Solana Update: FTX, Alameda & Impacts on SOL!

The collapse of FTX and Alameda research Has done serious damage to the crypto Market and it seems that Solana was one Of the most affected crypto projects Now this makes sense given that Solana Was the de facto exchange chain of FTX And that both FTX and Alameda were big Investors and participants in Solana’s Ecosystem today I’m going to give you a Quick recap of Solana tell you what’s Been going on with the project and Examine whether soul will survive the FTX Alameda meltdown Foreign I want to start with some Transparency and that’s that I no longer Hold Soul as part of my crypto portfolio If you’re subscribed to My Weekly Newsletter you’ll know that Soul Accounted for almost eight percent of my Portfolio until last weekend note that You can find the link to my Weekly Newsletter in the description Now my decision to sell Seoul was based On many factors including the current State of the crypto Market but there is No denying that the FTX Alameda Situation was top of mind for me now I Must also stress that this is not Financial advice it’s just my opinion And you will obviously have yours That said I will give both a bearish and A bullish case for Solana in today’s Video that’s because there does seem to Be some hope for Soul on the horizon it

Just looks very far away from where I’m Standing that’s just my perspective Though and I would love to get yours in The comments section Now as many of you will know Solana was Founded in 2017 by former Qualcomm Engineer Anatoli yakovenko the Solana Blockchain was built by Solana Labs Which is based in the United States and Its ongoing development is coordinated By the Solana Foundation which is based In Switzerland Solana raised 25 million dollars across Various icos between 2018 and 2020 and Raised an additional 314 million dollars From crypto VCS last year FTX and Alameda research were two of the largest Investors in Solana and were two of the Largest investors in Solana’s ecosystem That is crypto projects building on Solana This is because Solana’s original goal Was to become a decentralized Alternative to centralized stock Exchanges like the NASDAQ now this is a Goal that FTX and Alameda founder Sam Bankman freed could get behind given That his end game was also to displace The existing institutions with his own Infrastructure Solana’s main net went live in 2020 and Its blockchain is still technically in Beta recent comments by Anatoly suggest That Solana May soon be entering its

Alpha stage which is surprising given That the Solana blockchain continues to Experience issues more about all that Later on Under the hood the Solana blockchain Uses a novel proof-of-stake consensus Mechanism that timestamps transactions Using a technology called proof of History This consensus mechanism makes it Possible for the Solana blockchain to Process up to 65 000 transactions per Second until recently the Solana Blockchain was secured by almost 2200 Validators Solana’s validate account was just 1850 When FTX and Alameda collapsed this Suggests that FTX and Alameda were Running lots of Solana validators Note that Solana transactions are Processed by clusters of up to 150 Validators now Seoul is the native Cryptocurrency coin of the Solana Blockchain like all cryptocurrency coins Seoul is used to pay for transaction Fees fifty percent of every transaction Fee is burned with the other half going To validators obviously Seoul is also Used for staking staking rewards are Currently around eight percent for both Validators and delegators with a Five-day lockup there is no minimum Stake for validators or delegators Though the hardware requirements for

Running a validator are very high Misbehaving validators are also slashed Staking Soul as a delegator can be Easily done using the phantom browser Extension wallet which also acts as a Gateway to Solana’s ecosystem The Phantom extension has been Downloaded over two million times on Chrome and dap Radar’s data suggests That Solana’s dapps have at least half a Million monthly active users The focus of Solana’s ecosystem was Initially defy this was in large part Due to FTX which had its own D5 project Called project serum What’s crazy is that the order book Based serum decks lay at the heart of Solana’s entire defy ecosystem providing Liquidity and pricing data to many other Major defy protocols to my knowledge Most of serum’s liquidity came from FTX And Alameda now the massive drawdown in The total value locked in Solana’s D5 Protocols following terrorist collapse In May therefore suggests that this is When FTX and Alameda started to Experience the issues that ultimately Led to their collapse you can learn more About the FTX and Alameda situation Using the link in the description I Digress Now it’s barely been three months since I last covered Solana but a lot has Happened since then and not just stuff

