Why can Solana be reborn, and how should we participate?

Author: Jian Shu

The Past and Present of Solana

The background of Solana's birth: At that time, Ethereum, the "king of public chains," was undoubtedly the mainstream operating system for cryptocurrencies, boasting a large number of users and traffic. However, Ethereum also faced issues such as network congestion and high transaction fees. From the user experience perspective, Ethereum provided a poor experience, with unbearable congestion even when using DeFi applications.

• In March 2020, Solana launched its mainnet, officially claiming to be the fastest high-performance public chain. Solana's high performance and low gas fees addressed some of Ethereum's shortcomings.
• In July 2020, FTX announced it would use Solana as the underlying public chain to build its decentralized exchange—Serum.
• In October 2020, Wormhole launched, allowing assets on Solana to be transferred across chains with assets on Ethereum.
• In March 2021, Tether issued tokens on Solana.
• In June 2021, Solana completed a $314 million financing round, with investors including Alameda Research, founded by SBF.
• In November 2021, Solana's locked value reached $1 billion, which was one-tenth of Ethereum's at the same time and two-thirds of BSC's.

• In December 2021, StepN launched on Solana, and its explosive popularity allowed more users to learn about and participate in Solana.
• In February 2022, Solana surpassed Ethereum to become the blockchain with the most active developers.
• On November 9, 2022, FTX collapsed, and SOL plummeted by about 75% within a few days.

• From late August to early September 2023, Shopify and Visa announced integrations with Solana, expanding Solana's payment service landscape in the Web2 world.
• In December 2023, the Solana ecosystem revived, with locked value rising from about $300 million to nearly $1 billion within two months.

Will FTX Restart, and Will Solana Experience a Surge?

1. The Relationship Between FTX and Solana

After the collapse of FTX, Solana was immediately placed at the center of the storm, which can be traced back to the DeFi Summer of 2020. At that time, Solana was relatively unknown, just one of many public chains attempting to solve the "impossible triangle." However, SBF, co-founder and CEO of FTX and founder of Alameda Research, discovered Solana. In addition to participating in multiple rounds of financing for Solana, he also chose to build the decentralized trading platform Serum on Solana (the first decentralized trading platform on Solana) and subsequently invested in several Solana-based applications. This financial endorsement led many to associate SBF closely with Solana, with some even mistakenly believing he was the founder of Solana.

According to the latest court documents from FTX, FTX holds approximately 55.8 million SOL, over 10% of the total SOL supply, currently valued at about $3.5 billion, making it the largest cryptocurrency asset held by FTX. Additionally, FTX holds approximately $400 million worth of SOL (about 6.5 million SOL) that is in an unreleased state and will be unlocked linearly over time.

From this, we can see that FTX and Solana have a highly intertwined relationship, with FTX being the biggest supporter of Solana's development path, and Solana being the project with the most significant stake from FTX.

2. The Impact of FTX's Restart on Solana

As the FTX case temporarily comes to a close, on November 9, local time in the U.S., FTX's token FTT suddenly surged by about 90%, rising from a low of around $1.8 to a high of over $3. Meanwhile, SOL also skyrocketed from around $40, peaking at $63.95, an increase of about 60%.

The surge in FTT is mainly related to a statement made by Gary Gensler, the chairman of the U.S. SEC, during the Washington D.C. Fintech Week, where he said, "If Tom (former NYSE president, now leading a major bidding company trying to restart FTX) or others want to enter this field, I would say, do it within the legal framework."

From the holding structure, if FTX undergoes bankruptcy restructuring, SOL will undoubtedly be the biggest beneficiary aside from FTT. If FTX is simply liquidated, it would be similar to the MT.GOX liquidation, where the SOL held would create immense selling pressure, suppressing SOL's price increase; however, if FTX restarts, SOL will become FTX's most important crypto asset and resource. The successor of FTX will undoubtedly continue to collaborate deeply with SOL, promoting its development. As SOL's value grows, it will significantly help FTX overcome its financial difficulties.

On October 25, Bloomberg reported that FTX is negotiating with three undisclosed bidders to restart its trading platform, including Silicon Valley investment firm Proof Group, fintech and digital asset company Figure, and venture capital firm Tribe Capital. The company is expected to make a decision on how to proceed by mid-December. Options include selling the entire trading platform, which includes a valuable list of over 9 million customers, or bringing in a partner to help restart the trading platform. Additionally, FTX is also considering restarting the trading platform independently.

The date for deciding whether FTX will be sold or restarted is approaching. Whether sold or restructured, it is good news for Solana; as long as simple liquidation is avoided, SOL will not face significant upward pressure in the future.

Strengthening Oneself: What Are Solana's Advantages?

In every cycle of bull and bear markets, many projects fall, so why does Solana's locked value and token price perform strongly? Besides the potential impact of FTX's restart, Solana's excellent performance this year also relies on its inherent advantages.

1. Advanced Technical Principles of Solana

One of the main features of Solana's blockchain technology innovation is the introduction of a brand-new consensus mechanism, which is implemented based on the Proof of History (PoH) algorithm and a fast synchronization engine. Unlike traditional consensus algorithms that rely solely on cryptographic techniques, PoH uses a decentralized clock to establish the order of transactions and events on the Solana network. By efficiently tracking the order of these transactions, it enhances the overall efficiency of the network, which differs from other blockchains that may have ambiguous transaction orders.

Specifically, the PoH algorithm generates a series of verifiable timestamps that are stored in the blockchain ledger. Each timestamp contains the hash of the previous timestamp, creating a verifiable chain of events. This mechanism allows nodes in the network to reach consensus on the order of operations. PoH is not just a theoretical concept; it is also a timing system used to verify the order of events and the passage of time.

