However, the assets used as collateral in DeFi are often highly volatile. Like in traditional finance, users must put up collateral when borrowing assets from a decentralized application such as Solend. With almost no financial disincentive, liquidation bots flooded Solend between Jan. 23, the protocol received around 370,000 failed liquidation attempts. In a postmortem of the incident, the Solend team reported that, during a period of around 30 hours between Jan. Particularly affected were users of lending and borrowing protocols, such as Solend. With little economic disincentive, bots left users unable to complete transactions, impacting their ability to protect investments. The network’s validators became overrun with liquidation bots attempting to profit from the volatility. Solana became the object of immense criticism during the most recent crypto price drop as flaws in its underlying architecture revealed themselves.
While Solana is technically still in its beta testing stage, it’s unclear if the flood of crypto newcomers exploring its DeFi ecosystem and other applications is fully aware of the risks.Ĭrypto price volatility exposes more Solana growing pains. Solana criticism is mounting, as the incident is the latest in a growing list of recent periods of network instability. 
While Solana did not go down, per se, many users with collateral committed to DeFi protocols could not deposit additional funds to keep positions open or pay back loans. Falling crypto prices created many liquidation opportunities, and bots flooded Solana validators with duplicate transactions in search of liquidation bonuses. Solana recently experienced yet another period of instability, this time resulting in many forced liquidations for the network’s DeFi users. Finally, we look to the future and ask if the troubled Layer-1 blockchain will remain relevant going forward. Given that Solana is still technically in its beta testing phase, we consider whether those quick to dismiss the network are fair in their judgments. In this analysis, we begin by examining the causes of the network’s recent instability before assessing the growing criticisms of Solana. As such, we’ll be assessing the pitfalls of cross-chain bridges in a subsequent, dedicated piece. 2 that saw attackers make off with around 120,000 ETH - the second-largest DeFi exploit in history - from the Ethereum/Solana bridge is certainly significant, initial postmortems suggest that the problem lies with the bridging protocol’s smart contracts, not the underlying network itself. Solana’s most recent instability is the focus of this OKX Insights’ in-depth article. This effectively starved those producing blocks of legitimate transactions - meaning many users could not complete transactions during the kind of widespread price volatility that typically triggers heightened network usage. Such rapid price movement, combined with the network’s low cost to transact, led to Solana validators becoming overrun with duplicate transactions submitted by liquidation bots. 
Comparatively, BTC lost just 24.6% over the same period. 20, the Layer-1 coin fell by 43.4% to a local low of $81.
While almost everything was bleeding, the sell-off took a particular toll on Solana and its native coin, SOL. In just two days, their combined market capitalization lost $325 billion, bringing it as low as $1.695 trillion - levels not seen since July 2021. 23, 2022, the crypto markets suffered a particularly brutal downturn. A deep dive into Solana’s most recent instability and an examination of whether criticisms levied at the network are justifiedīetween Jan.
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