SOL Struggles As Network Falls Victim Of Its Own Success

Solana’s native cryptocurrency, SOL, has stalled after climbing above $200 for the first time since December 2021. The native token of the scalability-focused blockchain network pulled back after an unprecedented rally that saw the altcoin gain over 1,100% in six months. 

Beginning in October 2023, SOL surged from $17.34 and rallied to $209.9 by March 18, 2024. Solana’s rally marked one of the most impressive crypto performances between Q4 2023 and Q1 2024.

It attracted significant attention to the network, matching with an influx of developers creating new projects on the Layer 1 blockchain network.

Notably, Q1 2024 marked a significant period in Solana’s evolution. It became a hotbed for several innovative blockchain projects, including various types of memecoins.

All of a sudden, Solana became the center of the DeFi world, with the total value locked (TVL) in the blockchain network’s ecosystem surging from $1.417 billion on January 1, to $4.779 billion as of April 3, 2024, according to data from DefiLlama.

While Solana’s TVL soared, the influx of activities on the blockchain pushed its trading volume to levels it had never experienced. Before this period, the highest trading volume on the Solana network was $563.11 million, which the network experienced on November 9, 2022.

With the current surge in the Solana ecosystem, the trading volume surpassed this level as early as the first week of December 2023. Subsequently, the trading volume skyrocketed, rising exponentially, reaching an all-time high (ATH) of $3.497 billion by March 16, 2024.

The skyrocketing trading volume on Solana signified a swell in the number of transactions happening on the blockchain’s network. It also reflected the increasing number of users in the Solana ecosystem enabled by the growing number of projects launching on the network.

It is essential to note that the surge in transaction volume on Solana happened over a relatively short period. Hence, the network could not adjust effectively to accommodate the surge. Consequently, this led to the current network congestion that Solana blockchain users are experiencing.

The congestion has caused transactions to fail and made it difficult for Solana users to perform basic tasks. It has also triggered complaints from several users, especially some well-known maximalists of the network.

One such Solana maximalist is the Helium Foundation’s head of protocol engineering identified as Noah on X. While venting his frustration in a recent post, Noah said: 

“Solana sucks completely to use right now, No one would argue against that .” 

Noah continued by saying the path to scaling is wrought with landmines, noting that it doesn’t do any good to ignore, or wordsmith around them. He advised Solana devs to detonate the landmines early and loudly before we have hundreds of millions dependent on the infrastructure.

Noah’s post echoed the opinion of a renowned crypto trader identified as Moon on X. In his post, Moon asked if users are allowed to say that Solana sucks.  The post attracted several comments, with most respondents in agreement. 

The crypto trader further explained that trades on the Solana network work well because users can increase their fees.

However, he highlighted that users sending coins from one wallet to another find it difficult to execute transactions. Moon noted that such users cannot set custom fees for their transactions, leaving them stuck with the current network issues.

Solana’s congestion issues have lasted for a few weeks, and builders on the network have cast blame on certain apps and startups. Nonetheless, the network’s core devs appear to have identified the main reason behind the issues. They also seem to have found a sustainable solution to the problem.

In a rundown post on X, the Solana Foundation Head of Strategy Austin Federa noted that the issues stem from the implementation of the QUIC protocol. According to Federa, The problem can be attributed to a known issue that worsened due to “unprecedented demand.”

The Head of Strategy described the issue as a “tech debt,” clarifying it was a solution on their development roadmap to be addressed.

However, he noted that the rate at which the demand for Solana increased came unexpectedly. According to him, it flipped from ‘adequate but needing improvement’ to ‘inadequate’ in a matter of days.

Federa further explained that Core protocol developers across Solana’s ecosystem are working as swiftly as possible to implement and test improvements in the networking stack.

He believes doing so would address the current network congestion. He cited developers from Anza, Firedancer, Jito, and other core contributors among those working to resolve the issue.

The ongoing congestion has impacted Solana in several ways, including a drop in the price of its native cryptocurrency. SOL has dropped over 20% since March 20, when it reached a yearly high of $209.9. So, Solana’s price prediction has changed.

The Layer 1 blockchain network’s token has failed to regain previous momentum despite several attempts at rebounding. SOL traded for $174.32 at the time of writing, having bounced off local support at $162.27 on Wednesday, according to data from TradingView.

Solana’s TVL and trading volume also suffered the impact of the current network congestion. The blockchain solution’s TVL has dropped from its $4.779 billion two-year high to $4.357 billion at the time of writing.

During the same period, Solana’s trading volume dropped from a record-high $4.779 billion to $1.069 billion, according to data from DefiLlama.

With a solution in sight, many crypto users, especially those inclined to the Solana ecosystem believe the network would reclaim its trajectory. A timely resolution of the issue could coincide with the anticipated Bitcoin halving which crypto users expect to trigger another round of crypto market rally.

Therefore, finding a solution to the Solana congestion problems could benefit users in multiple ways. It could solve the primary problem and improve the networks scalability, at the same time boosting the market sentiment around the blockchain network’s native token.

Perhaps SOL may embark on a new phase of its upward trajectory in line with the anticipated crypto bull cycle.