Should Crypto Investors Be Worried About Solana’s Latest Outage?

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This weekend’s issues are a reminder that cryptocurrencies are still in their infancy.

Key points

  • The Solana network went down for seven hours over the weekend after bots overwhelmed the system.
  • Solana has suffered a number of outages this year, perhaps because the network cannot keep up with its extraordinary growth.
  • These technical issues are an integral part of investing in cryptocurrency, which is one of the many reasons why it is such a high-risk asset class.

The Solana (SOL) network went down for seven hours over the weekend, in the seventh such outage so far this year. The price of the popular cryptocurrency jumped over 11,000% in the past year. However, some fear the system cannot keep up with its rapid growth, as there have been a number of outages over the past nine months.

Solana’s Last Breakdown

The Solana network was down between Saturday and Sunday evening (April 30 and May 1), following bots overloading its system. Traffic hit a record 4 million transactions per second, and validators that verify transactions couldn’t keep up. The culprit was a non-fungible token (NFT) minting tool called Candy Machine, but it’s unclear how the bots were able to push the network out of consensus.

The company behind Candy Machine will now introduce a small surcharge for invalid transactions in an effort to reduce bot activity. This weekend’s issues aren’t as severe as some of Solana’s previous outages. According to CoinTelegraph, between January 21 and 22, the network was down for more than 29 hours due to duplicate transactions and network congestion.

Should investors be worried?

Solana wasn’t the only blockchain to get overwhelmed over the weekend. Top crypto smart contract Ethereum (ETH) suffered a gas price spike after an NFT land sale by Bored Ape Yacht Club disrupted the entire blockchain. Ethereum gas fees vary depending on system congestion. In this case, fierce competition for 55,000 plots of land caused costs to skyrocket. Some people have paid over $6,500 in fees.

On one level, these issues are concerning. But they are to be expected. This is new and evolving technology, and many of these projects are being developed on the fly. Especially blockchains like Solana which have grown exponentially in a short time. There are billions of dollars tied up in the Solana ecosystem, but it’s still a work in progress.

Read more: 5 Solana predictions for 2022

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It’s not just breakdowns and technical issues that we need to pay attention to. It is also security breaches and hacks. Decentralized finance (DeFi) may remove the middleman from many of our financial transactions, but it also removes some of the protections we take for granted.

According to Certik research, over $1.3 billion was lost in DeFi hacks last year. This year, hackers stole over $600 million from popular crypto Axie Infinity. Many projects say they prioritize safety. However, it is not always easy to know how true this is. Moreover, it often happens that while solving one problem, developers unwittingly create another one. For example, since many blockchains are not compatible with each other, developers use blockchain bridges to help move assets. But it is now becoming clear that these bridges can expose investors to unforeseen security risks.

At the end of the line

Cryptocurrencies have made huge strides in adoption, leading a recent Gemini report to say that it is now an “established” global asset class. But sadly, the ease with which you can buy crypto, the huge advancements in the functionality of DeFi apps, and the wealth of information you can access all belie the relative infancy of this industry.

Whether it’s outages, technical issues, security breaches, or all three, these issues are part of crypto investing. Rather than worry, see Solana’s latest outage as a reason to only invest money you can afford to lose – and avoid the asset altogether if you’re risk averse. It’s easy to get carried away with the hype around crypto and its potential to change the way we manage money, but we’re in uncharted waters and need to navigate them with caution.

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