happened independently, with multiple DeFi protocols that use Serum all coming together to quickly coordinate the fork…it’s a sign of maturity for the ecosystem. It is essential that every system have an important component. “oh shit” Bitcoin has experienced a similar moment with Mt. Ethereum has experienced The DAO Hack, which is similar to what Bitcoin had with Mt.
We saw the same things happen in those ecosystems…and people really had to ask the hard questions about why they’re building in that ecosystem, why they came in the first place and what they want the future of the ecosystem to be.
This is the only way I can see to get this result.
Blockworks: You mentioned that this is the time when people are coming together to build a future vision. How would that be for Solana?
Gokal: If you ask developers what they think, most will tell you we are just beginning to scratch the surface in terms of how much can be done with Solana.
Teleport is building an actual decentralized Uber service. Hivemapper has a similar project. Helium is moving from their original chain. The projects couldn’t have existed on another network.
Blockworks: SOL’s price has dropped significantly in the last month. What should be done to restore people’s confidence within this ecosystem?
Yakovenko: We rarely discuss Solana’s price. We’re in a clear bear market for crypto…but what we saw year over year, and at BreakPoint, is just the difference between a conference last year and this year…we have twice as many people show up.
It is only increasing. The number of crypto products that will be launched in the coming year is likely to surpass all previous years.
Blockworks: What changes do you expect to see in the regulatory environment following recent events?
Yakovenko: I am generally bullish about US regulations, and eventually setting right lines on what it’s OK to build, or not build, as well as how to launch these things. It’s what is missing at the moment.
For founders, the biggest worry and insecurity is that they do not know. A very bad answer from attorneys can be very costly. Someone who raises $3 million as a seed round cannot spend half of this amount in lawyer fees for the launch of a new product. This is not sustainable and people are leaving the US as these teams prefer to launch their products overseas. This is something that I believe needs to change.
The US government, in general, moves very slowly. But they eventually passed legislation that made it possible for all of these companies to be able to generate massive amounts value around the globe. That’s what I think will happen to crypto too.
Blockworks: Additional thoughts or comments?
Yakovenko: Stripe has announced that it will integrate with Solana. Many of these companies are committed to crypto. These companies have millions of users. It’s only going to get worse.
More and more people are going to understand self custody and learn what that means — they’re gonna know what it means to actually use cryptography. This powerful tool will continue to grow, much like the Internet.
We are building the future for that. This is a blip, it sucks, but in the end — four or five years later — barely anyone is going to remember it.
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