The now-infamous FTX debacle sent shockwaves through the broader cryptocurrency space in 2022, but the Solana ecosystem was particularly hard hit by the impact.
Speaking exclusively to Cointelegraph at the latest Solana Breakpoint conference in Amsterdam, Solana co-founder and CEO Anatoly Yakovenko recalled his concerns about several projects based on layer 1 smart contract blockchain protocols.
“I’m more worried about the startup ecosystem; we don’t know how exposed the team is,” Yakovenko explained. After FTX went bankrupt, the value of Solana’s native token, SOL, plummeted, with its token trading at $36 in early November 2022 and falling to $12 within days of the exchange’s collapse.
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Solana’s brain trust and several investors reached out to hundreds of teams building products, services and decentralized applications to assess the collateral damage. Yakovenko said that about 20% of Solana projects have received investment from FTX or Alameda Research, while only 5% of ecosystem startups have funds on closed exchanges.
“That’s what hurts the most. These teams see their running track disappear.”
Yakovenko sympathizes with founders who have struggled to raise funds and trusts FTX as the custodian of those funds. “You put it on an exchange that everyone seems to trust, and then boom, it disappears. That’s a catastrophic failure for these companies,” he added.
A prime example is Armani Ferrante, who raised around $20 million to build a Solana-based cryptocurrency infrastructure company coral. The engineer previously estimated that his company had lost about $14.5 million on assets held on FTX.
“People like Armani really doubled down and rebuilt their company. They used this failure as energy to build.”
While Yakovenko admitted that SOL’s value plummeted as a number of high-profile Solana projects were affected by investments led by Sam Bankman-Fried, which was a tough pill to swallow, it pales in comparison to the damage done to the ecosystem projects. It’s a small witch who sees a big witch.
“It’s really heartbreaking. It sucks that token prices are going down, but that’s crypto, it keeps going up and down. But people’s runway was evaporated, and it’s really painful. I’m glad the vast majority of teams survived Come down,” the CEO added.
As the one-year anniversary of FTX’s collapse approaches, the dust is starting to settle. Sam Bankman-Fried’s high-profile criminal trial has concluded, with the former CEO found guilty on November 3 of all seven charges. Sentencing is scheduled for March 2024.
There is also a silver lining for the Solana ecosystem, as Yakovenko explained, with some investors stating that FTX’s influence has been an obstacle to supporting the new generation of smart contract Layer-1.
2/ @VitalikButerin Recently asked me what I like @solana So I’m going to share with the public an adapted and clued version of what I wrote to him
— Chris Burniske (@cburniske) December 30, 2022
Yakovenko highlighted the influence of Ethereum Venture Capital investor Chris Burniske in articulating Solana’s value proposition.
“He basically said it’s time to go look at Solana because this big thing that was really bad for decentralization is gone. There are legitimate people building here. His influence has had a significant impact on the ecosystem, making everyone Everyone gets back on their feet.”
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