Solana (SOL) has been one of the best-performing crypto assets of 2021. After all, by the end of 2020, SOL was worth $1.51 — and now, each SOL is over $200. We are talking about a 135X for every dollar invested.
On one hand, Solana has been great. Its biggest argument is its own technology. After all, they can process a large number of transactions per second (around 65K TPS) for a fraction of the cost of other networks.
But not everything is rosy when it comes to Solana. Many people have come out against this network for various reasons. One of the main ones is the lack of decentralization. And the Solana network crashes have only added fuel to the fire.
Hate and FUD or not, there is a conversation to be had about Solana.
Why Is Solana Different?
Solana is a new generation blockchain developed by Solana Labs. This network seeks to solve the problem that bitcoin and Ethereum have: scalability. It is a network that theoretically supports about 65,000 transactions per minute.
So far, it seems that Solana is not very interesting, right? Well, here's what makes Solana unique: Proof of History (PoH) which is a validation method that proves a specific event over time.
In other networks, all nodes have to communicate with each other. That is, the production of blocks is sequential and the entire network must confirm the transaction to add it to the blockchain. This makes the waiting time slow. This is where Solana's Proof of History comes in.
Each Solana node keeps its own clock by encoding the passage of time. This is done through a sequential hashing verifiable delay function (VDF).
PoH aims to lighten the load on the network nodes in the processing blocks. This is made possible by providing a means of encoding time in the Solana blockchain.
Solana's Circulating Supply Problem
Everything seems to show that Solana is a wonderful thing so far, right? Well... there will always be arguments against anything. And clearly, Solana is no exception.
The first major problem surrounding Solana came to light in April 2021. Since its launch, Solana claimed that its circulating supply was 8.2M SOL. In April, a rumor started that this number was false. Solana denied it but did not update its information on CoinMarketCap or Binance.
At the end of the month, an independent agency discovered an unlocked wallet with about 13M SOL. Faced with this revelation, Solana's team accepted the fact and said that this was a loan to a Market Maker. They also said that the loan period would end in 30 days and that they would burn all the tokens.
So far, so bad for Solana. And it would get worse before it got better. In May, Solana's team reported that they were only able to recover 3.3M SOL. And to meet the quota, they created 8M more tokens. All to burn the 13M tokens they had said.
Solana Network Halt: A Risk for Decentralization?
There were already some signs of problems in the Solana network. But it wasn't until mid-September that the entire network was halted.
Solana's team explained everything from their Twitter account. Basically, resource exhaustion in the network caused a denial of service. The team engineers were working on it to fix the system bug. It took a total of 17 hours to get the network back online.
How is it that a theoretically decentralized network can be shut down to fix a bug? Well, the top 5 data centers that have Solana nodes control 47.4% of all nodes. This results in a real network centralization problem.
However, this allowed that when the new update came, it was easier to put it in place. So props to the Solana team. Except... then there were polemic statements from Anatoly Yakovenko, CEO of Solana Labs.
An Excuse or a Technicality?
Yakovenko was asked if the network could go down again. He brushed off the question by stating that he didn't know and that it didn't really matter.
Shocking, right? Well, his logic was more complex than that. According to him, as long as there was at least one copy of the ledger, everything was fine. Finally, he dropped out on a technicality. He said that Solana did not shut down per se, it just didn't produce a block for 17 hours.
And to answer the question Yakovenko did not want to answer: sadly, yes — the network again suffered other attacks.
On December 9, due to an initial DEX offering (IDO), the network was again clogged. This caused the network to lose about 50% of its transaction processing capacity. Four days later, this event repeated itself again thanks to another IDO.
Should Everyone Jump Out of the Solana Train?
Look... certainly with this in mind it seems that Solana doesn't seem like a great project after all. But that's where one goes wrong.
From a user standpoint, the dApps built-in Solana works great. Buying NFTs on that network is incredibly easy and the commissions are minimal. There are certainly a lot of discussions to be had about the future of Solana. And likewise, it's good to talk about all these dangerous things that have happened on the network. However, if Solana can continue to build with the end-user in mind, there is no reason to fear.
