- Solana recorded a 100% uptime year-to-date.
- TVL, DeFi velocity, and transactions were indicative of a healthy network.
Solana [SOL] negotiated several hurdles on its path in recent times to emerge as one of the most sought-after blockchain networks.
While the price action of the native token hasn’t been impressive, the proof-of-stake (PoS) network utilized the bear market to improve its underlying technology and forged important partnerships with the who’s who of the traditional finance ecosystem.
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Solana leaves network outages behind
On-chain analytics firm Nansen released a report, outlining notable achievements, risks, and growth prospects of the Solana ecosystem.
First and foremost, it was critical to understand that Solana’s fundamental strengths were its cost-effectiveness and fast speeds, which earned it the moniker “The Ethereum Killer”. Indeed, the transactions processed per second (TPS) on the network were in excess of 3,000, nearly 30 times that of Ethereum [ETH].
Such network advantages go a long way in attracting decentralized applications (dApps) in different realms like finance, gaming, and non-fungible tokens (NFT). However, what undermined this strength was the long list of downtime issues and network halts.
Having said that, Solana made significant improvements in this regard in 2023. Notably, it maintained a 100% uptime year-to-date according to the report.
Impressive on-chain indicators
The marked change in network stability began to have a positive impact on the chain’s liquidity. The total value locked (TVL) in terms of SOL was 27.12 million at the time of writing, more than double of what it was at the beginning of the year.
Source: DeFiLlama
While TVL remained an important indicator to gauge blockchain adoption, the analysis would be incomplete if user activity was not taken into account.
The metric DeFi velocity, or volume per dollar of TVL, measures for every dollar of liquidity, how much is transacted. Solana emerged as the most actively used network in the last week, with a DeFi velocity of 0.71. Notably, some chains with a higher TVL than Solana recorded lower DeFi velocity.
Moreover, monthly transactions on the network were stable, with a larger share of vote transactions. For the uninitiated, vote transactions are linked to a voting account that is owned by a validator. On the other hand, a non-vote transaction is a transfer of Solana that is broadcasted to the network and collected into blocks.
Nansen noted that the growing TVL and on-chain activity augured well for the future growth of Solana.
Source: Nansen
Notable achievements in recent months
It was worth noting that Solana’s robust on-chain fundamentals played a big part in cementing high-profile partnerships recently
The most significant was the agreement with payments giant Visa which involved the extension of its stablecoin settlement capabilities to the Solana chain. In fact, Visa acknowledged Solana’s advantages while announcing the partnership.
Apart from this, the introduction of Solana Pay as a new payments system on popular e-commerce company Shopify, served as another evidence of the network’s inroads into the Web2 world.
Solana’s technical prowess was recognized by peers from the Web3 community as well. MakerDAO, a leading stablecoin issuing protocol, considered using Solana instead of Ethereum for its upcoming stand-alone blockchain.
Solana needs to be wary of these
However, even though things looked good, there were certain challenges that could cast a negative influence on the Solana ecosystem.
Nansen ranked FTX’s upcoming liquidation plan, which could swamp the market with SOL tokens, as Solana’s biggest test in the coming days. SOL was FTX’s largest holding with over 71.8 million tokens in the exchange’s custody. This represented nearly 17% of SOL’s circulating supply.
Realistic or not, here’s SOL’s market cap in BTC terms
Nansen warned that if the entirety of SOL holdings were dumped in the market, SOL’s price could fall to lows seen after the collapse of the exchange last year.
Additionally, while Solana maintained a 100% uptime in 2o23 as pointed earlier, any further instances of network outage would cause a lot of damage to Solana’s credibility in the market.
