Solana News Can't Help SOL Soar. What's Next for the High-Speed Layer 1?

Key Takeaways

• Solana made a variety of huge statements at Breakpoint this weekend, however SOL stopped working to respond.
• Solana has actually dealt with lots of difficulties over crypto winter season, consisting of continuous interruptions and a decrease in DeFi activity.
• While Solana has problems to get rid of and competitors to deal with, it stays among crypto's greatest and most appealing communities.

Solana is among a number of Layer 1 networks to have actually suffered in the sustaining crypto winter season. Bright skies might return, Chris Williams composes.

Solana Makes a Splash at Breakpoint

It was a huge weekend for Solana as the Layer 1 network hosted the 2022 edition of its Breakpoint conference. When it comes to SOL? Not a lot.

The countless Solana fans that gathered to Lisbon for the Layer 1 blockchain's flagship occasion were dealt with to numerous huge statements throughout the conference. Probably the most significant one came Saturday when Google Cloud exposed that it was running a Solana validator and would begin indexing Solana information by means of its BigQuery item in early2023 Google Cloud will likewise make Solana offered by means of its Blockchain Node Engine to assist users run their own nodes in the cloud. Per CoinGecko information, SOL instantly rallied double digits past $38 as the statement broke, however the momentum didn't last. It's considering that cooled by 5.5%, trading at around $34 today.

SOL/USD (Source: CoinGecko)

In a various method to other blockchains such as Ethereum, the numerous engineers operating in the Solana community have actually concentrated on structure items for the mass market. An example of such an item is its Saga phone, which intends to be the world's very first Web3-ready mobile phone. Solana revealed at Breakpoint that it would deliver the item to designers as quickly as next month.

USDC company Circle likewise appeared at Breakpoint, revealing that it would make its Euro Coin using readily available on Solana in the very first half of2023 Euro Coin is currently reside on Ethereum. Circle likewise exposed that its upcoming cross-chain procedure would support Solana.

Arguably GameFi's the majority of prepared for title, Star Atlas designers shared an early demonstration for the video game at Breakpoint. Solana's high-speed abilities (it declares to procedure 65,000 deals per second) might make it a prime prospect for the Web3 video gaming area, however as there are no leading titles readily available to play today, it's uncertain just how much development groups have actually made-- and whether Solana will end up being a center for the specific niche. Games normally take years to establish, so it might be a long time up until Solana's GameFi environment gets.

The State of Solana DeFi

Like much of the crypto area, Solana has actually had a rocky year, not least in its DeFi community.

Solana topped $10 billion in overall worth locked as SOL neared $260 in November 2021, around the time of the inaugural edition of Breakpoint.

The overall worth secured Solana DeFi (Source: Defi Llama)

However, Solana DeFi has actually taken a pounding this year thanks to crashing market value, liquidity flying to other networks, and ruthless token unlock schedules watering down the worth of a few of the community's stars of2021 According to Defi Llama information, today the overall worth locked on Solana is around $968 million, which is somewhat less than Avalanche's $1.31 billion and a portion of Ethereum's $3229 billion. If the numbers do not considerably alter in the future, Solana might discover that it flourishes in other locations. It's likewise worth keeping in mind that the overall worth locked has actually stayed more steady in SOL terms this year, down around 54% from its June 2022 peak to approximately 31.3 million SOL.

Notably, Solana now tracks the Ethereum Layer 2 network Arbitrum in overall worth locked terms, and just somewhat leads ahead of Optimism. If Layer 2 continues to grow at its present speed, Solana might discover that it's not just in competitors with other Layer 1 networks for liquidity.

Both the Mango Markets and Solend exploits were possible due to low liquidity levels on their platforms, that made it much easier for whales to control their markets to get outsized loans. While Solana procedures are developing services to such issues, the network's DeFi environment might continue to encounter concerns as long as liquidity is low.

While Solana DeFi is down, without a doubt the greatest criticism fixed the network is over its duplicated blackouts. Solana has actually experienced hours-long downtimes on several events over the previous 2 years, most significantly in September 2021 when it decreased for 18 hours. Solana has actually been struck by 4 significant blackouts in 2022, with the most current downtime last month happening due to a misconfigured node.

Though interruptions have actually been a consistent issue for the network, Solana Labs CEO Anatoly Yakovenko has actually stated that an upcoming upgrade will avoid such events in the future. If Solana can get rid of the issue as he assures, the network ought to remain in a far better position by the next crypto market boom.

Leveraging High Speeds and Low Costs

While Solana DeFi might remain in a depression, the exact same can't be stated for the network's NFT environment.

