Crypto News
The Relationship Between SBF’s Downfall And Solana’s Continued Decline – Report
Solana has been a significant competition for Ethereum in the past few years and gained massive traction. But ever since the collapse of FTX, there has been speculation concerning the future of Solana.
The layer-1 blockchain experienced rapid growth, and the price of its native token surged wildly during the bull market run from 2020 to 2021. But lately, doubts are beginning to rise about what will happen to Solana next.
Moreover, Ethereum’s layer-two technology threatens Solana’s value proposition of delivering faster and lower fees transactions. Furthermore, the biggest challenge Solana may be facing now is with SBF (Sam Bankman-Fried), who was Solana’s biggest backer but is currently under investigation over allegations of fraud.
Many even argue that Solana’s price increase from 2020 to 2021 was thanks to SBF’s advocacy and market intervention. Solana’s value has decreased drastically from $258.78 in November 2021 to less than $10, according to current on-chain data — a 96% drop in value.
A Huge Decline
Compared to BTC, which experienced a 74.5% drop, and ETH, which saw a 74.6% drop, SOL has been more deeply affected than the leading digital assets. Even worse, DOGE — the famous meme coin dropped 76%, a dip smaller than the 96% drop of SOL.
What’s more, Solana has dropped to the 19th most valuable cryptocurrency from the 5th position, as reported by CoinGecko. Furthermore, there has been a decline in the trading volume of DeFi platforms based on Solana —- a drop from $10.2 billion to lower than $210 million from November 2021 to date.
That’s a drastic decline of 98%. SOL is the current 12th largest chain ranked by TVL (total value locked). Not only does it follow Polygon, but it also trails behind DefiChain and Cronos.
The most significant drop in Solana’s metric all around happened during the crash of FTX and the exposed fraud of SBF. There are speculations that Bankman-Fried’s support for SOL was financed through his theft at FTX.
Additionally, Caroline Ellison — CEO of Alameda, amongst other executives- reported to the SEC (Securities and Exchange Commission) that SBF promoted FTT (FTX token) market manipulation.
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Legislators need to educate themselves on Web3 if they care about protecting consumers, Steven Eisenhauer, chief risk and compliance officer at Ramp, writes.
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The Ministry of Justice in South Korea announced plans to introduce a crypto-tracking system to counter money laundering initiatives and recover funds linked to criminal activities.
The “Virtual Currency Tracking System” will be used to monitor transaction history, extract information related to transactions and check the source of funds before and after remittance, according to local media outlet khgames.
The South Korean Ministry of Justice will introduce a “cryptocurrency tracking system” in the first half of this year to strengthen the tracking of money laundering and recovery of criminal proceeds using cryptocurrencies. https://t.co/2CLkaLUrX6
— Wu Blockchain (@WuBlockchain) January 29, 2023
While the system is slated to be deployed in the first half of 2023, the South Korean ministry shared plans to develop an independent tracking and analysis system in the second half of the year. A rough translation of the ministry’s statement reads:
“In response to the sophistication of crime, we will improve the forensic infrastructure (infrastructure). We will build a criminal justice system that meets international standards (global standards).”
The South Korean police previously established an agreement with five local crypto exchanges to cooperate in criminal investigations and ultimately create a safe trading environment for crypto investors.
Related: South Korean prosecutors request arrest warrant for Bithumb owner: Report
The South Korean Supreme Court ruled that crypto exchange Bithumb must pay damages to investors over a 1.5-hour service outage on Nov. 12, 2017.
The finalized ruling from the supreme court ordered damages ranging from as little as $6 to around $6,400 be paid to the 132 investors involved.
“The burden or the cost of technological failures should be shouldered by the service operator, not [the] service users who pay commission for the service,” the court stated.
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Bitcoin hashrate is becoming highly centralized, with a few mining pools controlling most of the blockchain mining power. The latest data from Mempool indicates that 50% of the total hashrate is held by Foundry USA and Antpool.
A Highly Centralized Mining Network
Foundry USA has maintained a hashrate of over 30% of the total Bitcoin network for several weeks. It became the first mining pool of non-Chinese origin to lead the list in November 2021, following the ban on Bitcoin mining in China in the middle of the same year.
Back then, Foundry USA contributed 17% of the total Bitcoin hashrate. Today, the US-based pool averages 34.1% of the mining power, equivalent to about 104 EH/s, considering that the Bitcoin hashrate is around 300 EH/S.
Related Reading: First Bitcoin Mining Powered By Nuclear Energy To Open In The U.S. In Q1 This Year
Antpool comes in second with about 18.0% of the total hashrate equivalent to about 58 EH/s. The Chinese-based pool used to be the largest Bitcoin pool but was affected by the ban on crypto mining which caused several miners in the region to migrate.
What Is Behind This Trend?
The graph shows that over 80% of Bitcoin’s mining power is concentrated among just 5 pools. This contrasts with the beginning of 2022, when these five mining pools barely exceeded 60% of the hashrate.
Some factors could have contributed to this rise. One of which is the location of the servers of the said pools. The closer the servers are to the pools and mining facilities, the lower the information transfer latency. This means that a miner will likely get more shares in the mining process and earn more Bitcoin (BTC) by connecting to a closer server.
Another factor is the financial incentives offered by these major mining pools. Bigger mining pools can consistently distribute profits to their members, who pay a commission for mining with their resources, driving more miners to their ecosystem. This is evident with the high mining difficulty in recent weeks due to the bullish movement of Bitcoin, making it difficult for smaller mining pools to be profitable.
Related Reading: Why The S&P 500 Could Help Send Bitcoin Soaring Higher
However, Bitcoin’s highly centralized mining system poses significant dangers to the cryptocurrency. The miners could agree to reject transactions that do not meet a specific parameter leading to a 51% attack.
We’ve seen such attacks occur on other Proof-of-Work blockchains like Ethereum Classic, which could be a problem for Bitcoin. In addition, these pools are recognized companies and could face pressures from regulatory agencies trying to control activities on the Bitcoin network.
Bitcoin Price
So far, Bitcoin is still maintaining its bullish trend, with the leading cryptocurrency up by 40% since the start of the year. As of the time of writing, Bitcoin is trading at $23,400, according to data from Tradingview.com.
Featured image from Pixabay, charts from Trading View, Coinwarz, and Mempool
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