Rapid growth, hidden vulnerabilities, and the memcoin boom: what happened to Solana (SOL) in 2024?
In early August 2024, the Solana network even surpassed Ethereum (excluding L2 solutions) in monthly trading volume on decentralized exchanges, with $55.8 billion versus $53.8 billion, respectively — a first in the crypto industry.
The same applies to the value of the platform's native cryptocurrency, SOL, which has shown significant growth due to the rapid increase in demand for the asset. According to a report by Binance Research, in July alone, the SOL exchange rate grew by more than 30% and surpassed Bitcoin (BTC) and Ripple (XRP) on this indicator.
As of August 2024, the price of the SOL cryptocurrency is $150, which is still 44% below its all-time high (ATH) of $260 in November 2021. However, in the last year alone, the SOL exchange rate has risen more than 480%.
Regarding capitalization from 2023 until August 2024, Solana has been in the top four for a long time, repeatedly overtaking Binance Coin (BNB). Still, after the last major correction in the crypto market, it lost ground, closing the top five cryptocurrencies. Nevertheless, in 2023, VanEck analysts predicted that the Solana cryptocurrency would be among the top three as early as 2024.
Solana-ETF expectation
After adopting the spot Ethereum-ETF at the end of May 2024, analysts said that the next in line would be Solana. Until recently, it was among the three most prominent altcoins by capitalization, not counting the USDT stablecoin. Experts at VanEck, a significant investment company providing spot Bitcoin-ETF and Ethereum-ETF trading, predict that Solana-ETF will be launched soon.
Such discussions followed the U.S. Securities and Exchange Commission's decision to exclude the SOL cryptocurrency from the list of assets that constitute securities. After that, some large investment companies filed applications to launch a spot Solana-ETF. Meanwhile, it became known that Solana-ETF would be launched in Brazil on the local stock exchange.
However, BlackRock, the most significant investment company in the world, which manages about $10 trillion in assets, believes that investors' and funds' optimism about the launch of spot Solana-ETFs is premature. As the main argument, Robert Mitchnik, head of digital assets at BlackRock, cites the significant gap between the capitalization of the top two crypto market leaders and other altcoins. For example, while the capitalization of the leading altcoin, Ethereum, occupies about 15% of the total crypto market, Solana is just over 3%.
Memcoin boom on Solana
The Solana blockchain has shot to the forefront in terms of memcoin creator activity. This is mainly due to the high speed and cheapness of transactions (which significantly reduces the cost of creating meme tokens) and the ease of launching such assets. For example, in June 2024 alone, creators issued about 450,000 meme tokens on the Solana blockchain.
In addition, special tools for Solana-based meme-token creators, such as Pump.Fun and MakeNowMeme allow them to issue an asset literally in a couple of clicks. The latter even allows the creation of meme tokens by publishing tweets on social network X. These tools have become so popular that even the head of one of the most famous platforms in the crypto industry, Nansen, released his own meme token.
It is also worth considering that Solana, thanks to its performance and low transaction costs, is famous not only among meme-token creators; its ecosystem is also actively used by large companies for their purposes. For example, the world-famous asset management company Hamilton Lane created the world's first private credit fund based on the Solana blockchain called SCOPE in July 2024. In the same month, the decentralized trading platform AgriDex conducted the first agricultural transaction on Solana.
Hidden vulnerability in Solana and blockchain validators
In August 2024, a representative of the Laine validator in the Solana ecosystem announced that a critical vulnerability discovered by developers in the blockchain had been addressed. To avoid compromising the vulnerability and allowing attackers to exploit it, Solana Foundation technicians contacted the network's largest validators through closed private channels, alerting them to the exploit and then relaying instructions on how to fix it the next day.
The media published information about the hidden vulnerability only after more than 70% of validators performed an update, thus eliminating possible risks to the ecosystem.
Earlier in July, the Solana Foundation announced blocking validators involved in sandwich attacks against traders. This attack involves validators conditionally placing traders in a narrow price range on DEX exchanges, preventing them from profitably buying or selling an asset — hence the attack's name.
Given the decentralized nature of the blockchain, the Solana Foundation cannot suspend malicious nodes on the network without the support of the entire validator community. Still, it can exclude them from the delegation program. In such a case, rogue validators can continue participating in the Solana network consensus and process transactions. Still, they will not be able to receive funding, which is one of the primary sources of revenue for validators.
Also, earlier in May 2024, 77% of validators voted to eliminate the fee-burning mechanism that the community proposed in SIMD-0096, after which node operators began to receive the total fees paid on the network. In the long run, this could hurt Solana, as the burn mechanism has been holding back the rate of SOL issuance to some degree, and now this cryptocurrency has become inflationary.
