Try Quests to earn cryptoSolana Outages
Solana as one of the large-cap blockchains in the crypto space has experienced multiple outages since its launch two of which being in the recent months. In this analysis, the effects of these outages on the price of SOL and the activity of the network's users have been evaluated.
Solana is a third-generation blockchain that provides a variety of decentralized finance (DeFi) solutions, the development of decentralized applications (DApps), and smart contracts. Solana uses a proof-of-history (PoH) consensus mechanism which enables the network to achieve a high transaction per second throughput.
Although it is currently one of the large-cap blockchains in the space, there are concerns over the security and decentralization of the network which resulted in multiple outages of the blockchain since its launch in 2020. According to the Solana Status webpage, there has been a major outage in January of 2022 which lasted for multiple days. Recently, there were two outages from April 30 to May 1 and the 1st of June.
In this analysis, the effects of the recent outages on the price of Solana, and the activity and the health of the network in terms of user engagement have been evaluated.
The required data for this analysis have been collected from both solana and ethereum schemas. The price of wrapped SOL has been calculated using the fact_hourly_token_prices table of the ethereum.core schema.
For the analysis of swaps, the data in the fact_swaps table has been used. USDC and USDT were considered as the dominant stablecoins on the network to further analyze the volume of the swaps during the measured period.
To analyze the activity of different protocols on the network, the data on the fact_events table were used. The number of transactions for both the program_id and the event_type was calculated as a measure of user engagement with the network.
For the comparison of DeFi and NFTs, the swaps data has been selected from the fact_swaps table as a representative of DeFi activity and the NFTs sales data has been selected from the fact_nft_sales table as representative of NFT sector activity.
>USCD address: EPjFWdd5AufqSSqeM2qN1xzybapC8G4wEGGkZwyTDt1v > >USDT address: Es9vMFrzaCERmJfrF4H2FYD4KCoNkY11McCe8BenwNYB > >Time frequency: 2 months (last 60 days)
In the following chart, the price of SOL in addition to the daily percentage change of the price compared to the previous day has been plotted over the last 2 months. As it is demonstrated in the chart, the SOL coin has been losing nearly two-thirds of its value in the course of the last 60 days.
Regardless of the overall price movement, it can be seen that after the first outage on April 30 which lasted till the next day, the price at first saw a near 5% drop and then recovered around 2.5% in the next few days after the incident. The price crash which began on May 6, is largely due to the Terra crash which brought down the whole crypto market throughout the week until May 12. After the second outage on June 1st though, the price drastically dropped from slightly above $46 to below $40 territory in the next few days. Since then, it has been in the same range and is struggling to get back to higher prices.
It is worth mentioning that the whole crypto market has been in a downtrend since the beginning of April for ten consecutive weeks. Thus, the overall downward price movement of Solana cannot be solely due to its recent outages and it can be linked to the overall lack of interest in the crypto as a whole.
The graph of the number of swaps over the price of SOL in the last 2 months has indicated that in general, after every major price movement, the number of swaps increases. More specifically, After the first outage, the number of swaps increased to even hit its local high at nearly 7.5M swaps on May 14. This huge jump can be regarded as the Terra crash which placed an enormous amount of fear, uncertainty, and doubt (FUD) over the market and forced people to liquidate many of their holdings. Interestingly, after the second outage on June 1st, the number of swaps has also increased to the same level as before the incident. However, the network has seen the number of swaps drop to half in the last few days.
In the next three charts, the swaps volume of USDC and USDT as the two largest and major stablecoins on the Solana network has been evaluated. The first chart demonstrates the volume of the swap from and to these two stablecoins in the last 2 months. The volume of swaps both from and to these coins was decreasing during the first outage while it increased in the following days. On the other hand, the volume of the swap has steadily decreased after the second outage which indicates a major dissatisfaction among the users of the network. The swaps fluctuations between May 6 and May 13 were affected by the Terra crash. The daily total swaps volume shown in the second chart has indicated that USDC is the dominant stablecoin in the Solana network by a large margin compared to USDT.
The swaps volume net flow of USDC and USDT has been demonstrated in the following chart. It can be seen that during the days when the outage occurred, the stablecoins had a higher inflow which indicates a lack of confidence by the users and their preference to swap their assets into stablecoins.
The chart below demonstrates the number of transactions in the DeFi sector vs the NFT sector. Although both of these sectors have had a similar trend in terms of upwards and downwards movement in the whole cycle, there have been periods when they acted opposite of each other. One such example is during the Terra cash in May. Considering the outages, the NFT sector saw a drastic drop compared to the DeFi sector in the following days. However, it recovered and surpassed in the next week of the incident. After the second outage in June, the NFT sector saw a rise in its activity in contrast with the drop in the DeFi sector.
In the following graph, the number of transactions for each event on the Solana blockchain has been depicted. As it can be seen on the chart, the transfer event has had the largest share among all the events. Without a surprise, during the days of both outages, the number of transfers massively dropped but recovered the next day to even reach a local high. After the second outage in June, although the network shortly recovered, it has seen a constant drop since then. Surprisingly, the number of create and createAccount events saw a major surge during the first outage which can be interpreted as the high level of interest in the network even in its downtime.
In conclusion, the analysis of Solana network outages has demonstrated that the reaction of users greatly depends on the overall market sentiment. During and after the first outage from April 30th to May 1st, although the network's activity dropped, it recovers and even reached a local high level in the next few days. The market had been in a downtrend since the beginning of April at that point, however, the sentiment was not as bearish as after the second outage which happened after the Terra crash and the massive drop of all assets across the crypto market. Currently, the FUD is all over the market and the Terra incident has shown that even a large-cap project can crash to zero even in its stable state. While these outages continue on the Solana network, users will lose their interest in the network over time and prefer to move their assets into more stable and secure networks.
The analysis of the number of transactions on each protocol has indicated that the users of each one had a different response to the outages. Almost all of the protocols lost a large portion of their user's activity during the first outage. Protocols such as Serum and Raydium were not able to properly recover and their market share declined further even after the outage. Meanwhile, projects like Mango Markets and Jupiter gained a massive surge after the first outage. The second outage has had a similar outcome in terms of protocol activity. After June 1st, Serum had a massive drop and while it was able to slightly recover, it has continued to lose its market dominance. Again, Mango Markets and Jupiter were the biggest winners of the last outage and although they lost a percentage of their share, they fully recovered in the following days and continue to grow.