With the 2nd most significant NFT community behind Ethereum, Solana has actually constructed a fast-growing neighborhood of so-called "JPEG lovers." This year, collections like DeGods and y00 ts have actually taken the NFT scene by storm, trading at countless dollars on the secondary market in spite of negative market conditions.

DeGod #4833(Source: DeGods)

Solana has actually likewise drawn in lots of huge names from the digital art world. At Breakpoint, Metaplex revealed that it would release "immersive 3D NFTs" from Beeple on Solana, taking a significant branch off from Ethereum. pplpleasr, another leading artist in the NFT area, has actually likewise formerly introduced Solana NFTs. Where much of the traditional attention over non-fungible digital antiques has actually been on Ethereum, NFT locals have actually seen that activity is growing on its greatest rival network. The next NFT bull cycle might look various to the last one now that Solana's NFT neighborhood and facilities have actually gotten a lot speed throughout the bearishness.

Solana likewise appears to be familiar with its standing in the GameFi world due to its high-speed, low-priced abilities. Breakpoint included a whole day committed to the buzzy sector, which was where Star Atlas and other groups flaunted their newest development to a jam-packed space of prospective Web3 players.

What's the Future for Solana?

While the network has difficulties to conquer, it's perfectly clear that numerous favorable advancements are originating from the network. The different statements made at Breakpoint show that gifted business, artists, and tasks are taking an eager interest in the Solana network regardless of the troubles it has actually dealt with.

It's likewise worth mentioning that Solana and SOL aren't the only victims of crypto winter season. While SOL is down around 86.9% from its peak after surpassing in 2021, numerous other Layer 1 networks have actually suffered comparable losses. DeFi has actually likewise taken a whipping throughout the board, with Ethereum coming out greatest. Historically, Ethereum's rivals-- often called "Ethereum Killers"-- have actually seen activity subside and their tokens pass away off in bearish market, however none has actually had as numerous favorable advancements as Solana has actually done over current months.

Perhaps the best obstacle ahead for the network depends on its competitors. The brand-new Layer 1 networks Aptos and Sui, both established by previous Meta workers, have actually been compared to Solana owing to their guarantee of high speeds, and both tasks have actually raised nine-figure war chests this year. Aptos, which declares it can process 100,000 deals per second through its Move shows language, released with a token airdrop last month and anticipation for its development is high. Sui is likewise thought to be preparing its own airdrop. Capital is ruthless in crypto; if these tasks effectively record the area's attention, they might wind up surpassing Solana on the next market rally.

As with other leaders of what's ended up being called the "alternative Layer 1" area, Solana will likewise quickly have competitors in the type of Layer 2 networks. Arbitrum and Optimism's quick development this year has actually shown that liquidity will flood to Layer 2 if Ethereum prospers, and numerous other Layer 2 jobs are yet to release in earnest.

Still, Solana has among crypto's most active and fastest-growing environments with numerous appealing advancements on the horizon. Regardless of its concerns, it's clear that the network isn't going anywhere anytime quickly. When it comes to SOL, while the energy token might not be moving today, that's not unusual for crypto bearish market-- nevertheless favorable the news cycle looks. As soon as belief turns to bullish, however, there's excellent factor to think that SOL might see the advantage.

Disclosure: At the time of composing, the author of this piece owned ETH and numerous other cryptocurrencies.

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Why Olympus DAO can’t sustain its growth

Ethereum › DeFi

Olympus DAO is the first decentralized reserve currency protocol with over 1,000% APY.

Cover art/illustration via CryptoSlate

Olympus DAO was hit hard by the recent market sell-off, with OHM trading as low as $32 on March 9, down 97.7% from its all-time high of $1,415 set last April.

Olympus DAO is a decentralized reserve currency protocol, which will automatically issue OHM based on the value of the cryptocurrency. As of the end of October, staking OHM was over 8,000% APY, and is currently at 1,039%. However, both its TVL and token prices have plummeted in the face of such high APY.

What stopped OHM from continuing to grow?

Olympus DAO Controls Its Own Liquidity

According to Footprint Analytics data, Olympus DAO reached a peak TVL of $860 million by attracting users to stake and create LP tokens at over 1,000% APY. However, due to the market sell-off, TVL has fallen straight down to an equilibrium state and currently stands at $260 million, a 70% drop.

Footprint Analytics – TVL of Olympus DAO

Olympus DAO is the first protocol to use a bond mechanism to create an alternative to the “liquidity mining” model, providing liquidity by issuing OHM at a discount and creating LP tokens, creating the concept of “protocol-owned liquidity”.

