No Blockchain Infrastructure has been hit harder by the FTX fallout, than the Solana Blockchain. Over the past two years, Solana Blockchain has rapidly risen to be one of the largest blockchains by both market capitalization and usage. This growth was largely driven by Sam Bankman Fried who was both a massive investor and voice for the ecosystem.
Solana’s connections with FTX/Alameda
Alameda Research and FTX, owned 58.08M SOL tokens which represents nearly 11% of the Solana total supply. Between FTX bankruptcy, lockup periods, and the recent hack, it’s unclear how much of this has been dumped already versus how much will be tied up in litigation. In the past seven days, $SOL has tanked -51% in price, putting it at -94% below its all time high. It’s not entirely clear how much of this was from FTX/Alameda dumping vs. other insiders/holders dumping out of fear of the unknown.
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Aside from just the SOL token price tanking, Solana DeFi has also taken a massive hit. After hitting a high of $10.17B back in November, Solana TVL is down to just $327M according to DefiLlama, this comes off heels of the $100M+ Mango-markets hack last month. A lot of this has to do with a project called ProjectSerum, which was a top DEX on Solana and provided liquidity for other Solana protocols. Unfortunately, Project Serum was launched by SBF, apparently Serum program ‘update’ private key was controlled by FTX which makes it compromised.
Most of the top Solana dApps such as MagicEden and Phantom have dropped support for the legacy Serum protocol and the community is working on a fork. $SRM is down 58% in the last week off the news. Specifically, $soBTC and $soETH, are being dumped since they were both backed by collateral on FTX. FTX was also heavily invested in the Solana ecosystem through FTX ventures and Alameda. This includes projects such as helium which is migrating to DustLabs (team behind DeGodsNFT), and Solcialofficial (a Web3 social network).
Solana Foundation had some direct exposure of its treasury to FTX. They had $1M in assets stuck on FTX before withdrawals were paused (<1% of total treasury). They also hold 3.24M common shares of FTX trading & 3.43M in $FTT both have likely tanked to near $0. Relatively, Binance announced on Nov. 17 that deposits of Solana-based USDT and USDC have been “temporarily suspended until further notice” on the platform.Other top CEXs like; Bybit, Kraken, and OKX have also halted deposit on the USDC/USDT- Solana pair on their platforms. Circle, the Issuer of USDC and Euro Coin tweeted that there’s no issues with Issuing and Redeeming USDC.
USDC on Solana is operating as expected and there are no issues with issuing or redeeming USDC. USDC is always redeemable 1 for 1 for US dollars.
Any amount. Any time. For Free. Always.— Circle (@circle) November 17, 2022
However, Circle doesn’t offer a way for retail customers to redeem USD on-ramp USDC, assuming the regulatory risk is way too high to be worth bothering with retail. They can onboard the banks that then onboard the retail similar to Zelle’s model. The biggest safeguard for retail is that they’re able to redeem SPL-USDC through Circle, otherwise retail SPL-USDC holders are beholden to CEXs, who could close deposits, and wormhole liquidity pools which could dry up at any given time.