Solana, often called the “Ethereum killer,” suffered another major outage on the 22nd of January.
With a speed of around 50,000 transactions per second and one of the lowest gas fees, Solana is often considered the preferred blockchain for NFT and DeFi (Decentralised Finance), but this latest outage has again raised doubts about its stability and scalability.
What was the latest outage?
The latest issue faced by Solana users was reported by the Twitter account @SolanaStatus on the 22nd of January as caused by liquidation and arbitrage bots submitting a large number of transactions.
Solana is the preferred blockchain for liquidation and arbitrage that involves the quick buying and selling of assets (coins and tokens) to make a small profit.
Programs called ‘bots’ have been created to automate this process. These bots spam the network with hundreds and thousands of transactions intending to make a net profit in the end. To understand this topic, watch this Whiteboard Crypto video here.
The recent massive fall in the prices of crypto assets triggered these bots that started to congest the network with transactions. This put a big load on the validators causing transactions to drop for legitimate users.
Think of it this way. Let’s say you go to a restaurant and order some food. You get it in ten minutes of placing the order. Now imagine you arrive at the same restaurant, but this time they are busy on the phone taking orders from other customers. Since the kitchen is backed up with orders, your food now arrives in thirty minutes. We can imagine this snowballing into something much worse if the phone never stops ringing and if customers call in only to place the same orders again. This is a hypothetical situation but you get the idea.
This latest outage was caused by these bots (phone customers) placing duplicate transactions (repeat orders) that caused the network to slow and transactions to fail.
What was the impact?
The outage caused a lot of users to lose money since their positions had to be liquidated. They were later reimbursed by Solend.
This also impacted the price of Solana, which was already under a lot of selling pressure. As of January 31, Solana trades at $90.52, having dropped from $172 at the beginning of January, making it the biggest loss-making crypto along with Avalanche.
Since the outage, Solana has released version 1.8.14, which attempts to mitigate the worst effects of this issue. They will also make several other improvements in the next 8-12 weeks.
It would appear that the current market opinion is not favorable for Solana but the blockchain community looks at these problems as technical challenges which will ultimately result in strengthening the blockchain.
There is certainly interest in Ethereum alternatives, which is evident from the fact that Solana outperformed Ethereum in 2021 and continues to grow in the DeFi space.
It will be interesting to see how well Solana does this year, given a shaky start and the release of Consensus, the new Ethereum release in Q2 of this year.