That’s related to Alameda and FTX Shortly after our last update a group of Solana projects announced the creation Of a cross-chain messaging protocol if You watched our Cosmos update from Around that time you’ll know the Announcement seems to have been a not so Subtle response to cosmos’s announcement About its upcoming interchange security To my mind Solana’s subsequent Announcement underscored the multi-chain Future of crypto Institutional cryptocustodian fire Blocks also announced that it had added Support for Solana D5 protocols and Solana nfts in case you missed the memo Solana was becoming increasingly popular With institutions This was in large part due to Solana’s Close relationship with FTX and Alameda In early September a crypto project Called sui announced that it had raised 300 million dollars from various crypto VCS now this is significant because sui Has its roots in Facebook’s failed Digital currency project DM AKA Libra Just like Aptos and Aptos is considered By many to be a Solana killer this Arguably makes sui a Solana killer too This is in part because both sui and Aptos are coded in move a novel Programming language developed by DM’s Developers Move is based on the rust programming

Language used by Solana but is much more Developer friendly or so I’ve heard For those who don’t know sui and Aptos Are considered to be Solana Killers Because they’re all backed by the same Entities FTX Ventures was a big investor in both Aptos and sui and Aptos co-founder Mohammed Sheikh confirmed in an Interview that the project was working Very closely with FTX Fortunately for Solana Aptos and suey’s Exposure to FTX so early on in their Development could set them back quite a Bit Unfortunately for Solana it’s even Higher exposure to FTX could mean that It will be the crypto project that picks The shortest straw more on that in a Moment Anyways another Solana related Announcement in early September came From coinbase whose Cloud division spun Up archival nodes for the Solana Blockchain this is significant because Solana’s full transaction history was Only being stored on Google bigtable Which made it quite centralized In mid-september SEC chairman Gary Gensler said that proof-of-stake Cryptocurrencies could be Securities Although Gary’s comment was likely about Ethereum’s transition to proof of stake Solana Labs was recently accused of

Selling securities that is soul which Could put it at risk At the end of September the helium Community voted to migrate its Peer-to-peer networks from the helium Blockchain to the Solana blockchain this Is something we had predicted in one of Our earlier Solana updates Were it not for the FTX Alameda Situation this would have been bullish For hnt however the FTX Alameda Situation we’re in has made helium Solana integration incredibly bearish For hnt and not just because it’s a part Of Solana’s ecosystem Back in February helium raised 200 Million dollars in a funding round Co-led by you guessed it FTX Ventures At the end of September Circle also Announced that it would be expanding its Usdc stablecoin to five additional smart Contract cryptocurrencies and Introducing its own cross-chain Interoperability protocol Now this is evidence that circle is Moving away from Solana which is Apparently the official chain for usdc In early October the Solana blockchain Experienced yet another outage this time It was due to a misconfigured validator Node For context most of Solana’s outages Have been due to spam transactions Facilitated by its blockchain’s fixed

Transaction fees which are extremely low In mid-october Aptos announced its Mainnet launch and if you watched our Video about the project you’ll know that The launch was pretty badly botched it Still boggles my mind that a project With so much funding and backing managed To make so many mistakes but hey let’s Not go there at the end of October a Crypto project called trip protocol Announced it would be creating a Decentralized alternative to ride Sharing apps like uber built on Solana Now this is the kind of dap that could Reach Serious Mass adoption and it’s Such a damn shame that it’s been set Back by recent events In early November almost half of Solana’s validators went offline after a German cloud service provider called Hetzner banned all crypto companies and Projects from using its services The huge impact this had on the Solana Blockchain raised even more questions About Solana’s supposed decentralization Luckily for Solana this bearish news was Quickly overshadowed by all the bullish News that came out of Solana’s annual Breakpoint conference in Lisbon the Biggest news was that Google Cloud had Begun running a validator on Solana Which logically means that Google had Purchased lots of soul Google Cloud also announced that it had

Released software to index Solana’s Transaction history which you’ll recall Is being stored on Google bigtable now This is significant because Anatoly had Mentioned in earlier interviews that it Was extremely difficult for developers To analyze Solana’s transaction history Helium also announced that it was Building out a mobile network and would Be giving out sim cards with a free 30-day trial to everyone who purchased Solana’s upcoming Saga phone Helium also recently partnered with Telecom’s giant T-Mobile to increase 5G Coverage in rural areas another great Initiative now under threat now the Announcement that everyone seemed to Miss was that Solana’s neon layer would Be launching sometime in December if You’ve been keeping up with our Solana Updates you’ll know neon supports the Ethereum virtual machine or evm evm Compatibility could supercharge Solana’s Adoption as a cherry on top Circle Announced that it would be bringing its Recently released Euro stablecoin to the Solana blockchain next year making Salon The second smart contract cryptocurrency To support Euro C after ethereum this Suggests that Circle hasn’t given up on Solana just yet And then FTX and Alameda blew up not Surprisingly the price of every single Cryptocurrency that FTX and Alameda had

