Solana's network halted.. again
Solana's network went down due to a bug linked to certain cold storage transactions. Validators restarted the network after 4 hours by disabling the so-called "durable nonce transactions". ~4 Jun 2022
Recap on Solana (you can skip this section if you’re already familiar)
Solana is an open-source, highly functional and high speed layer-1 public blockchain that supports smart contracts, including non-fungible tokens (NFTs) and a myriad of decentralized applications (dApps). Native to their chain is the $SOL token which provides network security through staking as well as a means of transferring value.
Created in 2017 by Anatoly Yakovenko, a former executive at Qualcomm, Solana aims to scale throughput beyond what is typically achieved by popular blockchains while keeping costs low. Solana’s most recent competitors include NEAR Protocol alongside the usual big players such as ETH, BNB, ADA and DOT.
Solana had a fantastic year in 2021, after achieving one of the highest investing from VCs on an attractive yet fast paced vesting schedule. Though it still has significantly fewer projects than those built on Ethereum, they have caught the attention of many in the DeFi and NFT space. Some popular platforms include Solend, Serum, Saber, etc. and their native NFT market place Magic Eden.
Some Solana network stats..
Sep 2021 outage ~ 17 hours (# of validators ~ 800)
May 2022 outage ~ 7 hours
June 2022 outage ~ 4.5 hours (# of validators ~ 1800)
What Happened?
Last Wednesday, Solana experienced their latest outage for the 3rd time which lasted over 4 hours by a bug in how the blockchain processes a niche type of transaction that is designed for offline use cases.
Solana Labs communication chief Austin Federa told CoinDesk that the validators began restarting the network only after disabling these “durable nonce transactions”. These affected transactions will remain nixed till developers find the exact culprit and patch the issue that threw their consensus mechanism off balance.
Those offline custodians whose transactions fell under this category may be affected due to a possible freezing of their ability to move funds till its patched, validators claimed.
On Wednesday, a number of exchanges also reported problems with Sol’s deposits and withdrawals. These exchanges include Binance, Coinbase and Crypto.com.
According to CoinGecko, $SOL was already trading downwards along with the rest of the altcoins on Wednesday and continued a 24 hour slide down to sub $40, moving ~ -13% in a day.
“Durable Nonces”
In cryptography, a nonce is a random number used for a specific purpose.
Federa mentioned that the durable nonces represented “an incredibly small percentage” of Solana until recently. This tech has been growing on some exchanges lately.
In a tweet, Laine from Stakewiz, a Solana validator operator, said the bug was “known” and was being fixed prior to Wednesday’s events. It “hadn’t been triggered in this form previously”.
Durable nonces on Solana are designed for token holders with complex offline signing setups that can’t always prep their transactions fast enough for the speedy network.
For example, a custodian that signs Solana transactions with two air-gapped computers might not be able to finish the job within a single block. Normal transactions on Solana would fail in this scenario. Durable nonces give the token holder time to work.
What happened on Wednesday was a failure in Solana’s ability to handle durable nonces. Instead of treating these niche inbounds as a single transaction, the network’s validators double-counted them as a single transaction at two different block heights, Federa said. This impossible situation effectively broke Solana’s consensus mechanism.
Moving forward (my thoughts and analysis)
The price action says it all. The above diagram is a 2-Day candlestick chart (1 candle representing 48 hours worth of price movements). $SOL was already trading below $57 dollars due to the overall markets and took another major hit down to $37 now due to the recent events.
It is noted that Solana also had a tight vesting schedule around Feb and Mar of 2021. This essentially means that the big investors had a relatively short period of locking in their investments, before being able to freely choose to sell over time (dump). This explains why it has plummeted the way it did compared to other projects. All time highs are at $258 and now it has retraced ~85%.
Nonetheless, Solana is still a very promising player in the crypto asset space (DeFi and NFT markets included). It currently has $3.5 billion in TVL and ranks 4th in TVL amongst other top projects. (Defillama link). If prices remain within the current green and yellow bands (in the diagram above), it would be a decent area to be adding Sol and it has around 6 to 8x room to hit its all-time-highs (ATHs). Note: it is given that this would be a higher probabilistic outcome provided their fundamentals improve and the overall crypto market starts to recover properly.
Yeah, it can be annoying that this happens on a top class blockchain like Solana. However, like many great projects, it becomes more battle tested as the network grows (*ahem ahem* waiting for you Cardano…).
Note: I will not be going into detail of why Solana is a good investment. DYOR.
My trust in Solana still holds up fairly and am keen to see how they fare relative to the crypto market in the coming years. (disclaimer: author holds Solana and this is not financial advice) It is worth noting that there’s progress of some Solana competitors such as NEAR protocol and I am actively keeping up to date on other projects that stand to compete with Sol.
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