The Solana blockchain was one of the most successful "Ethereum killers" until its close connection to and support by Sam Bankman-Fried undercut trust.
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Crushed late last year by its close association with disgraced FTX CEO Sam Bankman-Fried, the Solana blockchain staged a roaring comeback — rising 60% over the last week and nearly 300% in the past three weeks.
Solana's native SOL token hit $24.75 this week, briefly pushing its market capitalization past competing Ethereum-killer blockchain Polygon's MATIC to enter the top 10.
That's up from a seven-day low of $15.37 and 30-day low of $8.14 on Dec. 29. It closed out the year down almost 95%.
Still, SOL has a ways to go to make up the ground it lost as FTX collapsed into bankruptcy. Between Nov. 6, when Binance CEO Changpeng "CZ" Zhao announced his exchange was selling off all of its FTX-issued FTT tokens and Nov. 9, when Zhao announced he wouldn't buy FTX to save it from collapse, SOL lost two thirds of its value. CoinMarketCap is owned by Binance.
FTX declared bankruptcy on Nov. 11, and Bankman-Fried was arrested in The Bahamas on Dec. 12.
SBF Support Turns Toxic
Bankman-Fried was a strong supporter of the Solana ecosystem, and had backed it heavily. While the Solana Foundation had no more than $1 million locked in the FTX bankruptcy, it nonetheless lost heavily, as its treasury was rich with Bankman-Fried stock and tokens.
That included about 3.25 million shares of FTX Trading's stock, 3.4 million FTT tokens, and almost 135 million SRM tokens from the Project Serum DEX launched by Bankman-Fried on Solana.
On Nov. 1, those FTT tokens were worth almost $90 million; now they're worth less than $9 million. The SRM tokens also collapsed with FTX, down about 80%, but staged a big comeback this weekend, regaining more than half of what it lost on Jan. 14.
But just Bankman-Fried's support was damaging. On Nov. 18, Tether announced it was burning $1 billion worth of Solana-based USDT stablecoins to move them to Ethereum. A day earlier, exchanges Binance, OKX and Bybit announced they would no longer accept the Solana versions of USDC and USDT without explanation — although Binance backtracked on USDT (SOL).
Serum was the main liquidity provider in the Solana DeFi ecosystem, but it had to shut down when FTX was hacked for $477 million during its transition into bankruptcy, as it was discovered that a private key that would let hackers introduce code changes was stored at FTX and had to be considered compromised. It was hard-forked, reopening as OpenBook but still using the SRM token.
Already a Bad Year
Solana had already been plagued with problems, most notably a series of major outages dating back more than a year.
These have raised reliability questions to the point that in September, Solana co-founder Anatoly Yakovenko admitted that they were the blockchain's "curse."
And in October, a leading Solana DEX and crypto lending DeFi Protocol, Mango Markets was hit with a $114 million exploit that drained its coffers and forced it to freeze deposits and withdrawals. It reopened after the hacker revealed himself to be Avraham Eisenberg, who called the attack a "highly profitable trading strategy" and claimed it was legal.
He nonetheless agreed to give back $67 million for a promise not to press charges. While the Mango Markets team agreed, the U.S. Department of Justice did not, and arrested Eisenberg for market manipulation on Dec. 23.
