The Solana Ecosystem

The Solana ecosystem has been making the headlines over the last week due to its connection with FTX. But what is the Solana ecosystem, and what has it actually got to do with FTX? Solana is a layer 1-based, highspeed blockchain which relies on a specific proof-of-stake consensus mechanism known as “proof of history.” This generates a much higher throughput than other blockchains such as Ethereum, processing over 50,000 transactions per second.

Solana’s transaction speeds have made it an incredibly attractive blockchain for NFT marketplaces, dApps and exchanges, not least FTX. Since the collapse of FTX, Solana’s TVL has declined 56%, but why? Sam Bankman Fried was a prominent endorsee of Solana. The Solana Foundation and Solana Labs sold 58.08M SOL tokens to Alameda Research and FTX Trading, representing nearly 11% of Solana’s total supply.

The fall of Bankman Fried has led to a loss of trust in Solana, with its native token falling to $12 at this time of writing, along with many other DeFi-related tokens. Furthermore, Solana-based decentralized exchanges Raydium and Orca have seen liquidity losses of 40%. Although this is unquestionably a major setback for the Solana ecosystem, how it responds could reveal its true value.

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