Olympus DAO supports three types of user actions: staking, bond buying, and selling.

Bond purchases are a unique mechanism of the Olympus DAO that allows users to purchase discounted OHM from the treasury by backing assets such as wETH and DAI. However, getting the discounted OHM requires paying the corresponding value of treasury assets such as wETH and DAI, and requires a waiting period of 2 to 5 days to fully obtain the purchased OHM.

In addition to treasury-backed assets, users can also pay LP tokens in exchange for discounted OHM, typically liquidity pair tokens associated with OHM, such as OHM-DAI LP. With stablecoins forming the LP token, this ensures that the treasury can control most of the liquidity and earn a fee by way of the LP token.

As a result, the capture of LP tokens and the stake function of OHM allow Olympus DAO to capture 99.8% of OHM liquidity.

Screenshot source – Olympus DAO website

Adopting the Prisoner’s Dilemma Model of Game Theory

The Olympus DAO attracts a large number of users because of its (3,3) economic model, which comes from the famous “Prisoner’s Dilemma” model of game theory.

The three behaviors of stake, bond, and sell design a (3,3) economic model. When all users participate in the stake, it can achieve a win-win effect for users and the protocol, that is the state of (3,3). However, the reason why users are willing to buy and stake OHM is due to its high staking income.

Screenshot source – Olympus DAO website

When obtaining OHM by purchasing bonds, users will pay assets such as wETH, DAI, and FRAX to increase Olympus’ treasury funds to support the value of OHM. The growth of the Olympus DAO treasury combined with the agreement to control 99.8% of OHM, then the OHM of the inherent 1 DAI can have a market price that is hundreds or even thousands of times higher.

A higher APY would also mean a higher premium, which would lead to a large amount of OHM as an incentive for inflationary output. At the same time, there will be a lot of OHM mining and selling operations in the market, and the price of OHM and the pledged APY of the agreement will also decrease. In the worst case, it may fall to a (-3,-3) phase. This means a corresponding loss for both Olympus DAO and users.

In this model, users who enter at the right time can earn high short-term returns, but the greedy tokenomics created with the APY can also be driven by human nature. Therefore, high returns are not maintained for a long time.

OHM Prices Are Free Floating and Determined by the Market

The price of OHM is backed by DAO’s treasury assets (such as wETH, DAI, and FRAX). Underlying logic:

• When the price of OHM rises, the protocol pushes down the price by issuing additional OHM.
• When the OHM price drops, the agreement will buy back and destroy the OHM, pulling the price back up.

As clear from the Footprint Analytics chart, OHM is highly volatile. Two peaks of over $1,100 were recorded, but as of March 9, the price was at an all-time low of $32.60.

Footprint Analytics –  OHM of Price

An analysis of the main upside and downside factors through OHM’s coin price movements.

OHM price increases:

• Olympus has introduced a bond feature that allows users to buy discounted OHM to form LP tokens and earn between super 1000% and 8000% APY.
• The rewards earned by users are compounded 3 times a day, accelerating the growth of the asset pool.

OHM prices fall:

• More users staking OHM will also cause OHM prices to fall.
• OHM’s prices are largely maintained by new purchasers.
• There is currently no practical use for OHM—the demand for OHM comes from users who want to use OHM to obtain high APY and provide liquidity for OHM trading pairs, pegging their LP tokens to discounted OHM.
• On January 17, a whale sold off 82,526 OHM coins (worth $13.3 million at the time), triggering a drop to a new low.

In contrast to the Lido stake protocol, where users do not need to lock in tokens such as ETH or LUNA to receive a stake reward at a 1:1 price for stETH or stLUNA, the reward for staking wETH or DAI at Olympus is OHM, which is still very risky as the price of OHM is highly dependent on market factors.

Summary

Still, in its early stages, Olympus DAO leads the project with a (3,3) model that requires users to participate together in placing bets, and it only makes sense if there are no rebels among all OHM stakers.

It is, therefore, more difficult to create a dynamic and balanced trend in an ever-changing cryptocurrency market. And users who want a high APY need to take a higher risk.

Date and Author: Mar. 2022, Vincy,

Data Source: Footprint Analytics –  Olympus DAO Dashboard

This piece is contributed by the Footprint Analytics community.

The Footprint Community is a place where data and crypto enthusiasts worldwide help each other understand and gain insights about Web3, the metaverse, DeFi, GameFi, or any other area of the fledgling world of blockchain. Here you’ll find active, diverse voices supporting each other and driving the community forward.

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Fed Can’t Stop Prices From Going Up Anytime Soon, But There’s Good News, Too

Jeffery S. Bredthauer, Associate Professor Of Finance, Banking and Real Estate, University of Nebraska Omaha.