Invested in instantly plummeted as ftx’s De facto exchange chain Seoul was at the Top of the list Souls price was only the tip of the Iceberg however as its entire ecosystem Also went into crisis mode loans were Liquidated wrapped tokens issued or Backed by FTX and Alameda depeged the Total value locked in Solana’s D5 Protocols fell off a cliff The upgrade keys for project serum and The serum decks were revealed to be in The hands of FTX causing the community To Fork what was left of the protocol S also feared that nearly a billion Dollars of souls set to be unlocked Would be sold Now their fears were calmed after the Solana Foundation announced it would be Postponing the unlock of the 30 or so Million Soul once again though calling Solana’s decentralization into question To add insult to injury Google Cloud Announced that it will also run Validator nodes for the Aptos blockchain And that it had partnered with the Project for a developer accelerator Program the timing couldn’t have been Worse given the circumstances So as you can see Souls price was Holding up quite well until the FTX Alameda situation Now this is impressive considering that Seoul’s supply has increased by around

15 million since August Assuming an average price of around 30 Dollars per Soul this means sole Experienced up to 500 million dollars of Cell pressure On the demand side it seems that Solana’s nft marketplaces were absorbing Most of this Supply shock institutional Investment vehicles for Seoul also still Have more than 100 million dollars Invested at seoul’s current prices This is scary considering some of these ETFs were seemingly issued with the help Of FTX What’s even scarier is that analytics on The Solana Explorer show that Transactions on Solana have fallen off a Cliff over the last week The Silver Lining is that the analytics Also suggests that drop in Solana’s Validate account was due primarily to Hetzner’s crypto ban and not the FTX Alameda situation In any case it’s clear that the demand For Seoul is down and it’s easy to Understand why some have begun to Question Solana’s future and this is in Large part due to the massive amount of Soul that FTX and Alameda will be forced To sell when the time comes to Compensate their creditors According to the coindesk article that Kick-started the concerns about FTX and Alameda’s balance sheets Alameda held

Roughly 1.2 billion dollars of soul in June assuming the price was around 40 Dollars per Soul at the time this works Out to around 30 million Soul held by The market maker As for FTX recent leaks suggest the Exchange held around 1 billion dollars Of Soul as of a few weeks ago assuming An average price of around 33 dollars Per Soul this means that FTX held an Additional 30 or so million sold Now it’s not clear how much Soul FTX and Alameda currently hold for what it’s Worth these numbers are consistent with The recent disclosures by Solana labs And the Solana Foundation about their Exposure to FTX and Alameda Solana labs And the Solana Foundation sold a total Of 58 million sold to FTX and Alameda Over the course of more than two years At current prices this sole is worth Roughly 900 million dollars and accounts For more than 15 of seoul’s total Supply While not all the sole held by FTX and Alameda is liquid the fact of the matter Is that it will inevitably be sold at Some point as part of their bankruptcy Proceedings as I mentioned a few moments Ago Seoul managed to survive half a Billion dollars of cell pressure over The last three months however this Assumes that the 14 million sold that Entered circulation were were sold which Is unlikely this means that soul may not

Be nearly as resilient to cell pressure As it seems More importantly the demand for Seoul is Not nearly what it was even just two Weeks ago this could make it difficult To absorb the hundreds of millions of Dollars of cell pressure that’s coming And that’s just from FTX and Alameda There are certainly other institutions And Retail investors who will sell their Soul never mind all the promising Solana Projects that will die because of their Exposure to FTX and Alameda to make Matters worse the bottom of the crypto Bear Market probably isn’t in yet this Means that Seoul will go lower even Without all the cell pressure from these Entities its long-term price chart Suggests Seoul could fall to eight Dollars this would be consistent with The estimated percentage loss in other Large alts now if you’re wondering how Long this crypto bear Market will last Be sure to check out our video about That from a few months back I reckon it Still holds true and we’ll be doing Another video about the potential Catalyst that could take us out of the Crypto bear Market lows in the next week Or two so stay tuned Now whether soul will ever rally back to Its all-time highs and Beyond depends on The Project’s upcoming Milestones these Can be found in an October blog post on

