2022 has not been a good start for cryptocurrencies and to date the total market capitalization is down 21% to $1.77 trillion. by Solana (SUN) has been even more brutal, presenting a correction of 48.5% so far this year.
Solarium leads the betting charts with $35 billion in locked value, which is equivalent to 74% of SOL tokens in circulation. Multiple reasons for poor performance can be identified, including four network outages in late 2021 and early 2022.
The latest incident on January 7 was attributed to a Distributed Denial of Service (DDoS) attack, which caused the Solana Lab developers to update the code and consequently reject these types of requests.
However, investors are more concerned about the centralization caused by the costs of being a Solana validator. To achieve block times of 400 milliseconds, the recommended hardware It includes a 2.8GHz 12-core CPU, 256GB of memory, high-speed 1TB SSD drives, and a low-latency internet connection.
solana is great for a centralized corporate state synchronization machine... I just prefer real crypto and blockchain
โ UltraXBT.eth (@UltraXBT) January 29, 2022
DApp usage is on the decline
The main metric for the Solana decentralized application began to show weakness in early November after the total value locked (TVL) of the network began to remain at $15 billion.
The chart above shows how Solana's decentralized application (DApp) deposits saw a 50% decline in three months, as the indicator hit its lowest level since September 8. By comparison, Fantom's TVL currently sits at $9.5 billion after doubling in three months. Another DApp scaling solution competitor, Terra (MOON), saw an 87% increase in TVL to $23.2 billion.
On the bright side, on Feb. 21, FTX.US, the US arm of global crypto derivatives and spot exchange FTX, announced a new blockchain game drive. It's also worth noting that Solana Ventures partnered with FTX and Lightspeed Venture on November 5th to launch a $100 million fund dedicated to the sector.
To confirm whether this drop in TVL should be of concern, DApp usage metrics should be analyzed. Some DApps are not financially intensive, so the value deposited is irrelevant.
As data from DappRadar shows, on January 28, the number of Solana network addresses interacting with decentralized applications dropped by 18% on average. The only positive change was Solend, an algorithmic lending protocol.
The decline in interest in Solana DApps was also reflected in its futures open interest, which peaked at $2 billion on Nov. 6 and was recently hit by a sharp correction.
The gaming sector could be a wow factor
Although Solana has been hit the hardest compared to similar smart contract platforms, there is strong use of the network in non-fungible token (NFT) markets, as measured by 178,820 active Magic Eden addresses in the last 30 days. .
In addition, Solana Ventures' commitment to the gaming sector could further show the processing capacity of the network. For example, games make up half of the top 10 DApps on each blockchain covered by radardapp. That includes Splinterlands, which has 578,280 active addresses, and Alien Worlds, which has 544,900.
The above data suggests that Solana is losing ground to competing chains, but holders are not worried as 74% of coins are still locked into staking. As long as Solana Labs' partnerships and investments continue to show potential, there is little reason to be bearish on SOL.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
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