This weekend’s issues are a reminder that cryptocurrencies are in their infancy.
- 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, potentially because the network can’t keep up with its extraordinary growth.
- These technical issues are part and parcel of cryptocurrency investing, which is one of many reasons why this is a high-risk asset class.
The Solana (SOL) network went down for seven hours over the weekend, in what was the seventh such outage so far this year. The popular cryptocurrency’s price surged over 11,000% last year. However, some fear the system can’t keep up with its rapid growth, since there have been a number of outages in the past nine months.
Solana’s latest outage
The Solana network was out between Saturday and Sunday night (April 30 and May 1), as a result of bots overloading its system. Traffic reached a record-breaking 4 million transactions per second, and the validators that verify transactions couldn’t keep up. The culprit was a non-fungible token (NFT) minting tool called Candy Machine, but it isn’t clear how the bots were able to push the network out of consensus.
The company behind Candy Machine will now introduce a small charge for invalid transactions in an attempt to reduce bot activity. This weekend’s issues are not as serious as some of Solana’s previous outages. According to CoinTelegraph, between January 21 and 22, the network was down for over 29 hours due to duplicate transactions and network congestion.
Should investors be worried?
Solana wasn’t the only blockchain that got overwhelmed over the weekend. The top smart contract crypto Ethereum (ETH) suffered a spike in gas prices after an NFT land sale by Bored Ape Yacht Club disrupted the whole blockchain. Ethereum gas fees vary depending on how congested the system is. In this case, fierce competition for 55,000 parcels of land caused fees to skyrocket. Some people paid more than $6,500 in fees.
On one level these issues are worrying. But they are to be expected. This is a new and evolving technology, and many of these projects are being developed on the fly. Especially blockchains like Solana that have grown exponentially in a short space of time. There are billions of dollars locked on the Solana ecosystem, but it’s still a work in progress.
Read more: 5 Solana Predictions for 2022
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It isn’t only outages and technical glitches that we need to watch out for. It’s also security breaches and hacks. Decentralized finance (DeFi) can cut the middleman out of many of our financial transactions, but it also cuts out some of the protections we take for granted.
According to research by Certik, over $1.3 billion was lost in DeFi hacks last year. This year, hackers stole over $600 million from popular play-to-earn crypto Axie Infinity. Many projects say that they prioritize security. However, it isn’t always easy to know how true that is. Moreover, it’s often the case that in solving one problem, developers unwittingly create another. For example, since many blockchains aren’t compatible with one another, developers use blockchain bridges to help move assets around. But it’s now becoming clear that those bridges may expose investors to unforeseen security risks.
Cryptocurrencies have made huge strides in adoption, causing a recent Gemini report to say it is now an “established” global asset class. But sadly, the ease with which you can buy cryptos, the huge strides in DeFi app functionality, and the wealth of information you can access all belie the relative infancy of this industry.
Whether it’s outages, technical glitches, security breaches, or all three, these issues are part of crypto investing. Rather than worrying, treat Solana’s latest outage as a reason to only invest money you can afford to lose — and to avoid the asset altogether if you are risk-averse. It’s easy to get carried away by 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 care.
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