The Solana GitHub and in interviews with Solana founder Anatoly yakovenko The October blog post in question is Called quote Solana Network upgrades and It appears to have been published in Response to the outages Solana had Experienced earlier that month The next Milestone on the list is the Introduction of different fee markets For different types of transactions After that Solana will be increasing the Size of the blocks on its blockchain This should make Solana even faster but It will likely make its blockchain even More centralized and could further Compromise its security as a result More about the trade-offs of TPS using The link in the description the third Milestone noted in the blog post is Compact vote state which can be simply Understood as reducing the size of Certain transactions This could further increase Solana’s TPS While protecting against some of the Centralization and security issues that Could arise from the Block size increase Now what’s funny about these Milestones Is that they’re eerily similar to Aptos’s Milestones Aptos is currently Working on implementing different fee Markets for different types of Transactions Solana’s inspiration Doesn’t stop at transactions either That’s because a repository on the

Solana GitHub suggests that it’s looking To make it possible to build on its Blockchain using the move programming Language this is significant because the Difficulty of building on Solana has Been one of the Project’s biggest Drawbacks The Solana GitHub also contains many Repositories related to on-chain Governance something that’s been in the Works for a while Now I don’t imagine Solana is in a rush To roll out its on-chain governance now That a significant chunk of souls Supply Is in limbo via FTX Alameda and other Affected crypto VCS speaking of which Anatoly dropped a bombshell about Solana’s development during a panel Discussion at the Project’s Aforementioned breakpoint conference Earlier this month He basically said that he will consider Solana to be out of beta once a second Validator client has been completed Now this is huge news that seems to have Flown under everyone’s radar because of The FTX Alameda situation to be fair Anatoly only said that he would consider Solana to be out of beta at that point Not that it necessarily would be even so It’s the closest thing we’ve got to an Alpha timeline thus far The thing is that Solana still seems to Be unreliable and its blockchain and

Especially its ecosystem seem to be in a More vulnerable position than ever This makes it hard to understand how Solana could be considered complete when It’s still experiencing so many issues This brings me to my concerns about Solana and my first concern has to do With Solana labs and the Solana Foundation specifically their balance Sheets The blog post detailing their exposure To FTX and Alameda suggests that the Solana Foundation only has around 100 Million dollars of cash on hand In case you’re wondering the foundation Only had around one million dollars of Cash on FTX when it collapsed however it Had 200 million dollars worth of ftt and SRM sitting there these tokens are now Essentially worth nothing along with the 3.2 million shares of FTX the foundation Also holds Frustratingly the blog post didn’t Reveal how much runway Solana Labs has But Anatoly mentioned on Twitter that it Has enough money in the war chest for Another 30 months or so Anatoly specified that this Runway is in Dollars which begs the question of how Much Soul Solana Labs holds Anatoly also Confirmed that Solana Labs had no assets On FTX which is certainly good news The bad news is that FTX and Alameda Were the primary money funnel for the

Solana ecosystem what’s more is that Solana’s association with FTX and Alameda could make its ecosystem Unattractive to other VCS What this means is that the Solana Foundation and Solana Labs might be the Only entities willing to invest in Solana’s ecosystem for a while and the Cash they currently have on hand won’t Be nearly enough This means they might have to start Selling Seoul which would cause its Price to fall even further This relates to my second concern and That’s regulation as I mentioned earlier The SEC is watching proof-of-stake Cryptocurrencies very closely and Solana Labs is already involved in a security Suit The fact that the SEC and others are now Investigating FTX means that Solana Could come under additional scrutiny Now my final concern about Solana is Straightforward and that is competition Anatoly admitted in an interview that The Solana team is anxious about Aptos And sui because of how developer Friendly they are Aptos and sui also Have an absurd amount of big Tech Backing due to their DM Origins there Are also other smart contract Cryptocurrencies like polka dot near Protocol Avalanche cardano and ethereum Which are fundamentally fighting for

Dominance of the same critical crypto Niche These crypto projects aren’t nearly as Exposed to FTX and Alameda as Solana was And continues to be Now with all that said there is one Thing that gives me hope for Solana and That’s all the promising projects in its Ecosystem make no mistake helium trip Protocol and others have the potential To change the world Soul will benefit immensely if they Succeed assuming they stay on Solana of Course All Solana must do is survive the bear Market now I am confident that it can But I also know that soul will likely be Going a lot lower before the Bulls Return When the time is right I may start to Accumulate Soul again assuming Solana Hasn’t been sucked into the hellish Vortex at FTX Alameda and SPF are headed For One thing’s for sure though and that’s That Solana will be much better off Without their influence Thank you


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