TVL and SOL price have been brutally adjusted by 50% vs. ATH – What can Solana do to help turn the tide?

The crypto market got off to a good start in 2022. So far, the total market cap is down 21% to $1.77 trillion. The adjusted SOL is even more brutal, showing a 48.5% year-to-date correction.

SOL (green), ETH (orange), AVAX (purple), BNB (yellow) | Source: TradingView

Solana tops the staking leaderboard with $35 billion, which is 74% of SOL tokens in circulation. There are many reasons why the network is inefficient, e.g. B. Four network outages in late 2021 and early 2022.

The last issue on January 7th was attributed to a DDoS (Distributed Denial of Service) attack, which forced Solana Lab’s developers to update the code and thus deny these types of requests.

However, investors are more concerned about centralization due to the cost of being a validator on Solana. The hardware is sufficient to achieve a block time of 400 milliseconds recommendations includes a 2.8GHz 12-core CPU, 256GB of memory, a high-speed 1TB SSD, and a low-latency internet connection.

“Solana is great for a centralized state synchronization engine… I love real crypto and blockchain,” user UltraXBT.eth tweet.

dApp usage is declining

Solana’s main index of decentralized applications (dApps) began showing weakness in early November after the total network value (TVL) gradually declined from $15 billion.

Total blocked on the Solana network | Source: Defillama

The chart above shows that Solana dApp deposits are down 50% in 3 months, reaching the lowest level since September 8th. Meanwhile, Fantom’s TVL is now at $9.5 billion after doubling in 3 months. Another dApp scaling solution competitor is Terra, whose TVL grows 87% to $23.2 billion.

On the other hand, FTX.US, the United States affiliate of the FTX spot and futures exchange, announced a new blockchain gambling division on Feb. 2. It’s also worth noting that on Nov. 5, Solana Ventures partnered with FTX and Lightspeed Venture to raise a $100 million fund for the sector.

To confirm whether a decrease in TVL is a concern, the dApp usage metrics should be analyzed. Some dApps are not financially intensive, so the deposit value does not matter.

Data in the chain 30 days of dApps on Solana | Source: DappRadar

According to data from DappRadar, the number of addresses on the Solana network interacting with decentralized applications decreased by an average of 18% as of January 28. The only positive change is Solend, an algorithmic lending protocol.

The decline in Solana dApp interest is also reflected in futures open interest, which peaked at $2 billion on Nov. 6 and was recently hit by a sharp correction.

The gambling sector can be an element of surprise

Despite being the hardest hit compared to similar smart contract platforms, Solana is still being used sustainably across all NFT markets, with Magic Eden having 178,820 active addresses over the past 30 days.

In addition, Solana Ventures’ bet on the gaming sector shows the processing power of the network. For example, games make up half of the top 10 dApps on each blockchain DappRadar Monitor. Of these, Splinterlands has 578,280 active addresses and Alien Worlds has 544,900.

The data above shows Solana losing ground to competing chains, but holders aren’t worried as 74% of the coins are still active. As long as Solana Labs’ partnerships and investments continue to show potential, there’s no reason to drop SOL’s price.

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