Experienced cryptocurrency investors know — and novices need to learn — that technology is vital in how this asset class functions.
That’s not the case with fiat currencies, and with more digital assets being linked to the blockchain, technology is taking on an increasingly prominent role in the crypto universe. And as is the case with any emerging technology, there are sure to be hiccups along the way.
One occurred last week when the Solana blockchain shut down for 17 hours as it was overwhelmed by transaction volume. Solana, also known by the ticker “SOL,” is one of this year’s best-performing digital tokens, but the outage took a bite out of the high-flying asset.
“A smart contract blockchain focused on high throughput and low fees, Solana faced a major production issue this week as a surge in transactions overwhelmed validating nodes and halted block production,” according to ARK Investment Management. “On (last) Tuesday, unable to produce new blocks Solana froze, preventing token holders from moving funds and Solana-based decentralized apps from functioning. Responding to the emergency, core developers and node operators coordinated with a software patch and a full restart of the network.”
The 17-hour window in which Solana couldn’t be bought or sold came at a time when the token was rounding into form, buoyed by the decentralized finance (defi) boom and increasing interest in non-fungible tokens (NFTs), which are sold on crypto blockchains. Solana is the seventh-largest digital asset with a market value of $36.8 billion as of last Tuesday.
“Despite centralization concerns, users have given Solana a try. Total DeFi (Decentralized Finance) value locked on Solana crossed $10 billion, and its NFT ecosystem has heated up. Notable among Solana’s supporters are cryptocurrency exchange FTX, which created both a decentralized exchange and an NFT marketplace on its platform, as well as venture capital investors including Multicoin Capital, Polychain Capital, and Andreesen Horowitz,” notes ARK Invest.
Overall, the Solana commotion is a reminder that there will be bumps on the road to broader crypto adoption, but it’s also worth noting that the shutdown was caused by volume, indicating that this is an issue the blockchain can work through as technological advancements are realized.
“While ease of use might top users’ priorities in the short term, ARK believes that ultimately decentralization and security will create the most value for blockchain technologies,” adds ARK.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.