The Proof of History (PoH) algorithm of Solana has the following advantages:

• Scalability: PoH allows for parallel processing of transactions, creating reliable and verifiable event sequences, enabling Solana to achieve high transaction volumes.
• Speed: Solana eliminates time-consuming operations by using a decentralized clock and historical timestamps, allowing for near real-time transaction confirmations with low latency.
• Security: PoH ensures that the order of events in the blockchain network is verifiable, making it more difficult for attackers to manipulate transaction order or conduct double-spending attacks, thus enhancing the overall security of the network.
• Efficiency: The parallel processing of transactions and the high throughput achieved by Solana contribute to improved transaction efficiency and reduced marginal costs.

2. The Healthy Development Ecosystem Built by Solana

Solana's ability to rise from the ashes after the FTX collapse and become increasingly popular in the public chain competition is not only related to the superiority of its underlying public chain technology but also to its high-quality development ecosystem, which seems to be rooted in Solana's genes from the very beginning and has continuously developed, forming a virtuous cycle.

The core team of Solana has backgrounds in high-tech companies such as Qualcomm and Google, which ensures high-quality underlying code and rapid project development. Compared to the technological development progress of Ethereum, Solana's launch speed is very fast, and it has already been listed on multiple centralized exchanges.

Leveraging its Silicon Valley background, Solana is committed to building a high-quality developer ecosystem, attracting core developers from large tech companies. Solana primarily cultivates the developer community by recruiting core developers in the tech field and hosting hackathons. These activities include short-term flash events with investors and founders from around the world serving as judges, known as the "Hacker House Series."

Opportunities for Participation in the Solana Ecosystem

The Solana airdrop season is upon us, with several protocols in the Solana ecosystem, such as Jito, Jupiter, and Pyth, recently distributing airdrops. Among them, Jito's token JTO quickly launched on top exchanges like Binance and Coinbase, attracting attention. Many native top projects on Solana were just launched last year and have not yet issued tokens, which is also a reason for the recent surge in Solana's locked value.

Here are some projects in the Solana ecosystem that we selected for interaction.

1. Kamino

Introduction: Kamino is an automated compounding concentrated liquidity lending protocol incubated by Hubble Protocol, with Kamino's TVL soaring to $75M.

Interaction Methods:

• Multiply deposit SOL to obtain mSOL
• Provide liquidity with mSOL and SOL
• Borrow and lend

2. Marginfi

Introduction: MarginFi, Solana's third-largest protocol, recently saw its TVL soar from $25 million to $200 million. The protocol has officially launched a "loyalty points" program, and airdrops will likely be distributed based on these points. Additionally, Marinade is conducting an MNDE incentive program until the end of this year.

Interaction Methods:

• Borrow and lend. Borrowing $1 earns 1 point per day, lending $1 earns 4 points per day.
• Refer other users to use MarginFi to earn 10% of the points from the invited user.

3. Drift Protocol

Introduction: Drift Protocol is Solana's first derivatives protocol, an on-chain cross-margin perpetual futures trading platform, which completed a $3.8 million seed round led by Multicoin Capital. Currently, the protocol has paused new user registrations due to an influx of users.

Interaction Methods:

• Deposit SOL into the protocol
• Trade on the exchange
• Provide liquidity to Drift liquidity providers (DLP)
• Stake in the insurance fund
• Borrow and lend

4. Zeta Markets

Introduction: Zeta Markets is an under-collateralized DeFi derivatives trading platform that allows users to effectively hedge against risks from crypto market volatility and extreme events. The protocol has launched a points system called Z-Score, with tokens distributed based on points, though the distribution ratio is not specified.

Interaction Methods:

• Trade on the exchange. The larger the trading volume, the more reward points earned.
• Keep an eye on official events. Holding certain NFTs at specific times can earn additional points.

5. Magic Eden

Introduction: Magic Eden is a cross-chain NFT marketplace supporting NFT trading for BTC, Ethereum, Solana, and Polygon. Magic Eden has raised a total of $160 million, with a valuation of $1.6 billion.

Interaction Methods:

• Trade and mint NFTs on the platform
• Experience the games above

6. Tensor

Introduction: Tensor is an NFT marketplace platform in the Solana ecosystem, also featuring an official points system (similar to BLUR). In the last bull market, SOL NFTs had a significant impact and are currently on the rise.

Interaction Methods:

• Buy and sell NFTs from the top 100 collections (points are related to the quantity of buying and selling, not the amount)
• Complete loyalty points tasks
• Purchase and stake Tensorian NFTs

7. Cega

Introduction: Cega is a decentralized alternative derivatives protocol that builds exotic options structured products for retail investors. It has raised a total of $9.3 million, with a valuation of $60 million.

Interaction Methods:

• Use Cega's options products

8. Parcl

Introduction: Parcl is a RWA leveraged trading platform built on Solana, which has completed a total of $11.6 million in financing.

Interaction Methods:

• Deposit into the protocol
• Provide liquidity
• Leverage trade RWA

9. Phantom

Introduction: Phantom is the most popular wallet on Solana, with over 3 million users.

Interaction Methods:

• Download and use the Phantom wallet
• Trade tokens using Phantom
• Complete DRiP Phantom tasks

10. Squads

Introduction: Squad is a multi-signature management tool based on Solana, which has completed $15.7 million in financing.

Interaction Methods:

• Create a multi-signature address
• Deposit tokens (you can refer to the airdrop standards of multi-signature wallets like Gnosis Safe, which distribute airdrops based on the amount and duration of deposited funds)

11. Bonfida

Introduction: A domain service platform on Solana.

Interaction Methods:

• Trade domain names, with brand airdrops.