Threat of a SOL Dump May Overshadow the Latest MakerDAO Development

Members of the cryptocurrency community are bracing for a potential SOL selloff in the near future.

A notable recent development in the Web3 space is the proposal put forth by Rune Christensen, co-founder of MakerDAO. Christensen's proposal suggests a significant departure from MakerDAO's historical ties with Ethereum's infrastructure by basing the upcoming native chain, "NewChain," on a fork of Solana's codebase. This proposal has triggered discussions within the cryptocurrency community, as it hints at a potential shift in the DeFi landscape.

In related news, recent movements of tokens from FTX's cold storage wallets have sparked speculation about the potential dumping of its substantial Solana (SOL) holdings. The collapsed cryptocurrency exchange FTX, which had deep connections with Solana, appears to be considering what to do with its sizable pool of cryptocurrency assets. Meanwhile, Anatoly Yakovenko, co-founder of the Solana protocol, has proposed a unique solution that could be advantageous for all parties involved.

The Path to NewChain

MakerDAO's "Endgame" upgrade, introduced in May this year, signified the final phase of its development journey. A pivotal aspect of this upgrade is the introduction of NewChain, a native chain expected to be fully operational in approximately three years. NewChain is envisioned as a standalone blockchain that reimagines the Maker protocol, enhancing its efficiency and capabilities.

The Proposal and Its Underlying Foundation

Rune Christensen's proposal to anchor NewChain on a Solana codebase fork has generated considerable attention. Nevertheless, the co-founder highlighted three core reasons for considering Solana's codebase as the bedrock for NewChain.

1. Technical Quality: Christensen underscores the remarkable technical quality of Solana's codebase. He argues that Solana's architecture is meticulously designed for efficient blockchain operation, benefiting from a deep understanding of past blockchain challenges. This aligns well with NewChain's objective of rectifying the technical shortcomings of the Maker protocol.

2. Resilient Ecosystem: Solana's ecosystem has proven its mettle by weathering challenges such as the FTX blowup. Moreover, Christensen emphasized the ecosystem's longevity, suggesting it can offer a talent pool for MakerDAO to tap into for contributions. The cost-effectiveness of Solana's infrastructure further strengthens its case as an avenue for NewChain's construction and maintenance.

3. Adaptability: The existing instances of Solana's codebase being successfully forked and adapted for appchains showcase its adaptability. Therefore, Christensen envisions a similar process for NewChain's development. This adaptability potentially accelerates NewChain's creation while capitalizing on Solana's tried-and-tested foundation.

Comparing Solana to Ethereum

One of the central questions arising from the proposal is the rationale behind favoring Solana's codebase over Ethereum's Ethereum Virtual Machine (EVM). Christensen acknowledged the EVM's significance for user adoption and ecosystem growth. However, he points out that the EVM does not align seamlessly with NewChain's backend requirements, motivating the exploration of alternative options.

NewChain's Role and Potential Impact

NewChain is poised to function as the backend for MakerDAO's SubDAO tokenomics and governance security. This strategic decision ensures that NewChain's architecture is tailored to the precise needs of the protocol, augmenting its efficiency and effectiveness. Simultaneously, Maker's governance token and the Dai stablecoin will continue to operate as usual on Ethereum.

FTX Could Dump Its SOL Holdings

Blockchain data unveiled on Twitter indicates that FTX's cold storage wallets, identifiable through the Solscan blockchain explorer, initiated the transfer of SOL tokens. These wallets collectively hold close to 7 million SOL, currently valued at around $134 million. This potential movement of assets has led to speculation about FTX's intentions regarding its SOL holdings.

In the past, the Solana Foundation disclosed that it had sold a significant number of SOL tokens to FTX and its sister trading firm Alameda Research, totaling 58,086,686 SOL—an amount now valued at $1.1 billion. However, the exact quantity of SOL retained by FTX at the time of its bankruptcy filing in November last year remains unclear.

Industry Experts Share Their Take

Analysts, including prominent cryptocurrency venture capitalist Adam Cochran, have taken to social media to discuss the recent developments in FTX's cold storage movements. Solana's co-founder, Anatoly Yakovenko, also joined the conversation, proposing a potential solution that could serve as a "win-win" for all parties involved.

Yakovenko expressed his preference for distributing the SOL tokens to former FTX customers directly, as a form of restitution. This approach, he believes, would be the most favorable outcome for everyone. The co-founder suggested that distributing the SOL tokens to the approximately 5 million affected users could benefit the Solana network in the long run. This strategy would empower users to control their assets and potentially sell their shares through a Dutch auction. Yakovenko dubbed this plan a "win-win" due to its potential to reconcile the interests of both the collapsed exchange's customers and the broader cryptocurrency community.

FTX and Solana’s Relationship

Before its collapse in November 2022, FTX had maintained strong ties with Solana, the 10th-largest cryptocurrency by market capitalization. The exchange's co-founder and former CEO, Sam Bankman-Fried, had actively supported Solana, and the platform had launched a marketplace for Solana-based non-fungible tokens (NFTs) while investing in multiple Solana-related projects.

FTX's bankruptcy was attributed to alleged criminal mismanagement, resulting in an $8.7 billion loss of customer funds. Bankman-Fried faced 13 criminal charges following his arrest last year.

As discussions around the fate of FTX's SOL holdings continue, the proposed "win-win" solution by Solana's co-founder presents an intriguing alternative that could potentially address the concerns of former FTX customers and contribute positively to the broader Solana ecosystem.

Price Overview

At press time, the cryptocurrency price tracking website CoinStats indicated that SOL was changing hands at $19.56. This was after the altcoin’s price slipped by a slight margin of 0.01% over the past 24 hours. This small negative performance also pushed the Ethereum-killer’s weekly performance further into the red zone, taking it down to -3.77%.

Price chart for SOL (Source: CoinStats)

Not only did SOL weaken against the Dollar throughout the past day of trading, but was also outperformed by the market leader Bitcoin (BTC) during this period as well. Data from CoinStats showed that SOL was down 0.33% against BTC at press time. Subsequently, 1 SOL token was worth 0.00075534 BTC.

Technical Overview

Daily chart for SOL/USDT (Source: TradingView)

From a technical perspective, a symmetrical triangle had formed on the daily chart for SOL/USDT, which suggested that a breakout in the next few days is imminent. Should SOL’s price break out towards the downside, then it may be at risk of retesting the crucial support level at $17.10 in the following week. Conversely, a positive breakout may lead to SOL flipping the resistance level at $23.90 into support before continuing to climb to $34.60 within the next couple of weeks.

Investors and traders will want to take note of the fact that a bullish technical flag was on the verge of being triggered on SOL’s daily chart. At press time, the daily RSI line was attempting to cross above the daily RSI SMA line. Should these two technical indicators cross, it will signal that momentum has shifted in favor of bulls. If this technical flag is validated, it may result in the bullish breakout being confirmed.

Disclaimer: Coinpaper does not recommend that any cryptocurrency should be bought, sold, or held by you. Always conduct your own research and consult your financial advisor before investing in any digital asset.