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, Original author: Ben Giove, compiled by Odaily translator Katie Koo.November has been a rough month for cryptocurrencies. Markets are falling, borrowing and investing are plummeting,Big Layoffs in the Encryption Industry

In this post we'll delve into the tough times the Solana ecosystem has had, delving into how the network has struggled and where the community has shown resilience.

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Can Solana survive?

Many tokens fell even more, with tokens held by Alameda Research, including Solana, being hit especially hard. Alameda held about $1.2 billion in SOL tokens as of June 30, according to Alameda’s balance sheet report disclosed by CoinDesk.

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SOL/USDT. Source: TradingView

While it’s unclear how much of the recent drop was caused by Alameda itself or traders’ panic, SOL plummeted from $35 to $11 (-68.5%) in the weeks following the FTX/Alameda crash.

This begs the question, is Solana dead? Will it bounce back? Let’s take a look at the impact of the FTX fallout and look ahead to Solana’s future.

Impact on Network Security and Stability

The 60% drop in the L1 native token in 72 hours was a huge "stress test". A crash of this magnitude would pose a risk to the chain's DeFi ecosystem through mass liquidations that could create bad debts for the lending protocol, and also increase the likelihood of downtime (a problem that Solana has struggled with in the past ), and reduce the cost of network-level attacks, bringing stability and security risks.

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cyber security

The 9 cycles (usually lasting 2-3 days) since November 6 have a net SOL value of 54.6 million, and the total open interest of SOL has dropped from 411.2 million to 356.6 million, a decrease of 13.2%. This represents approximately 15% of the circulating supply of SOL.

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SOL staking by cycle. Source: Solana Compass

Of this, $29.1 million (53% of total net worth) was unstaked during the crisis peak between November 7-10. As a result, the dollar value of staking that secures the network has dropped by a much larger margin. The value of SOL, which secures that network, plummeted 65.3 percent from $14.7 billion to $5.1 billion.

Despite these outflows (probably due to ~3-4 days delay in unstaked balances becoming liquid), Solana has not experienced any security issues or major attacks. Even after this staking exodus, L1 still has the 4th largest USD-denominated staking among PoS networks tracked by Staking Reward, maintaining its 19th position in staking ratio.

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stability

Extreme market conditions can affect the security and stability of the network. Because during periods of market turmoil, the chain typically sees a surge in demand for block space, which puts pressure on validators as users and bots frantically replenish collateral, execute liquidations, and capture other arbitrage opportunities created by market turmoil .

Solana has a reputation for being difficult to deal with these issues, experiencing multiple performance drops and downtime. Since September 2021, the network has experienced four complete outages totaling 37 hours and 11 minutes of downtime.Other upgrades, such as fee markets and increased transaction sizes, are expected to roll out in the coming months.

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These upgrades are having an impact, as Solana experienced no downtime or performance degradation throughout the crisis. In any case, the blockchain needs to be 100% live. But Solana's performance during this time is notable given its history and the magnitude of the crisis, an encouraging sign that the network is becoming more resilient.

Implications for Solana DeFi

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After the FTX crash, Solana experienced a severe liquidity crunch.

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The network’s USD-denominated DeFi TVL fell 72.1% to $278.3 million from $1 billion on Nov. 6. This is expected since many assets deposited into DeFi protocols such as SOL, ETH, and BTC are volatile. Therefore, a drop in TVL does not necessarily mean that users are withdrawing funds.

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Solana DeFi TVL. Source: Artemis

The supply of stablecoins on the Solana platform has also shrunk significantly in recent weeks.

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Since Nov. 6, the network’s stablecoin market capitalization has shrunk 46.1 percent from $3.9 billion to $2.1 billion. The drop was driven in large part by Tether’s chain-swap, which saw the USDT issuer move $1 billion in supply from Solana to Ethereum on Nov. 18. This transaction represents 55.5% of the total stablecoin outflow since the crisis.

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Serum takes a fatal blow

Many DeFi protocols have been severely affected in the wake of FTX, with projects close to Alameda being hit the hardest. The most notable of these is Serum, an order book-based DEX whose governance token, SRM, has become a poster child for “low float, high FDV (fully diluted valuation)” token design, allowing companies to trade at inflated The valuation utilizes the token to obtain a large amount of loans. Even with a 69.2% price drop over the past three-and-a-half weeks, SRM is still trading at $2.4 billion in FDV.Serum's contracts are controlled by administrative private keys held by FTX. This puts Serum and the proxy Solana ecosystem at risk, as Serum's "hard-rug" could lead to a domino effect.

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Serum USD TVL. Source: DeFi LlamaThe Solana DeFi community also deployed a Serum fork — OpenBook — which attracted $1.5 million in TVL. Whether the fork will survive remains to be seen, but it may provide a temporary solution for Serum-based projects as a lower-risk liquidity venue than its "parent protocol - Serum".

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down but not out

As we have seen, Solana suffered, but did not die. While the price of SOL is closer to the $3 in the SBF tweet than it was a few weeks ago, Solana is remarkably resilient as a network with no downtime or performance degradation during extreme volatility events. The chain has also withstood a significant portion of stake withdrawals so far. Given Solana's history of instability and outages, being able to operate smoothly during these turbulent times will help to deepen trust in the future of the network.

But that's not to say Solana's future is bright again.

Solana DeFi took a major hit with massive liquidity outflows — projects with close ties to FTX and Alameda, like Serum, were hit especially hard. It will also take time for the blockchain to shake off the fallout from FTX, which many see as a key ally to the network. Additionally, it's unclear how much SOL is currently held by Alameda, which has filed for Chapter 11 bankruptcy, and they will surely liquidate any remaining assets on their books during the proceedings.It’s worth thinking about whether developers and community members (who may not have experienced a 95%+ drop before) will stick around in the months and years ahead.

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Solana weekly NFT volume. Source: Nansen

That being said, Crypto OG knows that Solana is more than just a “darling” of the SBF, as it has been consistently used even during the bear market. The most recent blockchain hackathon saw 750 submissions, while SOL-denominated NFT transactions saw a 102% increase.In the long run, the Solana ecosystem will not be affected by FTX's predatory business practices and its own token design,

Solana may thus become a more decentralized and fair place.