Solana: One Hack Too Many (SOL-USD)

Overview

Solana (SOL-USD), the fast-growing blockchain often referred to as the “Ethereum-killer,” uses a unique proof-of-stake consensus and proof-of-history with timestamps. This hybrid of proof-of-stake and proof-of-history makes Solana a fast blockchain; the timestamps allow very fast sequencing of validators. Solana’s block time is 400 milliseconds, handling up to 50,000 transactions per second. Network fees on Solana are also very cheap. Low gas fees and high network throughput make many dApp developers prefer to build their dApp on Solana.

Following the popularity of NFTs, Solana has seen a slew of NFTs minted on its blockchain. Popular NFT marketplaces, including SolSea and Magic Eden, are built on Solana.

A Fast Network Plagued With Outages

Solana has suffered a handful of major network outages since its launch in 2020; three of the major outages occurred this year. The outages are the result of either a misconfigured node, bugs in Solana’s code, or the network getting overwhelmed by artificial traffic from bots.

In one recent network outage between September 30 and October 1, Solana’s blockchain went off for about 6 hours. Stakewiz.com, a Solana validator operator, tweeted that a misconfigured node caused an unrecoverable partition in the Solana network, and urged validators to participate in finding consensus on the relevant data to restore the network.

In September 2021, Solana went offline for nearly 18 hours. These outages have recurred several times over the past year. In early May, the Solana network froze for about seven hours until validators restarted it; NFT minting bots flooded the network. There was also a network outage in June, which lasted about four hours.

Lasting Solution to Solana Network Outages

Solana’s network outages have been a major cause of concern to its founder, developers, and users. Anatoly Yakovenko, Solana co-founder, believes that a lasting solution is imminent. Yakovenko admits that the network outages are Solana’s biggest challenge, and the Solana team has made finding a lasting solution to the outages the number one priority.

Firedancer, a validator client, is being developed by Jump Crypto to drastically increase Solana’s network throughput and efficiency. Firedancer will be a fully independent, second validator client for Solana. Solana claims that having a second independent validator client will increase the network’s decentralization. However, some critics point to Jump Crypto’s investments in Solana and the fact that it has carried out numerous bailouts of the network. One of the most notable was a $320 million bailout by Jump Crypto during the Wormhole bridge hack. However, the hack was not a Solana hack but related to how the Wormhole bridge connected to Solana.

Solana Million-Dollar Hacks

Hacks are not a new occurrence in the cryptosphere. Solana has suffered its fair share of hacks. Mango Markets, a Solana-based DeFi protocol, lost over $100 million in the latest attack. The attacker manipulated a price oracle; this enabled the attacker to manipulate the price of the protocol’s governance token MNGO and to take under-collateralized cryptocurrency loans.

The attack led to a drop in the Total Value of assets Locked (TVL) on Solana by as much as 24%, in the twenty-four hours following the attack; TVL dropped from $1.32 billion to $985 million and has continued to drop.

Interestingly, the attacker has since sent an ultimatum to the Mango community. Posting a proposal on Mango’s DAO platform, the attacker demands the Mango treasury use its $70 million, available in USDC, to repay bad debt. The hacker has promised to send stolen MNGO and SOL tokens to an address provided by the Mango team if the proposal is passed. The attacker has, however, voted in favour of the proposal using millions of the stolen tokens; the proposal, so far, has over 99% of votes in favour. The proposal is yet to reach the required approval quorum for it to be passed.

In early August, a widespread hack also hit the Solana network. Wallets were drained of SOL, USDC and other Solana-based tokens. Over $4 million worth of coins were stolen.

Final Thoughts: Is Solana Worth it?

Network outages occur to blockchains once in a while. Ethereum, for example, suffered an outage in November 2021 when the Ethereum infrastructure provider’s outdated client software was affected by an unexpected code change in Ethereum. However, the frequency of Solana’s network outages is becoming a real concern to users of the network. Solana is a very promising blockchain, which has taken a top spot among Layer-1 blockchains in a very short time.

However, it’s undeniable that Solana’s system is currently flawed. Though I still own Solana, I believe other L1 could surpass it in the future unless something changes. Cardano (ADA-USD) or Algorand (ALGO-USD) are two strong candidates.

Solana is known for rising up from nothing very fast, and it is often said that it has sacrificed efficiency in favour of growing faster. In contrast, these hacks are less common in a network like Cardano, where everything is peer-reviewed.

So is now a good time to buy Solana? Ultimately, I think so. For those who follow my work closely, I believe we have been in a crypto correction for over a year. Moreover, I believe that we are nearing the end of the bear market based on various metrics I’ve discussed before, including the halving cycle and a possible pivot in Fed policy.

On top of that, based on my chart analysis of Solana, I expect the coin to break all-time highs in the next bull market. With that said, the latest issues have made me look into diversifying into other L1 solutions. Cardano has always been my favourite, but I am now also considering Algorand closely.

Solana is not falling behind, which is also clear when we look at Solana’s analytics. Active addresses, for example, have fallen considerably in the last few months.

Ideally, I would like to see Firedancer become a lasting solution to Solana’s outage problems. If it does, I believe Solana will see an unprecedented increase in dApps development on its network, thereby winning a large share of the dApps and NFT markets.

Solana was one of the best-performing coins in the last bull run, and it has the reputation and infrastructure to continue to gain market share, but we need to see developers take these recent issues seriously and provide real solutions.