____

 

The Federal Reserve has begun its most challenging inflation-fighting campaign in four decades. And a lot is at stake for consumers, companies and the U.S. economy.

On March 16, 2022, the Fed raised its target interest rate by a quarter point – to a range of 0.25% to 0.5% – the first of many increases the US central bank is expected to make over the coming months. The aim is to tamp down inflation that has been running at a year-over-year pace of 7.9%, the fastest since February 1982.

The challenge for the Fed is to do this without sending the economy into recession. Some economists and observers are already raising the specter of stagflation, which means high inflation coupled with a stagnating economy.

As an expert on financial markets, I believe there’s good news and bad when it comes to the Fed’s upcoming battle against inflation. Let’s start with the bad.

Inflation is worse than you think

Inflation began accelerating in fall 2021 when a stimulus-fueled demand for goods met a COVID-19-induced drop in supply.

In all, Congress spent USD 4.6trn trying to counter the economic effects of COVID-19 and the lockdowns. While that may have been necessary to support struggling businesses and people, it unleashed an unprecedented bump in the US money supply.

At the same time, supply chains have been in disarray since early in the pandemic. Lockdowns and layoffs led to closures of factories, warehouses and shipping ports, and shortages of key components like microchips have made it harder to finish a wide range of goods, from cars to fridges. These factors have contributed to a worldwide shortage of goods and services.

Any economist will tell you that when demand exceeds supply, prices will rise too. And to make matters worse, businesses around the world have been struggling to hire more workers, which has further exacerbated supply chain problems. The labor shortage also worsens inflation because workers are able to demand higher wages, which is typically paid for with higher prices on the goods they make and the services they provide.

This clearly caught the Fed off guard, which as recently as November 2021 was calling the rise in inflation “transitory.”

And now Russia’s war in Ukraine is compounding the problems. This is mostly because of the conflict’s impact on the supply of gas and oil, but also because of the sanctions placed on Russia’s economy and the ancillary effects that will ripple throughout the global economy.

The latest inflation data, released on March 10, 2022, is for the month of February and therefore doesn’t account for the impact of Russia’s invasion of Ukraine, which sent US gas prices soaring. The prices of other commodities, such as wheat, also spiked. Russia and Ukraine produce a quarter of the world’s wheat supply.

Gas prices have soared in recent weeks. AP Photo/Rich Pedroncelli

Inflation won’t be slowing anytime soon

And so the Fed has little choice but to raise interest rates – one of its few tools available to curb inflation.

But now it’s in a very tough situation. After arguably coming late to the inflation-fighting party, the Fed is now tasked with a job that seems to get harder by the day. That’s because the main drivers of today’s inflation – the war in Ukraine, the global shortage of goods and workers – are outside of its control.

So even dramatic rate hikes over the coming months, perhaps increasing rates from about zero now to 1%, will be unlikely to make an appreciable impact on inflation. This will remain true at least until supply chains begin to return to normal, which is still a ways off.

Higher interest rates may reduce demand for new cars and trucks. AP Photo/David Zalubowski

Cars and condos

There are a few areas of the US economy where the Fed could have more of an impact on inflation – eventually.

For example, demand for goods that are typically purchased with a loan, such as a house or car, is more closely tied to interest rates. The Fed’s policy of ultra-low interest rates is one key factor that has driven inflation in those sectors in recent months. As such, an increase in borrowing costs through higher interest rates should prompt a drop in demand, thus reducing inflation.

But changing consumer behavior can take time, and it’ll require more than a quarter-point increase in rates at the Fed. So consumers should expect prices to continue to climb at an above-normal pace for some time.

Higher interest rates also tend to reduce stock prices, as other investments like bonds may become more attractive to investors. This, in turn, may lead people invested in stock markets to reduce their spending because they feel less wealthy, which may help reduce overall demand and inflation. The effect is minimal, however, and would take time before you see the impact in prices.

The good news

That is the bad news. The good news is that the US economy has been roaring at the fastest pace in decades, and unemployment is just about down to its pre-pandemic level, which was the lowest since the 1960s.

That’s why I think it’s unlikely the US will experience stagflation – as it did in the 1970s and early 1980s. A very aggressive increase in interest rates could possibly induce a recession, and lead to stagflation, but by sapping economic activity it could also bring down inflation. At the moment, a recession seems unlikely.

In my view, what the Fed is beginning to do now is less taking a big bite out of inflation and more about signaling its intent to begin the inflation battle for real. So don’t expect overall prices to come down for quite a while.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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