The Origin of Solana: How Alameda and FTX Brought SOL into the Abyss

Author: Jeff Albus, Blockworks; Translation: Baishui, Golden Finance

The first part of this article can be clicked on "The Origin of Solana: How to Turn Ideas into Reality?"

In 2021, Solana's ecosystem seems unstoppable as it expands at an astonishing pace. Funds are pouring into DeFi projects such as Serum, Raydium, and Mango Markets. NFT markets like Magic Eden are beginning to compete with Ethereum rivals such as OpenSea, and the network's transaction volume has reached historic highs. However, behind this rapid rise lies a precarious dependency: Alameda Research and FTX.

Both companies were founded by the now-imprisoned Sam Bankman-Fried (SBF), one of Solana's earliest and most influential supporters. Alameda participated in multiple funding rounds and acquired a large number of SOL tokens. FTX hosted the Solana Hackathon and played a key role in the launch and maintenance of Serum, a decentralized exchange and one of Solana's flagship apps.

At first, the deep entanglement with FTX was an indisputable advantage. Bankman-Fried, who was seen as a visionary at the time, became one of Solana's most outspoken supporters, often touting its superiority over Ethereum. This partnership has helped Solana attract liquidity, developers, and institutional credibility. However, this also means that Solana's fate is closely tied to FTX's success. **

**In November 2022, everything fell apart almost overnight. There are reports that FTX has $8 billion in holes in its balance sheet, ostensibly due to the reckless financial behavior of Alameda and its founder, SBF. Panic spread quickly. FTX customers withdrew their funds one after another, triggering a liquidity crisis that the exchange could not afford. Within days, both FTX and Alameda had collapsed, taking billions of dollars in customer funds and razing Sam Bankman-Fried's empire to the ground.

The catastrophe was catastrophic for the entire crypto industry, but no blockchain suffered more than Solana. Fearing that the crash could spread further, investors sold off their holdings. The price of SOL has fallen sharply from its all-time high of nearly $250 a year ago. While the bear market was the main reason for this decline, the collapse of FTX caused its price to drop further to around $9.77.

DeFi activities on the network dried up immediately. Serum, operated by FTX, collapsed, forcing traders to look for alternatives. The broader Web3 community has raised doubts about the stability of Solana, as it has experienced network outages in the past, now referring to it as 'Sam's chain,' a blockchain that is too close to the sun and is now destined to gradually fade from people's view. Nevertheless, the crash did not last as long as some had expected. Solana rebounded to above $20-24 in the following weeks, although its price remained in a long-term stagnation for most of the next year.

**The psychological blow can be more severe than the financial loss. Developers who build projects on Solana question whether the network will survive. Venture capital firms that were once eager to fund Solana startups have retreated, turning their attention to the promise of Ethereum and L2. But even as the walls close, Solana's loyal core community steadfastly refuses to give in. A small group of loyal creators, validators, and users are convinced that the technology itself is reliable, and they insist on continuing to build and promote it. But is their belief alone enough?

Solana series article preview: Comeback. How Solana overcomes difficulties, reborn from the fire, and recaptures the position of Web3 powerhouse.