Solana Blockchain Activity Remains High Despite FTX Collapse

Despite the collapse of crypto exchange FTX, activity on the Solana blockchain remains high, according to a report from Citi Research. Active addresses and daily non-fungible token (NFT) trading volume have returned to levels last seen before the collapse, despite 50 million solana (SOL) tokens being locked in FTX’s Chapter 11 proceedings.

Developers Still Active on the Chain

In an effort to promote adoption of the new cryptocurrency, developers have been airdropping free tokens to Solana holders. The largest NFT collection, DeGods, left the chain last month due to doubts about the network's future, though, and this has led to a decrease in users and developers.

At the end of 2020, Solana’s token went through a “slow burn lower” before slumping by 20% on December 29th. This changed when Ethereum founder Vitalik Buterin expressed his support for the blockchain, causing the price of SOL to almost double in the following weeks.

Solana Foundation's Exposure to FTX

The Solana Foundation said it has tens of millions of dollars in cryptocurrencies stranded on FTX, as well as 3.24 million common stock shares in Sam Bankman-Fried’s bankrupt crypto exchange. The Foundation held 134.54 million SRM tokens and 3.43 million FTT tokens on FTX when withdrawals went dark on November 6, which were worth around $107 million and $83 million one day before the freeze.

Many trading projects on Solana used wrapped assets called “Sollet assets” as stand-ins for bitcoin, ether and other non-native cryptocurrencies. FTX was believed to be the issuer and backer of these assets, and its collapse has sent them into a spiral and shouldered a handful of protocols with bad debt. The total exposure to Sollet-based assets on Solana was valued at approximately $40 million as of November 10, 2022.

The Solana Foundation itself appears to have avoided the worst of the crisis, as it held less than $1 million of its balance sheet on FTX when withdrawals ceased. The Foundation also lost no SOL to FTX.

Final Thoughts

FTX’s collapse last week continues to reverberate through Solana, with sell pressure on the price of SOL down 57% in a week. Trading funds, exchanges and crypto projects large and small have been disclosing their exposure to FTX and Alameda in light of the firms’ sudden downfall.

In light of this, the Solana Foundation has been cautious in its approach to FTX, and is determined to protect the interests of its users. However, the future of Solana is still uncertain and will depend on the ability of its developers to incentivize users and developers to stay.